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Learn more about: Common Real Estate Mortgage & Finance Terms GlossaryAcceleration Clause A statement in a mortgage contract that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Adjustable Rate Mortgage (ARM) A mortgage product that permits the lender to adjust its interest rate periodically.
Amortization The gradual repayment of a mortgage by installments, calculated to pay off the obligation at the end of a fixed period of time.
Amortization Schedule Available from your lender, this is a timetable for payment of your mortgage. It shows with each payment how much is applied towards your principal balance and how much is applied towards interest payment.
Annual Percentage Rate (APR) The total cost of the mortgage stated as a yearly rate. This includes your base interest rate and other fees that may be paid by the borrower such as loan origination fee, commitment fees, prepaid interest, and other costs.
Appraisal This is an estimate of the market value of your property.
Appreciation Appreciation is an increase of the value of a property due to changes in the market or other conditions.
Assessed Value The value placed upon a property by your tax assessor which is used to compute your property taxes.
Assumable Mortgage A mortgage that can be taken over by the buyer when the property is sold.
Binder An offer on a property secured by an earnest money deposit.
Buydown An amount of money paid to the lender at closing to reduce the borrowers' monthly mortgage payment.
Cap A provision of an ARM limiting how much the interest rate or mortgage payments can increase or decrease.
Cash Reserve A requirement for some lenders that borrowers have sufficient cash remaining after closing, equivilant to two months mortgage payments.
Clear Title Title to a property without leins or question of ownership.
Closing A meeting to finalize the sale of the property.
Closing Costs Expenses or settlement costs, above the sales price, incurred by both the buyer and seller during the transfer of a property.
Commitment Letter A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.
Condominium A form of ownership where a unit and interest in common areas is owned.
Contingency A condition that must be met before a contract is legally binding.
Conventional Mortgage Any mortgage that is not insured or guaranteed by the federal government.
Convertible Mortgage An adjustable rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative A form of ownership in which residents of a multiunit housing complex own shares in the corporation that owns the property rather than the unit itself.
Credit Report A report which records and lists the personal information, public financial records, and credit history of an individual based on the payment history reported by the creditors.
Credit Derogatives Negative credit reflected on a credit report such as slow pays, collection accounts, charge off accounts, leins, judgements, etc.
Debt A sum of money owed someone.
Debt to Income Ratio Percentage of total debt payments to gross income.
Deed The legal document conveying title to a property.
Deed of Trust A document used in some states instead of a mortgage that gives the lender a security interest in the property.
Default The failure to make loan payments when they are due.
Deposit A cash deposit made by a potential buyer to demonstrate that the offer to purchase property is serious. Also called 'earnest money'.
Depreciation A decline in the value of property.
Down Payment The part of the purchase price that the buyer pays in cash and does not finance with the mortgage.
Earnest Money A cash deposit made by a potential buyer to demonstrate that the offer to purchase property is serious.
Equal Credit Opportunity Act (ECOA) Federal Law that prohibits lenders from denying mortgages on the basis of race, color, religion, national origin, age, sex, or marital status.
Equity A homeowner's financial interest in a property. Equity is the difference between the fair market value of a property and the amount still owed on the mortgage.
Escrow Money deposited with a third party that is returned upon fulfillment of a condition or contract. Also, an account held by the lender or servicer into which a homeowner pays money for taxes and insurance.
Fair Credit Reporting Act (FCRA) A consumer protection law that regulates disclosure of consumer credit reports and establishes procedures for correcting mistakes on credit records.
Fannie Mae Federal National Mortgage Association
Federal Housing Administration (FHA) They provide mortgage insurance and set construction and underwriting standards. FHA does not lend money.
FHA Mortgage A mortgage insured by the Federal Housing Administration.
FICO Your FICO® score is the numeric representation of your financial responsibility, based on your credit history. Based on a scale of 300 -850, there are three FICO® scores - one from each national credit bureau. These three FICO® scores are the measure that most lenders will look at when evaluating your credit or loan applications
Fixed-Rate Mortgage A mortgage in which the interest rate does not change during the entire term of the loan.
Flood Insurance Insurance that compensates for physical property damage resulting from flooding. It is required for property located in federally designated flood areas.
Forbearance A lender's agreement to postpone foreclosure to allow the borrower time to catch up on overdue payments.
Foreclosure The legal procedure permitting a creditor to take possession of and sell property that is mortgaged and in default.
Freddie Mac Federal Home Loan Mortgage Corporation
Good Faith Estimate An itemized breakdown of estimated closing or settlement costs.
Gross Monthly Income The total amount a borrower earns each month before income taxes or other expenses are deducted.
Hazard Insurance Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Home Equity Loan A loan based on the equity a borrower has in his or her home.
Homeowner's Insurance An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and it's contents.
Homeowner's Warranty Insurance that covers repairs to specific parts of a house for a specific period of time.
HUD The U.S. Department of Housing and Urban Development which administers many housing programs.
HUD-1 Statement The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.
Index A measurement used by lenders to determine any changes to the interest rate charged on an ARM.
Interest The fee charged for borrowing money.
Interest Rate The percentage of an amount of money usually expressed as an annual percentage, which is paid for the use of money for a specified period of time.
Joint Tenancy A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.
Late Charge The penalty a borrower must pay when a payment is made after the due date.
Lease to Purchase Mortgage A mortgage product that allows low and moderate income buyers to lease a home with an option to buy it at a later date. Usually, the monthly rent payment consists of the PITI on the first mortgage and an additional amount set aside for a down payment.
Lien A legal claim to a property that must be paid when the property is sold.
Loan The lending of money by a lender to a borrower to be repaid with or without interest.
Loan Origination Fee A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.
Loan-To-Value (LTV) The amount of a loan compared to the value of a property,expressed as a percentage.
Lock-In A written agreement guaranteeing the home buyer a specified interest rate, provided the loan is closed within a set period of time.
Mortgage A legal document which a borrower gives to the lender on property as security for payment of a debt.
Mortgage Banker A company that originates mortgages exclusively for resale in the secondary market.
Mortgage Broker An individual or company that, for a fee, acts as intermediary between borrowers and lenders.
Mortgage Margin The set percentage the lender adds to the index value to determine the interest rate of an ARM.
Mortgage Note A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time; the mortgage note is secured by a mortgage.
Mortgagee The lender in a mortgage agreement.
Mortgagor The borrower in a mortgage agreement.
Mortgage Insurance Insurance that protects lenders against loss if a borrower defaults.
Net Pay The amount of salary left after taxes and other deductions are taken.
Origination Fee A fee paid to a lender for processing a loan application, stated as a percentage of the mortgage amount.
Owner Financing A property purchase transaction in which the property seller provides all or part of the financing.
PITI Stands for Principal, interest, taxes, and insurance and are the 4 components of your mortgage payment.
Points A one-time charge by the lender to decrease the monthly payments on a mortgage loan.
Prepaids Fees collected at closing to cover items such as setting up escrow accounts for property taxes, homeowner's insurance, and mortgage insurance premiums.
Prepayment Penalty A fee that may be charged to a borrower who pays off a loan before it is due.
Prequalification The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan application is made.
Prime Rate The interest rate charged by lenders to their best, most creditworthy customers.
Principal The amount borrowed or remaining unpaid.
Private Mortgage Insurance (PMI) Insurance that protects lenders against loss if a borrower defaluts.
Qualifying Ratios Guidelines applied by lenders to determine how large a loan to grant a homebuyer. This compares your gross monthly income to housing expense and your total monthly debt to gross monthly income.
Real Estate Agent A real estate agent is a licensed professional who acts on behalf of an owner to sell property or on behalf of the buyer. The agent is paid commission by the seller.
Real Estate Settlement Procedure Act (RESPA) A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Refinancing Paying off one loan from the proceeds of another loan on the same property. Many times this is done to lower monthly payments, obtain a lower interest rate, or pay off other debts.
Second Mortgage A mortgage that has a lein position subordinate to the first mortgage.
Servicing All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
Settlement A meeting to finalize the sale of the property.
Settlement Statement The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.
Survey A drawing showing the legal boundaries of a property.
Title A legal document that establishes the right of ownership to a property.
Title Company A company that specializes in examining and insuring titles to real estate.
Title Insurance Insurance to protect the lender or buyer against loss arising from disputes over the ownership of property.
Title Search An examination of the public records to ensure that the seller is the legal owner of the property and that there are no leins or other claims outstanding.
Transfer Tax State or local tax that is payable when title passes from one owner to another.
Trustee A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
Truth-in-Lending Act A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
Two-Step Mortgage A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10 years), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan, due within 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier" mortgage.
Underwriting The process of reviewing a loan application to determine the risk involved for the lender.
Veteran Affairs, Department of A federal agency that guarantees "no downpayment loans" to veterans who have served in the military and to active military personnel in the US Armed Forces.
VA Loan A loan that is guaranteed by the US Department of Veteran Affairs.
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 A document signed by the borrower's employer verifying his/her position and salary.
Zoning Ordinances The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.
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Greatland Financial is an Equal Opportunity Housing Lender,
licensed by the California Department of Real Estate. FHA, VA and Members of California Mortgage Association.
licensed by the California Department of Real Estate. FHA, VA and Members of California Mortgage Association.
About this Page: Learn more about commonly used terms and deffinitions related to the real estate finance & mortgage industry.