Glossary

Understand these borrowing

and saving terms.

Glossary

A

Abandonment

The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.

Absentee Owner

An owner who does not personally manage or reside at property owned.

Absolute Auction

An auction in which the subject property is sold to the highest bidder regardless of the amount of the winning bid.

Absorption Rate

An estimate of the expected annual sales or new occupancy of a particular type of land use.

Abstract

The written, legal history of a property that traces its ownership throughout the years.

Abstract Exam

A fee related to the title insurance required by the lender. A public record search exam is done to ensure that both you and the lender are aware of any liens or encumbrances that could affect the property. For our comparison purposes, an abstract exam fee is considered to be a third-party fee and may be included in the title insurance fee by some lenders.

Acceleration Clause

A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Acceptance

A party's consent to enter into a contract and be bound by the terms of the offer.

Accepted Contract

A sales contract signed by both seller and buyer that defines the terms of the sale.

Additional Principal Payment

A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.

Adjustable Rate Mortgage (ARM)

An ARM is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so the interest rate changes up or down are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an ARM, the lender is required to provide you with an ARM Program Disclosure, which spells out the terms of the loan.

Adjusted Basis

The original cost of a property, plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.

Adjustment Date

The date on which the interest rate changes for an ARM.

Adjustment Period

The period that elapses between the adjustment dates for an ARM.

Administrative Fee

A fee charged by a lender to cover the administrative costs of processing your loan request.

Administrator

A person appointed by a probate court to administer the estate of a person who died intestate.

Affordability Analysis

A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs you might expect to pay.

Amenity

A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Man-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization

A loan repayment plan, which enables the borrower to reduce debt gradually through monthly payments of principal and interest.

Amortization Schedule

A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.

Amortization Term

The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30-year Fixed-Rate Mortgage, the amortization term is 360 months.

Amortize

To repay a mortgage with regular payments that cover both principal and interest.

Annual Fee

An annual fee for a line of credit is sometimes required. If an annual fee is shown, you will be billed for that amount annually until the loan is paid in full.

Annual Mortgagor Statement

A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR)

To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an Annual Percentage Rate to provide an effective interest rate for comparison shopping purposes. Some of the costs you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.

Annuity

A specified income paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application

The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.

Application Deposit

Funds required by a lender in advance of processing a loan request. Generally, a Commitment Fee is collected to cover the costs of an appraisal and credit report and may or may not be refundable.

Appraisal

An analysis performed by a qualified individual to determine the estimated value of a home.

Appraisal Fee

In order to verify the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third-party fee.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser

A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation

An increase in the value of a property due to changes in market conditions and other causes. The opposite of depreciation.

Assessed Value

The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment

The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessment Rolls

The public record of taxable property.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Anything of monetary value owned by a person. Assets include real property, personal property, and enforceable claims against others — including bank accounts, stocks, and mutual funds.

Assignment

The transfer of a mortgage from one person to another.

Assumable Mortgage

A loan that does not have to be paid in full if the home is sold. Instead, the new owner can take over payments on the existing loan and pay the seller the difference between the sales price and the balance on the loan.

Attorney-In-Fact

One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Attorney Opinion

Commonly referred to as a "title opinion," this fee is related to the title insurance required by the lender. It is a document issued by an attorney listing any liens or encumbrances that could affect the property that are a matter of public record. For our comparison purposes, the attorney opinion fee is considered to be a third-party fee and may be included in the title insurance or closing fee by some lenders.

Attorney Witness

Related to the settlement/closing fee. This fee is standard in some states and is the closing attorney's fee for witnessing the signing of the closing documents. For our comparison purposes, an attorney witness fee is considered to be a third-party fee and may be included in the title insurance or closing fee by some lenders.

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B

Backfill

The replacement of excavated dirt into a hole, crevice, or against a structure such as a foundation.

Backup Contract

A contract to buy property that becomes effective if a prior contract fails to be agreed upon.

Balance Sheet

A financial statement in a table form that shows assets, liabilities, and net worth.

Bankrupt

A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.

Bankruptcy

A court proceeding in which a debtor, who owes more than his/her assets, can relieve the debts by transferring the assets to a trustee.

Before Tax Income

It is income before deducting taxes.

Beige Book

A survey of economic conditions, conducted in the Federal Reserve's 12 regional banks, in preparation for Federal Open Market Committee meetings. Frequency: Twice per quarter. Source: Federal Reserve.

Beneficiary

The person designated to receive benefits resulting from certain acts.

Bequeath

To transfer personal property through a will or last testament. Compare with Devise.

Betterment

An improvement to increase property value, as opposed to repairs or replacements that simply maintain value.

Billing Error

Any mistake in your monthly statement as defined by the Fair Credit Billing Act.

Bill of Sale

A written instrument that transfers title to personal property.

Binder

An agreement between a buyer and seller to purchase real estate. A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides it is to be refunded.

Binder Deposit

A sum of cash paid to a seller by a buyer prior to the closing to show the buyer is serious about buying the house. The binder deposit is deducted from the purchase price at closing and is not an additional cost. It is sometimes referred to as earnest money.

Blanket Insurance Policy

A single policy that covers more than one piece of property (or more than one person).

Blanket Mortgage

A single mortgage secured by more than one parcel of real estate.

Bona Fide

A statement made in good faith without fraud.

Bond

An interest-bearing certificate that serves as evidence of a debt with a maturity date. Typically, bonds represent obligations of a government or business corporation. A real estate bond is a written obligation, usually secured by a mortgage or deed of trust.

Breach of Contract

A violation of the terms of any legal obligation or agreement.

Bridge Loan

Sometimes called a "swing loan," a bridge loan is generally a loan secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Broker

A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.

Budget

A detailed plan of income and expenses estimated over a specified period of time. Budgets provide guidelines for managing costs and profits.

Budget Category

A category of income or expense data you can use in a budget.

Building Code

Regulations established by local governments to control design, construction, and materials used in construction. Building codes are usually based on standardized health and safety guidelines.

Business Days

Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually excludes weekends and holidays.

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C

California Bungalow

A small, one-story, compact, early-twentieth-century house.

California Ranch

A one-story, post-World War II style, ground-hugging house with a low, pitched roof.

Call Option

A provision in a home loan that gives the mortgagee the right to call the mortgage due and payable at the end of a specified time period for any reason.

Cancellation Clause

A contract provision that gives the right to terminate obligations upon the occurrence of specified events.

Cap

The cap refers to a provision of an ARM that limits how much the interest rate or payment can increase or decrease.

Capital

1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.

Capital Expenditures

The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital Improvement

Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.

Cash Out Refinance

A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. This additional cash may be used by the borrower for any purpose.

Cash Reserves

A requirement buyers have sufficient cash remaining after closing to make two months' payments (principal and interest), plus real estate taxes and homeowners insurance.

Certificate of Deposit (CD)

An instrument, issued by a financial institution, that is evidence of a type of savings deposit. The document includes the institution's promise to return the deposit, plus earnings at a specified interest rate within a specified period.

Certificate of Deposit Index

A rarely used index for determining interest rate changes for certain ARM plans.

Certificate of Eligibility

A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) Loan.

Certificate of Reasonable Value (CRV)

A document issued by the VA that establishes the maximum value and loan amount for a VA loan.

Certificate of Title

A statement of opinion rendered by a title company or attorney. It states a title to real property is legally held by the current owner.

Chain of Title

A history of all documents, including conveyances and encumbrances, that affect title to a parcel of real property. It starts with the earliest existing document and ends with the most recent.

Change Frequency

Term sometimes used to describe the frequency of payment or interest rate changes in an ARM.

Chattel

Anything tangible and owned, other than real estate. The same as personal property.

City/County Tax Stamp

A tax required in some municipalities if a property changes hands or a new mortgage is obtained. The amount of this tax can vary with each state, city, and county. For our comparison purposes, this fee is considered a tax or other unavoidable fee.

Civilian Employment

Economic indicator that reports the number of new civilian jobs created and the percentage of civilians in the job market who are unemployed. One of the most anticipated and closely watched economic indicators. Frequency: Monthly. Source: Labor Department.

Clear Title

A title that is free of clouds, liens, disputed interests, or legal questions as to ownership of the property.

Close of Escrow

A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.

Closing

A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker, and the lender. In the case of a refinance, the closing involves the borrower and the lender. This is sometimes referred to as the settlement or the close of escrow.

Closing Cost Item

A single fee a home buyer must pay at closing. Closing costs are made up of individual items — such as origination fees, escrow fees, underwriting fees, and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.

Closing Costs

The total of all the items to be paid at closing related to your new mortgage.

Closing Statement

Also referred to as the HUD-1 or the settlement statement, this is the document that provides line-by-line detail of the financial details related to a specific real estate transaction, such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Cloud on Title

Any conditions — such as encumbrances, liens, or claims — revealed by a title search that adversely affect the title to real estate. Clouds on a title often cannot be removed, except by a quitclaim deed release, or court action. Compare with Clear Title.

Coinsurance

A sharing of hazard insurance risk between the insurer and the insured or others. A coinsurance clause states to what extent a loss will be covered based on the percentage of value insured.

Collateral

Property pledged as security for a debt. The borrower risks losing the collateral if the debt is not repaid according to the terms of the loan contract.

Collection

The process of bringing a delinquent debt current and the filing of the necessary notices to proceed with repossession or foreclosure when necessary.

Co-Maker

A person who signs a promissory note along with the primary borrower. A co-maker's signature guarantees the loan will be repaid because the borrower and the co-maker are equally responsible for the repayment. Sometimes called a co-signer.

Commission

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a small percentage of the price of the property or amount borrowed. It is sometimes called points.

Commitment Letter

A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. It also is called a loan commitment.

Common Area Assessments

Charges against individual unit owners in a condominium complex, or planned unit development (PUD), for additional funds to repair, maintain, or improve the common areas of the project.

Common Areas

Those areas of a property (usually a planned unit development or condominium project) used by all owners or tenants. Common areas may include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings and parking areas.

Common Law

The body of law based on general custom in England and used to a certain extent in the United States. Common law sometimes prevails unless superseded by other law.

Community Home Buyer's Program

An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

Community Land Trust Mortgage Loan

An alternative financing option that enables low- to moderate-income homebuyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.

Community Property

In some western and southwestern states, a form of ownership under which property accumulated through joint efforts of husband and wife is presumed to be owned equally by them unless acquired as separate property of either spouse.

Comparables

An abbreviated form of comparable properties used for comparative purposes in the appraisal process. They are properties very similar to the property being appraised; have been sold recently; and have approximately the same size, location, and features. Comparables help the appraiser determine approximate fair market value of the subject property and are often just called "comps."

Compound Interest

Interest paid on the original principal balance and on the accumulated and unpaid interest.

Condemnation

The taking of private property for public purpose by a government under the right of eminent domain. Also, the determination a building is not fit for use or is dangerous and must be destroyed.

Condominium

A form of real estate ownership in which each owner has title to a specific unit in a project and joint ownership in the common areas of the project.

Condominium Conversion

Changing the ownership of an existing rental complex building to the condominium form of ownership.

Condominium Hotel

A condominium complex with registration desks, short-term occupancy, room service, and daily cleaning services. Such properties are often operated as commercial hotels, even though the units may be individually owned.

Conforming Loan

A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as "Jumbo Mortgages." The cost of obtaining a Jumbo Mortgage is generally higher than the cost of obtaining a conforming mortgage.

Construction Loan

A short-term loan used to finance the construction of a new home. During the term of the loan, the lender makes payments to the builder as the work progresses, and the borrower makes interest payments on only the funds that have been disbursed to the builder. Typically, the Construction Loan is refinanced into a permanent loan after the home is completed.

Construction Spending

Economic indicator that measures the total amount of spending in the United States on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume. Frequency: Monthly. Source: Commerce Department.

Consumer Confidence

A monthly survey of 5,000 households designed to measure Americans' optimism about their current situation and the future. Frequency: Monthly. Source: Conference Board.

Consumer Price Index (CPI)

The CPI measures the change in the cost of living for most American families. Widely followed as an indicator of inflation of retail purchases. Frequency: Monthly. Source: Federal Reserve.

Consumer Reporting Agency (CRA)

A company that prepares detailed reports used by lenders to determine a potential borrower's creditworthiness. These agencies obtain data for these reports from a credit repository, as well as from other sources. More Commonly referred to as credit bureaus.

Consumer Sentiment

An index designed to measure consumer optimism. Includes a preliminary report at mid-month and final report near month-end. Frequency: Semimonthly. Source: University of Michigan.

Contingency

A condition that must be met before a contract is legally binding. For example, a lender's commitment to provide financing to a borrower may be contingent on receipt of an acceptable appraisal.

Contract

An oral or written agreement to do or not to do a certain thing for consideration.

Conventional Mortgage

A mortgage that is not insured or guaranteed by a government agency.

Convertibility Clause

A provision in some ARMs that allows the borrower to change the ARM to a Fixed-Rate Mortgage at a specified period within the term of the loan.

Convertible ARM

An ARM that allows borrowers to convert their mortgage to a Fixed-Rate Mortgage for the remainder of the loan term if certain conditions are met.

Cooperative (Co-op)

A type of real estate ownership in which residents of a multi-unit property own shares of the corporation that owns the property. The ownership of these shares gives the owner the right to occupy a unit in the building.

Cooperative Corporation

A corporation that holds the title to a cooperative project and grants occupancy rights to shareholders through leases or similar rental agreements.

Cooperative Project

A residential or mixed-use building wherein a corporation holds title to the property, sells shares of stock, representing the value of a single apartment, to individuals who then receive a lease, or similar agreement, as evidence of title.

Cosigner

Another person who signs your loan and assumes equal responsibility for it.

Cost of Funds Index (COFI)

An index that may be used to determine the interest rate changes of an ARM. The COFI is the weighted average of interest rates that Federal Home Loan banks have paid to their customers recently. Usually, the COFI for the 11th district of Federal Home Loan Banks is used and covers banks in California, Nevada, and Arizona. The index value is announced on the last working day of the month following the month listed.

Courier/Mailing Fee

The fee associated with a lender sending documents to other parties, such as an attorney or title company, involved in the loan. For our comparison purposes, this fee is considered a third-party fee; however, some lenders may choose not to pass these costs on to the borrower.

Covenant

A promise written into deeds, mortgages and other financial instruments that obligates or restricts the borrower. The violation of some covenants can result in foreclosure.

Credit

A lender may reduce the actual amount of the closing costs by a credit in order to offer more competitive fees.

Credit Bureau

An agency that gathers and keeps your credit record.

Credit Grade

A value given to an individual to reflect his/her current and past debt repayment patterns. A grade of "A" is considered to be the best.

Credit History

A record of a person's debt history, including all open and fully repaid obligations. A credit history helps a lender to determine whether a potential borrower has satisfactory history of repaying debts in a timely fashion.

Credit Life Insurance

A type of insurance, often bought by borrowers, that will pay off the debt if the borrower dies while the policy is in force.

Credit-Related Insurance

Health, life, or accident insurance designed to pay the outstanding balance of a debt.

Credit Report

A record of an individual's current and past debt repayment patterns. A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner. For our comparison purposes, the credit report fee is considered to be a third-party fee.

Credit Repository

An institution that collects, maintains, stores, and sells financial and publicly recorded information about the payment records of individuals applying for credit.

Credit Scoring System

A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Creditor

A person or business that is owed money.

Customer Credit

Economic indicator that measures the level of outstanding consumer installment debt. It can be used in conjunction with real sales to determine whether cash or credit is fueling growth. Frequency: Monthly. Source: Federal Reserve.

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D

Damages

The amount recoverable by a person who has been injured in any manner through the act or default of another.

Debenture

An unsecured bond or note.

Debit

In a closing statement or settlement, an item charged to a buyer or seller. Compare with Credit.

Debit Card

A plastic card, which looks similar to a credit card, consumers may use to make purchases, withdrawals, or other types of electronic fund transfers.

Debt

An obligation to pay another.

Deed

The written instrument that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so the transfer of ownership is part of the public record.

Deed-in-Lieu

A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.

Deed of Trust

This document, referred to as a mortgage in some states, pledges a property to a lender or trustee as security for the repayment of a debt.

Deed Stamp

A tax required in some municipalities if a property changes hands. The amount of this tax can vary with each state, city, and county. For our comparison purposes, this fee is considered a tax or other unavoidable fee.

Default

A breech of the agreement with a lender, such as the failure to make loan payments in a timely manner.

Delinquency

The failure to make payments on debts when they are due.

Delivery Fee

A fee charged generally by the title company or attorney for the delivery of documents to your lender. For our comparison purposes, the delivery fee is considered to be a third-party fee.

Department of Veterans Affairs (VA)

An agency of the federal government that provides services and guarantees residential mortgages made to eligible veterans of the military services.

Deposit

Funds required by a lender in advance of the processing of a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.

Depreciation

A decline in the value of real or personal property. The opposite of appreciation.

Devise

A gift of real property by will or last testament.

Disburse

The act to pay out on the loan.

Disclosures

Information that must be given to consumers about their financial dealings.

Discount Points

Fees collected by the lender in exchange for a lower interest rate. Each discount point is 1 percent of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate. These are sometimes referred to as "points."

Discount Rate

The interest rate the Federal Reserve charges member banks for loans, using government securities or eligible paper as collateral. This provides a floor on interest rates because banks set their loan rates a notch above the discount rate.

Documentary Stamp

A tax levied by some local or state governments at the time the deeds and mortgages are entered into public record. For our comparison purposes, documentary stamps are considered to be a tax and other unavoidable fee.

Document Preparation

Lenders will prepare some of the legal documents — such as the mortgage, note, and truth-in-lending statement — you will be signing at the time of closing. This fee covers the expenses associated with the preparation of these documents.

Dower

The rights of a widow in the property of her husband upon his death.

Down Payment

The portion of the purchase price of a property the borrower will be paying in cash rather than included in the mortgage amount.

Draw Period

Generally associated with Home Equity Lines of Credit, the draw period is the period of time you can access funds from the line. After the draw period expires, a repayment period generally follows.

Due-On-Sale Clause

A provision in a mortgage allowing the lender to demand repayment in full, if the borrower sells the property that serves as security for the loan.

Durable Goods Orders

Economic indicator measures new orders placed with domestic manufacturers for immediate and future delivery of factory hard-goods. Monthly percent changes reflect the rate of change of such orders. Levels of and changes in Durable Goods Orders are widely followed as an indicator of factory sector momentum. Frequency: Monthly. Source: Commerce Department.

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E

Earnest Money

A sum of cash paid to a seller by a buyer prior to the closing to show the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as a binder deposit.

Easement

A right of way giving people, other than the owner, access to or over a property.

Easement by Prescription

The continued use of another person's property for a special purpose that can develop into permanent use if certain conditions are met.

Economic Base

The industry within a certain geographic area that provides employment opportunities essential to support the community.

Effective Age

An appraiser's opinion of the physical condition of a structure. The actual age of a building may be longer or shorter than its effective age.

Effective Gross Income

Normal annual income, which may include overtime and bonuses, that is regular, consistent, and guaranteed. A person's salary is usually the prime source, but other income may qualify if it is significant, documented, and stable.

Elderly Applicant

As defined in the Equal Credit Opportunity Act, a person who is 62 or older.

Electronic Fund Transfer (EFT) Systems

A variety of systems and technologies for transferring funds electronically rather than by check.

Eminent Domain

The right of a government to seize private property for public use upon payment of its fair market value. Eminent domain is the legal basis for condemnation proceedings.

Employment Report

Includes the unemployment rate, non-farm payroll, average work week, and overtime. The non-farm payroll is probably the most watched number. Increases in these numbers can be an indication of pending "wage inflation."

Encroachment

A property improvement or obstruction that physically intrudes upon the property of another.

Encumbrance

Anything affecting the title to a property — such as a mortgage, judgment, or easement.

Endorsements

Additions to a title insurance policy for special coverage — such as surveys, environmental, and state particular endorsements — not included in the standard insurance policy. For our comparison purposes, the fees for endorsements are considered to be a third-party fee.

Endorser

A person who signs ownership interest over to another party.

Equal Opportunity Act (ECOA)

The federal regulations that requires lenders to make credit equally available to all without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity

An owner's financial position in a property. Equity is the difference between the property's value and the amount owed on mortgages.

Escrow

Funds paid by one party to another to hold until a specific date when the funds are released to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their monthly principal and interest payments for the payment of real estate taxes and hazard insurance. This is also referred to as impounds. The money is held by the lender to make payments when they are due. An escrow also can refer to funds held by a third party to ensure the completion of repairs or improvements that must be completed on the property but cannot be done prior to closing.

Escrow Account

The account funds are kept in by the lender for the payment of real estate taxes and/or homeowner's insurance. Can also refer to the account funds are held in for the completion of repairs or improvements to a property that cannot be completed prior to closing.

Escrow Analysis

A periodic review of escrow accounts to determine if current monthly deposits balances will provide sufficient funds to pay property taxes, hazard insurance, and other bills when they come due.

Escrow Payment

The portion of a borrower's monthly mortgage payment held by the loan servicing company to pay for property taxes, hazard insurance, mortgage insurance, and other items as they become due.

Estate

The nature and extent of interest an individual has in real property (degree of ownership). Also, the combined total of all real and personal property owned by an individual at the time of his/her death.

Eviction

The legal expulsion of an occupant from real property. Usually exercised by a lessor against a lessee to recover possession of property.

Exam Fee

A fee associated with an inspection by a title company of public records and other documents to determine the chain of ownership of a property. For our comparison purposes, exam fee is considered to be a third-party fee. Some lenders may include this fee in the cost of the title insurance.

Examination of Title

The report on the title of a property from the public records. It is not as thorough as a full title search.

Exclusive Listing

A written contract giving a licensed real estate agent the exclusive right to sell property for a specific time but reserving the owner's right to sell the property without the payment of a commission.

Executor

A person named in a will to administer an estate. Most Courts will appoint an administrator if no executor is named. (The feminine form is executrix.)

Existing Home Sales

Reports the number of existing homes sold, expressed on an annual basis. Can be combined with New Home Sales to determine the total volume of home sales, a strong indicator of future national mortgage origination volume. Frequency: Monthly. Source: National Association of Realtors.

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F

Façade

The front outside wall of a building.

Face Interest Rate

The percentage interest rate shown on the actual loan note or document.

Factory Orders

Economic indicator measuring the total volume of orders placed with U.S. factories. Also includes inventory and order backlog components, which can offer insight into inflation and growth in the manufacturing sector. Frequency: Monthly. Source: Commerce Department.

Fair Credit Reporting Act

A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.

Fair Market Rent

The amount a property would command if it were currently available to rent or lease.

Fair Market Value

The highest price a willing, but not compelled, buyer would pay; and the lowest price that a willing, but not compelled, seller would accept.

Fannie Mae

Federal National Mortgage Association (FNMA) is one of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Federal Funds Rate

Interest rate charged by banks, with excess reserves at a Federal Reserve district bank, to banks needing overnight loans to meet reserve requirements. The federal funds rate is the most sensitive indicator of the direction of interest rates because it is set daily by the market. This is unlike the prime rate and the discount rate, which are periodically changed by banks and by the Federal Reserve Board, respectively.

Federal Housing Administration (FHA)

An area of the U.S. Department of Housing and Urban Development (HUD) that ensures low-down-payment mortgages granted by some lenders. The loan must meet the established guidelines of FHA in order to qualify for the insurance.

Federal Open Market Committee (FOMC)

Policy committee in the Federal Reserve System that sets short-term monetary policy objectives for the Fed. The committee is made up of the seven governors of the Federal Reserve Board, plus five of the 12 presidents of the Federal Reserve Banks.

Fee Simple

Absolute ownership of real property; the greatest possible interest a person can have in real estate.

Fee Simple Estate

An unconditional, unlimited estate of inheritance representing the greatest possible interest in land that can be enjoyed.

FHA Co-Insured Mortgage

A mortgage for which the FHA and the originating lender share the risk of loss in the event of the borrower's default.

FHA Mortgage

A mortgage insured by the FHA; it also is known as a government mortgage.

Finance Charge

The total dollar amount credit will cost.

Finders Fee

A fee paid to a mortgage broker for finding a mortgage for a potential borrower.

Firm Commitment

A lending institution's agreement to give a loan to a specific borrower on a specific property.

First Mortgage

A mortgage that is the first loan recorded in the public record and generally the primary loan against a property.

Fixed Installment

The monthly payment due on a mortgage loan, which includes both principal and interest.

Fixed-Rate Mortgage

A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common mortgage terms are 30 and 15 years. With a 30-year Fixed-Rate Mortgage, your monthly payments are lower than they would be on a 15-year Fixed-Rate Mortgage; but the 15-year loan allows you to repay your loan twice as fast and save more than half the total interest costs.

Fixtures

Personal property or improvements that become real property when attached to the land or building in a permanent manner.

Float

A term describing the interest rate for a loan that has not yet been guaranteed by a lender. If the lender has not yet guaranteed or locked the interest rate, it is floating and could change prior to closing.

Flood Certification

An inspection to determine if a property is located in an area prone to flooding, and it is also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third-party fee.

Flood Insurance

Insurance to protect a homeowner from the cost of damages to a property due to flooding or high water. It is required by law that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.

Floor

The interest rate below which the rate of an ARM cannot be adjusted.

Foreclosure

The legal process in which a borrower's ownership of a property is dissolved due to default. Typically, the property is sold at a public auction, and the proceeds are used to pay the loan in full.

Forfeiture

The loss of money, or anything else of value, due to a breach of legal obligation or contract.

Freddie Mac

Federal Home Loan Mortgage Corporation (FHLMC) is one of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Fully Amortized ARM

An ARM with monthly payments that are sufficient to liquidate the remaining principal balance during the amortization term.

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G

Gain

An increase in monetary or property value.

Gap Loan

Short-term financing, usually to cover a gap in time between a person's purchase of a home and that person's later receipt of funds, usually from the sale of their previous home. Sometimes called a Bridge Loan or swing loan.

Garden Apartment

An apartment housing complex where the tenants have free access to a lawn or garden area.

Gated Community

A private, fenced-in housing development, sometimes employing security guards.

Good Faith Estimate

A written estimate of the closing costs the borrower will have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Government Mortgage

A mortgage guaranteed by the VA or is insured by the FHA and can be compared with a conventional mortgage.

Government National Mortgage Association (GNMA)

A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created in 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by FNMA. It is commonly called Ginnie Mae.

Grant

A technical term used in deeds of conveyance of property to indicate a transfer.

Grantee

The person to whom an interest in real property is conveyed.

Grantor

The person conveying an interest in real property.

Green Sheet

The Real Estate Transfer Declaration prepared by an attorney, which accompanies a deed transferring title to real estate. The Green Sheet provides details of the transfer and is used to calculate the real estate transfer taxes that must be paid by the seller. In Illinois, this form is printed on green paper, hence the name Green Sheet.

Gross Domestic Product (GDP)

Measures aggregate economic activity available, encompassing every sector of the economy. Quarterly percent changes (at an annualized rate) in GDP reflect the growth rate of total economic output. GDP growth is widely followed as the primary indicator of the strength of economic activity. Frequency: Quarterly. Source: Commerce Department.

Ground Rent

The amount of money paid for the use of land when title to a property is held as a lease hold estate rather than a fee simple estate.

Group Home

A residential building designed for unrelated people with special needs. These homes provide long-term shelter and support services residential in nature.

Growing Equity Mortgage (GEM)

A Fixed-Rate Mortgage involving scheduled payment increases during a specified period of time. The increase amount of the monthly payment is applied directly to the remaining principal balance.

Guarantee Mortgage

A home loan guaranteed by a third party.

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H

Habendum Clause

The "to have and to hold" clause that defines the amount of the estate granted in the deed.

Half Bath

A half bathroom in a home that contains a wash sink and a toilet but no bathtub or shower stall.

Hangout

The principal balance of a loan remaining when the term of the loan is beyond the term of a lease.

Hazard Insurance

Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. It also is referred to as homeowner's insurance.

Home Equity Conversion Mortgage (HECM)

A special type of mortgage that enables seniors to convert the equity in their homes.

Home Equity Line of Credit (HELOC)

A loan secured by real property, usually in a subordinate position, that allows the borrower to receive the loan proceeds in the form of multiple advances up to a limit representing a maximum percentage of the borrower's equity in a property.

Home Equity Loan

A loan secured by a subordinate mortgage on one's principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.

Home Inspection

A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. A complete and satisfactory home inspection is often required by the homebuyer.

Homeowners Association

A nonprofit association that manages the common areas of a condominium project or planned unit development (PUD). In a condominium development, the association has no ownership interest in the common elements. In a PUD, it holds title to the common elements of the project.

Homeowners Association Dues

Payments made to an association responsible for the maintenance of the common areas in a condominium or subdivision development.

Homeowner's Insurance

Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as hazard insurance.

Homeowner's Warranty

A type of insurance policy that covers repairs to certain parts of a home for an agreed upon period of time. It is typically provided by the contractor or seller as a condition of the sale.

Housing Ratio

A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type and amount. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance) by the borrower's monthly gross income. Also referred to as a front-end ratio or a top ratio.

Housing Starts

Economic indicator measuring the number of residential units on which construction is begun each month. Monthly percent changes reflect the rate of change of such activity. The level of housing starts is widely followed as an indicator of residential construction activity. Frequency: Monthly. Source: Commerce Department.

U.S. Department of Housing and Urban Development (HUD)

HUD ensures Home Loans made by lenders meet minimum standards for such homes.

HUD Median Income

Median family income for a particular county or metropolitan statistical area, as estimated by HUD.

HUD-1 Statement

Also referred to as the closing statement or the settlement statement, this is the document that provides line-by-line detail of the financial details related to a specific real estate transaction, such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

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I

Illiquidity

Having inadequate cash to meet current obligations. Real property is considered an illiquid investment because of the time and effort required to convert it to cash.

Implied Agency

Form of agency that occurs when the words and actions of the parties indicate there is an agency relationship.

Implied Contract

A contract created by actions but not necessarily written or spoken.

Impound Account

A fund set aside for future needs, such as an escrow or reserve account.

Impounds

An impound refers to the funds a mortgagor pays to the lender along with his/her monthly principal and interest payments for the payment of real estate taxes and hazard insurance. This is also referred to as an escrow account. The money is kept by the lender to make payments when they are due.

Income Property

Real estate developed and improved to produce steady income.

In-File Credit Report

A computer-generated report containing credit and legal information obtained from one of the main credit bureaus.

Index

A published interest rate used to establish the interest rate offered on an ARM. Some of the most common indices are treasury bills, treasury securities, London Inter-Bank Offering Rates (LIBOR), and the Cost of Funds Index (COFI).

Index of Leading Indicators

An index of 11 indicators designed to forecast the strength of the economy six to nine months in the future. Frequency: Monthly. Source: Commerce Department.

Individual Retirement Account (IRA)

A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in financial accounts or in other forms of investment such as stocks, bonds, or mutual funds.

Industrial Production

A fixed-weight measure of physical output of the nation's factories, mines, and utilities. Monthly percent changes in the index reflect the rate of change in output. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. Frequency: Monthly. Source: Federal Reserve.

Inflation

An increase in the amount of money or credit available relative to the amount of goods or services available. Inflation causes an increase in the general price level of goods and services. Over prolonged periods, inflation can reduce the purchasing power of a dollar, making it worth less.

Initial Interest Rate

The original, starting interest rate of a loan at the time of closing. This rate changes for an ARM. It is sometimes called a teaser rate.

Installment

A regularly scheduled periodic payment a borrower agrees to make to a lender.

Installment Loan

Borrowed money repaid in equal periodic payments. Cars and furniture are often paid for with installment loans.

Insurable Title

A property title a title insurance company agrees to ensure against defects and claims.

Insurance

A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.

Insurance Binder

A document stating insurance is only temporarily in effect. Because the coverage will expire by a certain date, a permanent policy must be obtained prior to the expiration date.

Insured Mortgage

A mortgage protected by the FHA 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 cost of the use of money.

Interest Accrual Rate

The rate at which interest accrues on a mortgage. Usually, it is also the rate used to calculate the monthly payments.

Interest Rate

The cost of borrowing a lender's money. Interest takes into account the risk and cost to the lender for a loan. The interest rate on a Fixed-Rate Mortgage depends on the going market rate and how many discount points you pay up-front. An ARM's interest is a variable rate made up of the index and the lender's margin.

Interest Rate Ceiling

The maximum interest rate for an ARM, as specified in the mortgage loan note.

Interest Rate Floor

The minimum interest rate for an ARM, as specified in the mortgage loan note.

Investment Property

A property not occupied by the owner.

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J

Jeopardy

An element of risk or danger.

Joint Account

A credit account held by two or more people so all can use the account and all assume legal responsibility to repay.

Joint and Several Liability

A situation whereby a creditor can demand full repayment from any and all borrowers. Each borrower is liable for the full debt, not just the prorated share.

Joint Tenancy

A form of co-ownership that gives each tenant equal undivided interest and equal rights in the property, including the right of survivorship.

Joint Venture

An agreement between two or more parties who invest in a property or business.

Judgment

A decree made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.

Judgment Lien

A lien on the property of a debtor resulting from a judgment.

Judgment Search Fee

A fee charged by a title company to search the public record for judgments filed against a property owner or borrower that could ultimately encumber the title of the property. For our comparison purposes, a judgment search fee is considered to be a third-party fee.

Judicial Foreclosure

Type of foreclosure proceeding used in some mortgage states handled like a civil lawsuit and conducted entirely under the direction of a court.

Jumbo Mortgage

A loan exceeding the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a Jumbo Mortgage is generally higher than the cost of obtaining a conforming mortgage. This also is known as a non-conforming loan.

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K

Keogh Plan

A tax-deferred pension account designated for employees of unincorporated businesses or for people who are self-employed.

Kicker

A payment sometimes required by a mortgage loan in addition to normal principal and interest.

Kiosk

An independent stand from which merchandise is sold or services completed.

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L

Laches

Undue delay or negligence in asserting one's legal rights.

Land

Any part of the surface of the earth.

Land Banking

The business of buying land not currently needed for use.

Land Contract

A property installment selling agreement whereby the purchaser may occupy and use the land, but no deed is given by the seller until a specified part of the sales price has been paid.

Late Charge

The penalty a borrower must pay when a payment is made after the stated due date.

Late Payment

A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.

Lease

A written contract between a property owner and a tenant that expresses the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Leasehold Estate

A way of holding title to a property wherein the mortgagor does not actually own the property, but instead has a long-term recorded lease on it.

Lease-Purchase Mortgage Loan

A creative financing option that allows homebuyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount deposited into a savings account created for a down payment.

Legal Description

A legal property description sufficient to locate and identify the property without verbal testimony.

Lien

A legal claim against a property.

Lender

The bank, mortgage broker, or financial institution providing the loan funds to a borrower.

Lender Fees

Fees kept by the lender to cover some of expenses and to meet its profitability goals. Typically fees such as origination fees, discount points, processing/administration fees, underwriting fees, and document preparation fees are lender fees. This is the area of fees you should compare very closely from lender to lender before making a decision.

Lessee

A person or company that signs a lease to get temporary use of property.

Lessor

A person or company that provides temporary use of property usually in return for periodic payment.

Liabilities

A person's financial obligations, including both long-term and short-term debt, as well as any other amounts owed others.

Liability Insurance

An insurance policy offering protection against claims a property owner's negligence resulted in bodily injury or property damage to another party.

Liability on an Account

Legal responsibility to repay debt.

LIBOR

See London Inter-Bank Offered Rates.

Lien

A loan secured by real estate. An encumbrance against a property for money due. The lien can be voluntary, such as a mortgage, or involuntary, such as a judgment.

Lien Certificate

A certificate to verify there are no claims by one person on the property of another as security for money owed.

Lifetime Interest Rate Cap

On an ARM, a limit on the amount the interest rate can increase or decrease throughout the term of the loan.

Lifetime Payment Cap

On an ARM, a limit on the amount payments can increase or decrease throughout the term of the loan.

Line of Credit

An agreement by a financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset

An asset easily converted into cash.

Loan

Borrowed money usually repaid with interest.

Loan Commitment

A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. It also is called a commitment letter.

Loan Origination

The process by which a mortgage lender creates a mortgage secured by real property.

Loans In Process (LIP)

Loan proceeds placed into a special account for the completion of improvements or repairs to the property.

Loan Term

The number of months you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term, and no balance will be due.

Loan-to-Value Ratio (LTV)

A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan-to-value ratio, divide the loan amount by the home's value. The LTV ratio is used to determine what loan types the borrower qualifies for, as well as the cost and fees associated with obtaining the loan.

Loan Purpose Max LTV % Points/Rate
Purchase
Owner-Occupied Single Family — 1 unit 95 0 points
Owner-Occupied Single Family — Rural Housing 100 of appraisal 2% fee
Owner-Occupied Multiple Units — 2 units 90 0 points
Owner-Occupied Multiple Units — 3-4 units 80 0 points
Owner-Occupied Manufactured Housing — 20-year term 95 0 points
Owner-Occupied Manufactured Housing — 30-year term 90 0 points
Non-owner Occupied
Family members only
70 1.5 points
Investment Property
Total business loan relationship limited to $50,000. Please contact Business Services for anything more than $50,000.
70 1.5 points
Construction-Permanent 90 0 points
Completion Loans    
Purchase
Borrower does not own lot; generally, purchasing from builder.
95 0 points
Refinance
Borrower does own lot; generally, paying off another lender’s construction note or builder may have carried financing during construction.
95 0 points
Jumbo Loans    
Loan amounts $417,000 or greater; 15-year Fixed-Rate or 30-year ARM with no conversion 90 1 point
Does not reduce rate
Refinance    
1-Unit Property/Single-Family Residence    
Owner-Occupied Limited Cash Out (balance & closing costs)
No subordinate financing
95 0 points
Owner-Occupied Limited Cash Out (balance & closing costs)
With subordinate financing up to 95% CLTV
90 0 points
Owner-Occupied Cash Out
No cash-out refinances on non-owner-occupied property.
0-75 0 points
Owner-Occupied Cash Out
Max LTV/CLTV 85%
75.01-85 .75 points
2-Unit Property    
Owner-Occupied Limited Cash Out (balance & closing costs)
No subordinate financing; can go to 95% if median FICO more than 680 (700 if self-employed)
90 0 points
Owner-Occupied Limited Cash Out (balance & closing costs)
With subordinate financing up to 90% CLTV
90 0 points
Owner-Occupied Cash Out
No subordinate financing Max LTV 75%; with subordinate financing Max LTV 75%, Max CLTV 75%; if credit score 720 (740 self-employed), can go to 90% LTV; points above 75% would apply (see 1 unit point chart.)
0-75 0 points
3- to 4-Unit Property    
Owner-Occupied Limited Cash Out
(balance & closing costs)
No subordinate financing
80 0 points
Owner-Occupied Limited Cash Out (balance & closing costs)
With subordinate financing up to 80% CLTV
80 0 points
Owner-Occupied Cash Out
No subordinate financing Max LTV 75%; with subordinate financing Max LTV 75%, Max CLTV 75%
0-75 0 points
Manufactured Housing    
Owner-Occupied Limited Cash Out Refinance (Primary Residence)
20-year term
65 0 points
Owner-Occupied Limited Cash Out Refinance (Primary Residence)
30-year term
90 0 points
Owner-Occupied Limited Cash Out Refinance (Second Home)
30-year term
90 0 points
Owner-Occupied Limited Cash Out Refinance (Primary Residence)
20-year term
65 0 points

Lock

Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.

Lock-In

Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.

Lock Period

The number of days the lender will guarantee the interest rate offered for a loan. In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.

London Inter-Bank Offered Rates (LIBOR)

An index used to establish the interest rate of some ARMs, it is the interest rate at which the highest rated banks offer to lend to one another in Eurodollars. LIBOR offers various maturities — including one-month, three-month, six-month and one-year. However, the six-month index is most common for mortgages. LIBOR is quoted daily in the Wall Street Journal's Money Rates.

Lot Drawing

A fee, usually associated with a survey or title policy, to obtain a plat of the property to verify there are not encroachments or easements that would affect a lender's desire to provide financing. For our comparison purposes, the lot drawing fee is considered to be a third-party fee.

Lump Sum Payment

A lump sum is applied toward the principal balance, which may qualify to reduce future monthly principal and interest payments for the remainder of the loan's original term without the expense of refinancing. The term and rate will remain the same.

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M

MACRS

Modified Accelerated Cost Recovery System.

Maintenance

Activities required to compensate for wear and tear on a property.

Management Fee

The fee charged for professional property management. It is usually set at a fixed percentage of total rental income generated by the managed property.

Mansion Tax

A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another, particularly for high valued properties. For our comparison purposes, this fee is considered to be a tax or other unavoidable fee.

Margin

The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

Master Association

A homeowners' association sometimes formed in a large condominium project or planned unit development (PUD) that is made up of representatives from associations covering specific areas within the project.

Maturity

The date on which the principal balance of a financial instrument becomes due and payable.

Maximum Financing

Usually, a loan amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product.

Merged Credit Report

A credit report that contains information from at least three credit repositories. Any duplicate entries are combined to provide a concise summary of a your credit.

Modification

Changing the terms of an existing loan without recording a new Home Loan on the property.

Monetary Policy

Actions by the Federal Reserve System to influence the cost and availability of credit with the goals of promoting economic growth, full employment, price stability, and balanced trade with other countries.

Money Market Account

A type of savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions may apply to the withdrawal of funds.

Money Market Fund

A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and United States Treasury bills.

Mortgage

The legal document used by a borrower to pledge his/her property as security in order to obtain a loan. In some areas of the country, the mortgage is called a "deed of trust."

Mortgage Banker

A company that originates mortgages for resale in the secondary mortgage market.

Mortgagee

The person or company who provides the loan funds to the borrower.

Mortgage Insurance

Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The borrower usually pays the cost of the insurance and is most often required if the loan amount is more than 80 percent of the home's value. Sometimes referred to as Private Mortgage Insurance (PMI).

Mortgage Insurance Premium (MIP)

Amount paid by a borrower for mortgage insurance, either to a government agency, such as the FHA, or to a PMI company.

Mortgage Life Insurance

A type of term life insurance often bought by mortgagors. In the event the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. This is not to be confused with Mortgage Insurance.

Mortgage Registration Fee

A fee or tax charged by some state and local governments when a mortgage is obtained. For our comparison purposes, the mortgage registration fee is considered to be a tax and other unavoidable fee.

Mortgage Tax

A tax charged by some state or local governments paid to the state when a mortgage is obtained. For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.

Mortgagor

The person who receives funds from a lender in exchange for a security interest in the property. This person is commonly known as the borrower.

Multifamily Mortgage

A residential mortgage on a dwelling, such as an apartment complex, designed to house more than four families.

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N

Name Search

A fee charged by title companies in some states to cover the cost of searching the public record for court orders against the current owner or proposed purchaser that could affect the title of the property. For our comparison purposes, the name search fee is considered to be a third-party fee.

National Association of Purchasing Management (NAPM) Survey

This prices-paid index gives insight into inflation in the manufacturing sector. A reading above 50 percent generally indicates the manufacturing sector is expanding, and below 50 percent signifies contraction. Frequency: Monthly. Source: National Association of Purchasing Management.

National Association of Realtors®

An organization of Realtors® devoted to encouraging professionalism in real estate activities.

National Tenant

A lessee with a presence and established reputation in most of the United States. These tenants are typically well-known and usually have better credit than local tenants.

Negative Amortization

A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.

Net Cash Flow

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance.

Net Closing Costs

For our comparison purposes, the net closing costs are the total closing costs quoted by a lender, less any credit or rebate that is offered.

Net Worth

The total value of all a person's or company's assets, minus all liabilities.

New Home Sales

Reports the number of new single-family homes sold, expressed on an annual basis. Can be combined with Existing Home Sales to determine the total volume of home sales, a strong predictor of future national mortgage origination volume. Frequency: Monthly. Source: Commerce Department.

No-Cash-Out Refinance

A refinance loan is an amount that pays off the existing mortgage balance on the property and does not provide the borrower with any cash at closing.

Non-Conforming Loan

A mortgage that exceeds the maximum loan amount for the most common mortgage investors. The cost of obtaining a non-conforming mortgage is generally higher than the cost of obtaining a conforming mortgage. It is also known as a Jumbo Loan.

Non-Liquid Assets

Any assets that cannot easily be converted into cash.

Notary Fee

A fee for a licensed notary public to certify your signature on the loan documents.

Note

The written agreement containing the promise to repay the loan; it is signed by the borrower at closing. The note also contains the terms of the loan, such as interest rate, payment, and term.

Note Rate

The interest rate stated on a mortgage note, it is also called nominal rate or face interest rate.

Notice of Default

Formal written notice to a borrower that a default on a loan has occurred and legal action may be taken.

Number of Application Questions

To apply for an online mortgage, applicants are asked to provide personal and financial data about themselves. In order to help compare one site to another, we have estimated the number of questions that must be answered to complete an application at each site.

NY Tax & Title Search

A fee charged by New York title companies or attorneys to cover the cost of searching the public record for court orders against the current owner or proposed purchaser that could affect the title of the property. The tax records are searched as well. For our comparison purposes, the NY Tax & Title Search fee is considered to be a third-party fee.

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O

Obligee

A person or company whose favor an obligation is entered into.

Obligor

A person or company who has engaged to perform some obligation.

Occupancy Rate

Percentage of currently rented units in a building, neighborhood, complex, or city.

Offer

A buyer's expression of willingness to purchase a property at the seller's specified price.

Offer to Purchase

An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his/her mind or is unable to purchase, the earnest money paid is forfeited, unless the binder expressly provides that it is to be refunded.

Online Approval

An instant approval provided by some online lenders as soon as you complete the online application. An online approval saves you time.

Online Rate Locks

The ability to lock in an interest rate directly from the website of a lender. The online rate lock capability means you don't have to make telephone contact during business hours when you are ready to lock in your interest rate.

Online Status

The ability to obtain status details about the progress of your mortgage request at the website of the lender. This convenience allows you to learn about the status of your request anytime you would like.

Original Principal Balance

Total amount of principal owed on a loan before any payments are made.

Origination Fee

A fee charged by a lender as a way to cover processing expenses or to increase their profitability for originating a mortgage loan. Most commonly, the origination fee is expressed as a percent of the loan amount.

Owner Financing

A real property purchase transaction in which the seller provides the financing.

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P

Package Mortgage

A mortgage agreement in which the principal amount loaned is increased because personal property as well as real property serve as security.

Pad Site

A single freestanding retail site, often adjacent to a mall or larger shopping center.

P&I

The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.

Paper

Credit given, evidenced by a written obligation with property as collateral.

Partial Payment

A loan payment not great enough to cover the scheduled monthly payment on a mortgage.

Payment Change Date

The date when a new monthly payment amount takes effect on an ARM. The payment change date usually occurs in the month immediately after the adjustment date.

Periodic Payment Cap

On an ARM, a limit on the amount payments can increase during a single adjustment period.

Periodic Rate Cap

On an ARM, a limit on the amount the interest rate can increase during a single adjustment period.

Personal Income

Economic indicator that measures the total income of all Americans from all sources and is reported both before and after taxes. It also reports personal spending and personal savings. The level of spending can be used as an indicator of consumer optimism. Frequency: Monthly. Source: Commerce Department.

Personal Property

Any and all property that is not real property.

PITI

(P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term, as well as monthly escrow payments for taxes and insurance.

Planned Unit Development (PUD)

A housing project that includes common property owned and maintained by a homeowners' association for the benefit and use of the individual unit owners.

Plat Drawing & Conservation Fee

A fee charged by title companies in some states for obtaining a map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. This drawing is required to obtain title insurance. For our comparison purposes, the plat drawing and conservation fee is considered to be a third-party fee.

Plat Registration

A fee charged by title companies in some states to review the registration of a public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. For our comparison purposes, the plat registration fee is considered to be a third-party fee.

Points

Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1 percent of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate.

Power of Attorney

A written legal instrument authorizing another person to act on one's behalf. A power of attorney can grant either complete or limited authority.

Pre-foreclosure Sale

A process in which the lender allows a borrower to avoid foreclosure by selling the property for less than the amount that may be owed to the lender.

Prepaids

Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.

Prepayment

Any amount paid to reduce the principal balance, not interest, of a loan before the due date. CEFCU does not charge a fee for prepayment.

Prepayment Penalty

A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.

Prequalification

Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.

Prime Rate

The interest rate banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.

Principal

The actual balance, excluding interest, of a mortgage loan. It also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.

Principal & Interest

The monthly payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I."

Principal Balance

The outstanding balance of principal on a loan. Principal does not include interest or fees.

Private Mortgage Insurance (PMI)

Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80 percent of the home's value. Sometimes referred to as mortgage insurance.

Processing/Administration Fee

A fee charged by a lender to cover the administrative costs of processing a loan request.

Producer Price Index (PPI)

Measures the average level of prices of a fixed basket of goods received in primary markets by producers. Monthly percent changes reflect the rate of change in such prices. Changes in the PPI are widely followed as an indicator of commodity inflation. Frequency: Monthly. Source: Labor Department.

Productivity

An economic indicator that measures the output per hour of work for non-farm business production. Can be used in conjunction with the rate of change in GAP to determine whether economic growth is likely to be inflationary. A separate component measures unit labor costs, an important indicator of future inflation. Frequency: Quarterly. Source: Labor Department.

Promissory Note

A written promise to pay a specified sum to specified person during a specified period of time.

Property Taxes

Taxes based on the assessed value of the home, paid by the homeowner for community services — such as schools, public works, and other costs of local government. It is sometimes paid as a part of the monthly mortgage payment.

Public Auction

A gathering at a pre-announced public location to sell property to satisfy a mortgage that is in default.

Public Record

A collection of legal documents filed with the local government registry so the public will know what liens, encumbrances, or judgments may affect any piece of real estate.

Purchase Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchasing Managers Association of Chicago (PMAC) Survey

The PMAC Survey is a composite diffusion index of manufacturing conditions in the Chicago area. Readings above 50 percent indicate an expanding factory sector.

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Q

Quadrangle

A square-shaped land area, 24 miles on each side. Frequently used in the government rectangular survey method of land description.

Qualifying Ratios

Calculations performed by lenders to determine your ability to repay a loan. The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income. The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.

Qualifying Thrift Lender

A lender who specializes in home mortgage finance under the rules established by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

Quantity Survey

A method used by appraisers to estimate how much it would cost to reproduce an improvement.

Quitclaim Deed

A deed that transfers, without warranty, whatever interest or rights a grantor may have at the time the transfer is made. Often used to remove a possible cloud on the title.

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R

Radon

A naturally appearing radioactive gas found in some buildings, that, in sufficient concentrations, may cause health problems.

RAM

Reverse-Annuity Mortgage.

Ranch House

Once described a low, one-story house typical of the western United States. The term is now used to describe just about any one-story home.

Rate

The annual rate of interest for a loan; it is also called the interest rate.

Rate Change Cap

The maximum amount an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an ARM.

Rate Lock

An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.

Rate of Interest

Same as interest rate.

Real Estate Agent

A person licensed to negotiate the purchase and sale of real estate on behalf of buyers and sellers.

Real Estate Settlement Procedures Act (RESPA)

A consumer protection law that requires mortgage lenders and brokers to give borrowers advance notice of closing costs in the form of a Good Faith Estimate.

Real Property

Land and anything permanently affixed to the land — including structures, trees, minerals, and the interest, benefits — and rights thereof.

Realtor®

A real estate broker or associate who is an active member of a local real estate board affiliated with the National Association of Realtors.

Reconveyance Fee

This fee is charged by title companies or attorneys in some states and covers the cost of removing your current lender's lien from your property title when you refinance. A reconveyance fee is considered to be a third-party fee.

Recordation Exam

A fee charged by the title company in some states to review documents to assure they meet the state standards prior to being recorded. A reconveyance fee is considered to be a third-party fee.

Recorder

The public official who keeps records of transactions that affect real property in a specific geographic area (usually a county). A recorder is often known as a County Recorder or County Clerk.

Recording

The entering in a book of public record the details of a properly executed legal instrument that affects title to real property, thereby making it a part of the public record.

Recording Fees

A fee charged by the local government to record mortgage documents into the public record so any interested party is aware a lender has an interest in the property. For our comparison purposes, a recording fee is considered to be a tax or other unavoidable fee.

Refinance

The process of paying off any existing mortgages on a home with a new mortgage loan.

Release Fee

The fee charged to release a lien to free real estate from a mortgage.

Remaining Balance

The amount of principal owed on a loan that has not yet been fully repaid.

Remaining Term

The number of payments left to be made on a loan before it is fully amortized (paid in full).

Rent Loss Insurance

An insurance policy that protects a landlord against loss of rent or value due to natural casualties that renders the premises unsuitable for use and therefore excuses the tenant from paying rent.

Repayment Plan

An agreement between a lender and a borrower, made to help the borrower repay delinquent installments.

Replacement Reserve

An amount set aside from net operating income for replacement of short-lived common property in cooperative housing projects such as condominiums.

Rescission

The cancellation of a contract by the operation of a law or by mutual consent. In some circumstances, borrowers have the right to cancel a transaction within three business days after closing.

RESPA

See Real Estate Settlement Procedures Act.

Retail Sales

Measures total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Frequency: Monthly. Source: Commerce Department.

Retirement Plan 401(k) & 403(b)

Employer-sponsored investment plans that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by private corporations. 403(b) plans are provided by non-profit organizations.

Retirement Plan 401(k) & 403(b) Loans

Some administrators of 401(k) and 403(b) plans allow for loans against the funds you have accumulated in these plans.

Reverse Mortgage

See Home Equity Conversion Mortgage.

Revolving Credit

A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount actually borrowed plus any interest due.

Right of First Refusal

A contract provision that requires a property owner to give another party the first opportunity to purchase or lease the property before it is offered to others.

Right of Ingress or Regress

The right to enter or leave specific property or premises.

Right of Survivorship

In joint tenancy, the right of surviving joint tenants to acquire the interest of a deceased joint tenant.

Rural Housing Service (RHS)

An agency within the United States Department of Agriculture that provides financing to farmers and other qualified borrowers buying.

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S

Safe Harbor

A set of rules and regulations that will guarantee compliance with the law, if followed.

Safe Rate

An interest rate provided by low-risk investments, such as high grade bonds or secured first mortgages.

Sale-Leaseback

A technique in which a seller deeds property to a buyer, who simultaneously leases the property back to the seller.

Sales Contract

An agreement between a buyer and seller to purchase real estate. A sales contract, also known as an offer to purchase or a binder, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his/her mind or is unable to purchase, the earnest money paid is forfeited unless the binder expressly provides it is to be refunded.

Sales Disclosure

A state specific form that may need to be filed, disclosing everything about the sale of the home.

Salesperson

A person who is licensed to make real estate transactions while under the supervision of a broker licensed by the state.

Search and Exam Fee

A fee charged by a title company or attorney in some states to perform a check of the title records that verifies the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.

Search and Survey

A fee charged by a title company in some states to perform a check of the public record to verify that the buyer is purchasing a home from the legal owner and there are no liens, overdue assessment, or other claims that would adversely affect the transfer of title. In addition, a search is performed to ensure there are no issues a survey would show that could affect the property.

Search Fee

A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.

Secondary Mortgage Market

The buying and selling of existing mortgages, primarily residential first mortgages.

Second Mortgage

A loan that has a lien position subordinate to the first mortgage.

Secured Loan

A loan backed by collateral.

Security

The collateral offered to a lender in exchange for a loan. When a lender provides a mortgage, you provide your home as the security. This means if payments are in default, the lender has the right to take title to the property.

Security Interest

The lender's right to take property offered as security.

Seller Take-Back

An arrangement in which the owner of a property provides financing.

Servicer

A company that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer may or may not be the original lender.

Servicing

The collection of the monthly payment from the borrower by the lender and the administration of any escrow payments.

Settlement

A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. It is sometimes referred to as the closing or the close of escrow.

Settlement or Closing Fee

A fee charged by a title company, closing agent, or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.

Settlement Statement

Also referred to as the HUD-1 or the closing statement, this is the document that provides line-by-line detail of the financial details related to a specific real estate transaction — such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Smart Lock

CEFCU offers Smart Lock,* which allows you to lock in your rate for 90 days. With Smart Lock, you:

  • Can lock your rate for 90 days when you apply for preapproval and pay a non-refundable $350 application fee.
  • Continue shopping for the perfect home.
  • Close on your new home within 90 days of locking the rate.

*Smart Lock available for mortgages used for the purchase of a primary or retirement home; it does not apply to Construction Loans.

Standard Payment Calculation

The process used to determine the monthly payment required to repay the remaining principal balance of a loan in fairly equal installments during the remaining term of the loan at the current interest rate.

State/Local Tax Fees

A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

State Tax Stamps

A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Step Mortgage

A type of ARM that allows for the interest rate to increase according to a specified schedule. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan. It is sometimes called a step-rate mortgage.

Subdivision

A housing development created by dividing a large parcel of land into many individual lots for sale.

Subordinate Financing

Any mortgage or other lien with a lower priority than that of the first mortgage.

Survey

A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor. The survey is typically a written map of the property showing locations of buildings and boundaries. In some states a survey is required by a title company to issue a title insurance policy. A survey fee is considered to be a third-party fee.

Survey Affidavit

A fee charged by a title company to issue an insurance policy without requiring a full survey be completed.

Sweat Equity

Contribution to the construction of a property in the form of labor or services, instead of cash.

Swing Loan

Sometimes called a Bridge Loan, a swing loan is generally a loan secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

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T

Tacking

Adding on to a certain period of time.

Takeout Financing

A firm commitment to provide permanent long-term financing after a construction project is completed.

Taking

The acquisition of a piece of land, usually through condemnation.

Tangible Property

Real estate and other property of value that can be seen and touched.

Tax Base

The total value of property, income, or other taxable assets subject to taxation.

Tax Certificate

A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Taxes and Other Unavoidable Fees

Fees we consider to be taxes and other unavoidable fees include State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If you see a tax or recording fee in the fee comparison table listed by some of the sites and not others, do not assume you won't have to pay it. It probably means the lender who doesn't list the fee hasn't done the research necessary to provide accurate closing cost information nationwide. Contact one of the sites directly for more information or talk to your real estate agent or attorney for guidance.

Tax Service Fee

A fee charged to a borrower by a lender so another company will assume responsibility for verifying the amount of real estate taxes due and taxes have been paid during the life of the loan. For our comparison purposes, a tax service fee is considered to be a third-party fee; however, some lenders may not charge for this service.

Tenancy by the Entirety

Type of joint tenancy that provides the right of survivorship and is available only to a husband and wife. Compare with tenancy in common.

Tenancy in Common

Type of joint tenancy without the right of survivorship. Compare with tenancy by the entirety and with joint tenancy.

Term

The loan term is the number of months you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due.

Third-Party Fees

Third-party fees are usually fees the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Fees we consider third-party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees. Typically, you'll see some minor variances in third-party fees from lender to lender because a lender may have negotiated a special charge from a provider they use often or chosen a provider that offers nationwide coverage at a flat rate. You also may see some lenders absorb minor third-party fees — such as the flood certification fee, tax service fee, or courier/mailing fees.

Title

A legal written instrument evidencing a person's lawful possession of a property.

Title Company

A company that specializes in examining titles to real estate and issuing title insurance.

Title Examination

A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.

Title Insurance

An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property and defects in the title not found in the search of the public record. For our comparison purposes, the title insurance cost is considered to be a third-party fee.

Title Opinion

A statement issued by an attorney as to the quality of title after examining an abstract of title. It is also referred to as an Attorney Opinion.

Title Search

An examination of the public title records to determine the legal ownership of a property and to ensure there are no liens, encumbrances, or other claims outstanding.

Total Closing Costs

This is the total of all the items that must be paid at closing related to your new mortgage. Because the exact charges for some of these items cannot be obtained until the time of closing, the figure may only be an estimate.

Total Debt Ratio

A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type. It is calculated by dividing the monthly housing expense — Principal, Interest, Taxes, and Insurance plus all other monthly debt obligation — by the borrower's monthly gross income. Also referred to as a back-end ratio or a bottom ratio.

Trade Equity

Equity resulting from a buyer giving an existing property as trade for all, or part of, the down payment on the subject property.

Transfer of Ownership

Any legal method by which the ownership of property changes hands.

Transfer Tax

A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee. It may also be referred to as an Intangible Tax.

Treasury Bills

An index used to establish interest rates for adjustable rate mortgages. It is based on the interest rate paid to private investors by the U.S. Government to obtain funding for the national debt and other expenses. Sometimes called T-bills, they are available in denominations of 3 months, 6 months, and 1 year. The 3-month and 6-month Treasury bills are auctioned every Monday, and the 1-year Treasury bills are auctioned on Tuesdays. The resulting figures are released to the public the next day. This index can have either a weekly or a monthly value.

Treasury Bond

Negotiable, long-term U.S. Government debt obligation with a maturity of 10 years or longer issued in minimum denominations of $1,000.

Treasury Index

An index used to determine interest rate changes for some ARM programs. It is often based on the U.S. Treasury's daily yield curve.

Treasury Note

An intermediate U.S. Government security with a maturity of 1 to 10 years. Denominations range from $1,000 to $1 million or more. The notes are sold by cash subscription, in exchange for outstanding or maturing government issues, or at auction.

Treasury Securities

An index used to establish interest rates for adjustable rate mortgages. It is based on the yields of actively traded 1-year, 3-year, or 5-year Treasury Securities adjusted to constant maturities. The Treasury Security indices are calculated by the U.S. Treasury and reported by the Federal Reserve Board. These indices have either a weekly or a monthly value. The weekly indices are released on Monday afternoon for the previous week. Monthly values for these indices are generally available on the first Monday of the following month.

Trustee

A fiduciary who holds property in trust for another to secure performance of an obligation or act.

Truth in Lending Act

Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the APR within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.

Two-Step Mortgage

A type of ARM that has one interest rate for the first few years (typically 5 or 7) and a different rate for the remainder of the amortization term.

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U

Underlying Mortgage

Generally refers to the first mortgage when there is a wraparound mortgage.

Underwriting

Detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower's credit history, as well as an examination of the value and quality of the subject property.

Underwriting Fee

A fee charged by some lenders to cover the cost of the lender's analysis of the risk associated with a loan. For our comparison purposes, an underwriting fee is considered to be a lender fee.

Undivided Interest

An ownership right to use and occupy property shared among more than one owner. No single co-owner may have exclusive rights or possession to any part of the property.

Uniform Commercial Code (UCC)

Group of laws that are applicable to commercial transactions. Only a few of the laws have relevance to real estate transactions.

Unsecured Loan

A loan not backed by collateral.

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V

Vacancy Rate

The percentage of all units or space not leased, not rented, or unoccupied.

Vacant Land

Land not currently being used.

Vacate

To move out of a premises.

Vacation Home

A home used by the owners only occasionally or seasonally, primarily for recreational purposes.

Valid

A document or contract that has legally binding force.

VA Loan

A mortgage for veterans and service persons. The loan is guaranteed by the VA and requires low or no down payment.

Vested

Having the right or privilege to use a portion of a fund, such as an IRA.

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W

Waiver

The voluntary abandonment or surrender of some claim, right, or privilege.

Warehousing

The packaging together of many mortgages for the purpose of selling them in the secondary market, usually by a mortgage banker who has originated the loans.

Warranty

A promise contained in a contract.

Water Table

Usually defined as the upper-most level at which underground water is normally encountered in a particular area.

Wire Transfer Fee

A fee charged by some lenders to cover the cost of wiring the mortgage funds to the appropriate parties, such as the title company or attorney, so they are available for closing. For our comparison purposes, a wire transfer fee is considered to be a third-party fee. However, some lenders may not charge for this service.

Wraparound Loan

A loan that includes the remaining balance on an underlying first loan. Instead of having separate first and second mortgages, a wraparound loan has both.

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Y

Yield

A measurement of the rate of earnings from an investment, usually expressed as a percentage.

Yield To Maturity (YTM)

The internal rate of return on an investment. It typically takes into account all investment returns and their timing.

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Z

Zone

A geographic area reserved and defined by local ordinance for specific limited use. Zones are usually subject to certain restrictions or conditions.

Zoning

The local government's specifications for the use of property in certain areas.

Zoning Map

A map of the local geographic area that defines current zoning designations and land use.

Zoning Ordinances

The acts of an authorized local government establishing building codes and setting regulations for property usage.

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