Have you ever wondered exactly what that mortgage loan consultant was talking about? Maybe the closing attorney rattled off some words really fast without giving you a chance to ask what they meant? Just in case you weren’t able to ask, we put together a glossary.. so, now you know!

0-9

The 1003 is the basic mortgage application. It is usually 3 – 4 pages in length. It can also be called the Uniform Residential Loan Application.

A

A common land measurement. One acre equals 43,560 square feet.

An adjustable rate mortgage is a home loan with an interest rate that adjusts on a predetermined basis. Most ARMs begin with a fixed rate for a certain period of time and then adjust up or down according to the index on which it is based.

Amortization is the paying off of debt with a fixed repayment schedule in regular installments over a period of time. Generally monthly payments on a mortgage.

APR reflects not only the interest rate of your loan but also the fees, points , and other charges that you have to pay to get the loan.

The increase in the market value of real estate property.

A value placed on your property by a tax assessor for tax purposes.

An assumable mortgage is a type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner’s remaining debt, the buyer can avoid having to obtain his or her own mortgage.

Fees charged by the Closing Attorney or Settlement Agent which usually are part of the closing costs charged to close your mortgage.

B

A mortgage in which a large portion of the borrowed principal is due and repaid in a single payment at a designated time during the term of the loan.

The individual or individuals responsible for repayment of the loan.

A business day means all calendar days except Sundays and legal public holidays. It is any day on which the lender’s office is open to the public to conduct business.

A buy down is a mortgage financing technique where the borrower attempts to obtain a lower interest rate for at least the first few years of the mortgage.

Real estate agent that works on behalf of the buyer.

C

A capital gain is a profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price.

A tax charged on the profit made from the sale of a home, property, or investment.

A mortgage refinancing transaction in which the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to take out equity from the borrower’s home.

The “closing” is the last step in buying and financing a home or in the refinancing of a loan. The “closing,” also called “settlement,” is when you and all the other parties in a mortgage loan transaction sign the necessary documents.

The person responsible for coordinating the loan closing related steps. This can include distribution of funds and recording closing documents. Depending on your state laws, the closing attorney can be an attorney, a notary, or possibly a representative of the title company.

Closing costs are fees associated with closing a mortgage loan. These fees typically include attorney fees, appraisal fees, up front mortgage insurance, title and recording fees, etc. These fees are listed on the Good Faith Estimate or the Loan Estimate form after October 3, 2015. They will also be listed on the HUD-1 Settlement statement or Closing Disclosure after October 3, 2015.

The date all loan documents are signed and loan terms are finalized.

Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The Closing Disclosure is a new form that became effective on October 3, 2015 and replaces the HUD-1 Settlement Statement.

A person who is responsible for repaying the debt along with any other borrower or co-borrower.

A letter issued by a lender stating the terms and conditions by which the lender agrees to lend money to the borrower.

Similar home sales, located in the same region as the subject property, used by an appraiser to help calculate the home value of the subject property in an appraisal.

Terms set by an underwriter that are required to be satisfied to be able to fund the home loan. These conditions can be required prior to or at the loan closing, or after a loan closes. See Stipulations.

A mortgage loan meeting GSE (Government Sponsored Enterprise) like Fannie Mae or Freddie Mac underwriting guidelines. Standard conforming loans are limited to maximum loan amount established by the GSE.

A short-term loan used to finance new home construction. These loans are usually converted to a standard home loan after construction is complete.

A clause in a mortgage loan or a sales contract giving specific conditions that must be met by the buyer and/or seller for the purchase contract to be executed. A standard contingency clause example is: ‘buyer will purchase the home if approved for a home loan.’

A mortgage meeting conditions of funding set by Fannie Mae and Freddie Mac. Also referred to as a Prime Mortgage.

A borrower’s ability to obtain a home loan based on current and previous credit obligation repayment history. It is a record of a borrower’s payment behavior that reflects their ability to repay a loan.

D

The date which the buyer will be able to move into the property. This is usually the same as the close date.

The amount of money owed to creditors.

Debt to Income (DTI) is a ratio of your gross monthly income to your total monthly debt payments including your monthly house payment. If gross monthly income is $4,000 per month and monthly debt payments, including housing, are $1,500. per month your DTI ratio = 37.5%.

A deed is the document that transfers ownership of real estate.

A document conveying title of the property to a third party. The title remains with the third party until the mortgage is paid.

Default is the failure by the borrower to meet the legal obligations or terms of a loan. For example when a home buyer fails to make a mortgage payment.

The decrease in market value of property or real estate asset.

Discount point is a fee paid at closing to purchase a lower interest rate. One point equals 1.0% of the loan amount.

E

Money put up by the buyer as a token of good faith when making an offer on a home. Earnest money is usually a sign the proposed buyer is serious about their offer.

The value of a home above the principle amount owed on the house or property.

An account held by the lender or servicer in which funds are held for the payment of items other than the mortgage. These funds are generally used for the payment of property taxes and home owners insurance premiums when due and are usually collected monthly as part of the total loan payment. See Impound Account.

F

The value of a property based on current market conditions.

The Federal National Mortgage Association. Fannie Mae provides funding for home mortgages.

Federal Emergency Management Agency

Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders.

A home mortgage loan backed by FHA (Federal Housing Administration) mortgage insurance.

A mortgage program set to have the same interest rate over the life of the loan.

A document confirming whether or not a property is in a FEMA designated flood zone.

The process of taking possession of a mortgaged property as a result of the Borrower’s failure to keep up mortgage payments.

Federal Home Loan Mortgage Corporation. Freddie Mac provides funding for residential home mortgages.

G

An estimate of settlement charges and loan terms. RESPA (real Estate Settlement Procedures Act) requires a GFE be provided to a borrower within three business days of the application date. This form has been replaced by the Loan Estimate form on October 3, 2015. See Loan Estimate.

H

This insurance covers the cost of damage to the property and protects both the borrower and the lender in case of such damage. Most lenders will require the home owner’s insurance to cover the replacement value of the home, not the appraised value. See Home Owner’s Insurance.

A thorough inspection of the home, done by a licensed inspector. A home inspection is done to find any major or minor flaws in the home prior to purchase, and is required by many lenders prior to home loan approval.

A loan secured by the property that is used to purchase or refinance a home.

A homeowner’s association (HOA) is an organization in a subdivision, planned community or condominium complex that makes and enforces rules for the properties in its jurisdiction. HOAs will usually require each resident to pay a home owner’s due or HOA dues which may be paid monthly or annually.

Homeowners insurance is a form of property insurance designed to protect an individual’s home against damages to the house itself, or to possessions in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property. See Hazard Insurance.

Purchasing a house and quickly selling it for profit.

Department of Housing and Urban Development is a federal government agency.

Residential Loans insured under one of the Department of Housing and Urban Development (HUD) loan programs

I

An account held by the lender or servicer in which funds are held for the payment of items other than the mortgage. These funds are generally used for the payment of property taxes and home owners insurance premiums when due and are usually collected monthly as part of the total loan payment. See Escrow Account.

The initial interest rate is the interest rate that applies on the first day of a loan’s term. At some point during the loan’s lifetime, this rate may adjust or be reset. See Adjustable Rate Mortgage.

Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for a loan. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR). See Annual Percentage Rate.

A property or home purchased as an investment. In most cases an investment home will be rented or “flipped” for profit.

J

Property ownership in which more than one person will share equal ownership in the home.

A type of property ownership where two or more people own a property together, each with equal rights and obligations, until one owner dies. Upon an owner’s death, that owner’s interest in the property passes to the surviving owner without the property having to go through probate.

Typically a loan exceeding the standard conventional loan limits. This is considered a high-risk loan and will usually have stiffer requirements.

L

Fees associated with closing costs. These fees can include processing fees, underwriting fees, origination charges, etc.

A right given to another entity, by the owner of the property, to secure a debt.

Money borrowed from a lender, by a credit worthy individual or business, paid back under agreed terms.

The Loan Estimate is a new form effective on October 3, 2015. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. This form replaces the Good Faith Estimate and Truth-in-Lending statement and is provided to the borrower within 3 business days of the application date.

It is the termination or due date on which an installment loan must be paid in full. The date or time when a loan becomes due and payable. For example, a 15yr fixed rate mortgage becomes “mature” at 180 months from loan closing.

M

The document, which is recorded against the title of the property, that is used to establish a home or property as collateral for a loan.

The individual or company acting as an intermediary between a potential borrower and lender.

An insurance policy that protects a lender or investor from losses due to default on a loan. Mortgage insurance can be reflected as a monthly premium on top of the mortgage payment, up front fees rolled into the loan, or paid in a bulk sum by the borrower.

A dollar amount paid to the Mortgage Insurance Company to cover the cost of Mortgage Insurance.

Unlike the mortgage broker, a mortgage lender uses its own money or the money of investors in mortgage transactions.

A mortgage loan originator is an individual who for compensation takes a residential mortgage loan application and/or offers or negotiates terms of a residential mortgage loan for a borrower.

N

A mortgage requiring no closing costs, fees, or origination charges. These mortgages will generally see a higher interest rate to compensate for the lack of fees charged to the borrower.

O

A fee charged by a lender or broker to help compensate employees and expenses involved in the loan process. This fee will always be disclosed in the GFE (Good Faith Estimate) or the Loan Estimate starting on October 3, 2015 and on the HUD-1 closing statement or the Closing Disclosure starting on October 3, 2015.

P

A legal document giving certain rights to a person on behalf of another person. In most cases this is used if a borrower is unable to be present to sign documents.

Any charges that are required to be paid prior to or at closing and not included in the Annual Percentage Rate (APR) calculation. These would include items such as Appraisal Fee, Home Owner’s Insurance premium, Property Tax, etc.

A process used to evaluate a borrower’s eligibility for a loan and the maximum loan amount the borrower may qualify for.

The amount financed on a loan. This amount does not include interest.

If your down payment on a purchase or the equity in your home on a refinance is less than 20%, the borrower is required to purchase Private mortgage insurance. This insurance protects the lender from losses in the event the borrower is not able to make the mortgage payments and defaults on the loan.

Fees charged as compensation for various processing functions. These are part of closing costs.

A fair market value assessment of the subject property. The appraisal will take various factors into account, including values of similar properties, property condition, and market conditions.

Property tax is a tax assessed on real estate. The tax is usually based on the value of the property (including the land) and is generally assessed by local or municipal governments.

A fair market value assessment of the subject property. The appraisal will take various factors into account, including values of similar properties, property condition, and market conditions. See Property Appraisal.

Q

A quitclaim deed is a legal instrument which is used to transfer interest in real property. The entity transferring its interest is called the grantor, and when the quitclaim deed is properly completed and executed it transfers any interest the grantor has in the property to a recipient, called the grantee.

R

Puts a hold on an interest rate for a specific period of time such as 30 days. Rates are generally locked when the mortgage lender has a commitment from the borrower.

The Real Estate Settlement Procedures Act (RESPA) is a consumer protection law, first passed in 1974. The purposes of RESPA are to help consumers become better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services. You can get more information about RESPA at the U.S. government RESPA site.

The process of replacing a currnet loan with a new loan. In most cases the new loan will be under different terms.

A list of payments over the life of the mortgage loan. The schedule may appear different depending on the loan terms. Some mortgage calculators let borrowers see their repayment schedule based on the amount of the home loan, the interest rate and monthly payments. See also Amortization.

The cost to completely rebuild your home at current material and labor costs. This is not the same as appraised value.

A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for paying property taxes, homeowner’s insurance and home maintenance. Once the homeowner no longer lives in the property as their primary residence or they die the loan must be repaid.

A provision under the Truth In Lending act on a loan refinance that allows a homeowner 3 business days after the closing date to review the loan documents and to make sure they understand and agree with the terms of a refinance. If the borrower does not agree with the terms they may rescind or cancel the loan with no costs. After 3 business days, if the borrower does not rescind or cancel the loan, the loan is considered closed and funded.

S

A Real Estate Sale Contract functions as a legally binding agreement between two parties, a buyer and a seller, concerning the terms of the purchase or transfer of real property.

A mortgage secured on a home or property that already has a mortgage, know as the first mortgage, secured against the property. The second mortgage is in a second position against the property title behind the first mortgage.

A real estate agent working for the selling homeowner.

Selling a property or home for less than the loan amount owed on the property. In some cases this is used to avoid a foreclosure and allows a better outcome for both the lender and the home owner.

Terms set by an underwriter that are required to be satisfied to be able to fund the home loan. These conditions can be required prior to or at the loan closing, or after a loan closes. See Conditions.

A subprime mortgage is a type of loan granted to individuals with poor credit histories, who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages.

A document showing property boundary lines and any other property or construction limits.

T

Simultaneous ownership of real estate in which all owners will have an equal right to use the property. Unlike Join Tenancy, there is no right of survivorship if one of the owners dies; instead, there must be a probate to transfer the ownership.

These are fees charged by vendors other than the mortgage lender for services performed for the lender or borrower and are paid when the service is performed or at the loan closing. These fees will show up on the Good Faith Estimate or the HUD-1 closing statement or the Loan Estimate and the Closing Disclosure after October 3, 2015.

An official document used in real estate that specifies who owns a piece of property.

Title Company is a company involved in examining and insuring title claims for real estate purposes. The company verifies ownership of real property and determines the valid owner through a thorough examination of property records in a Title Search. The title company usually does an abstract of title.

Insurance purchased by the borrower and/or the lender on the title of the property that will protect the borrower and/or the lender in case of any title disputes.

Also known as a TIL, the Truth in Lending Disclosure provides the borrower a document that will show interest rate, APR, amount loaned, as well as total cost of the loan and loan interest. After October 3, 2015 this form was replaced with the Loan Estimate form. (See Loan Estimate).

U

A Mortgage underwriter is the person a lender uses to determine if the risk of offering a mortgage loan to a particular borrower is acceptable and if the borrower and the property qualify for the loan.

Mortgage Insurance Premium paid ‘Up-Front’ is a portion of the Mortgage Insurance Premium paid at time of closing instead of the premium being paid on a monthly basis over the term of the loan. The UFMIP can be either added to the loan amount or paid at closing by the borrower

V

The VA (Veteran’s Administration) loan is a special loan program created for our active, retired, and reserve military service members.

W

An instrument that transfers the ownership of real property from one person to another and in which the grantor promises that the property title is good and clear of any claims.