Acceleration Clause
A mortgage provision that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed. (top)

Adjustable-Rate Mortgage (ARM)
A mortgage in which the interest rate changes over time based on a margin or index. Rate changes are made within prescribed limits and times as defined in the mortgage contract. (top)

Amortization
The gradual repayment of a mortgage by installments. (top)

Amortization Schedule
A timetable schedule for payment of a mortgage showing the amount of each payment with regard to interest and principal and the remaining balance on a loan. (top)

Annual Percentage Rate (APR)
The total yearly cost of a mortgage stated as a percentage of the loan amount. This includes the loan base, interest rate, mortgage insurance and some other related fees. (top)

Appraisal
A professional appraiser's opinion of the market value of a property. (top)

Appreciation
An increase in the value of property due to changes in market conditions or other causes. (top)

Assessed Value
The valuation placed upon a property by a public tax assessor for purposes of taxation. (top)

Assumable Mortgage
A mortgage that can be taken over by the buyer when a property is sold. (top)

Assumption
When the seller's existing mortgage is transferred to the buyer. (top)

Bankruptcy
An individual or individuals can restructure or relieve themselves of debts and liabilities by filing in federal bankruptcy court. Bankruptcies are of various types including Chapter 7 No Asset bankruptcy which relieves the borrower of most types of debts. Usually, a borrower cannot qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged. (top)

Bill of Sale
A written document that transfers title to personal property. (top)

Binder
A preliminary agreement, secured by the payment of earnest money, under which a buyer can offer to purchase property. (top)

Biweekly Mortgage
A mortgage in which you make payments every two weeks versus the normal once a month payment. The general result is that instead of making twelve monthly payments during the year, you make thirteen and the extra payment reduces the principal and time it takes to pay off a thirty year mortgage. (top)

Buydown
A buydown normally refers to a fixed-rate mortgage where the interest rate is "bought down" over a specific period, usually one to three years. After that period, and for the remainder of the term, the borrower’s payment is calculated at the note interest rate. Speak to your lender for more details. (top)

Clear Title
A title that is free of any liens and legal requirements as to ownership of the property. (top)

Closing
The action of finalizing the sale. The buyer signs the mortgage and all closing costs are paid. This is also referred to as the "settlement". (top)

Closing Costs
Fees and expenses incurred by buyers and sellers in transferring ownership of a property. These are also referred to as "settlement costs". (top)

Contingency
A stipulation or condition that must be met before a contract is legally binding. (top)

Conventional Mortgage
Any mortgage that is not guaranteed or insured by the federal government. (top)

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

Covenant
A mortgage clause that restricts or obligates the borrower. If the clause is violated, it can result in foreclosure of the property. (top)

Credit Report
A report stipulating an individual's credit history and standing. This report is prepared by a credit bureau or company and used by a lender in determining a loan applicant's worthiness. (top)

Deed of trust
The document used in some states instead of a mortgage. With a deed of trust, the title is conveyed to the trustee rather than to the borrower. (top)

Default
A loan defaults if failure to make mortgage payments in a timely manner or meet other mortgage conditions. (top)

Delinquency
A loan is delequent if a payment is overdue. This is before the default stage. (top)

Depreciation
This is the opposite of "appreciation". It's where the propery's value is in decline. (top)

Due-on-Sale Clause
A provision or clause in a mortgage allowing the lender to demand full payment of the loan if the borrower sells the property that is securing the mortgage. (top)

Easement
A right-of-way giving individuals other than the owner access to a specific area on the property, i.e. utility or phone company easement which allows them to have access to your property to make repairs. (top)

Eminent Domain
A right to acquire private property by the government for the purpose of public usage by condemnation and payment of just compensation. (top)

Encroachment
Normally construction that falls on a neighbor's property, i.e. if you were to have a building of yours fall on or cross your property boundries. (top)

Encumbrance
Normally a charge, claim, or lien attached to real property and binding that real property. (top)

Equity
The difference between the outstanding mortgage balance and the market value of the property. (top)

Equity Loan
A loan secured by the equity in the borrower's home. (top)

Escrow
The holding of documents and money by a neutral third party prior to closing, normally an escrow company. (top)

Federal Tax Lien
A lien attached to property for nonpayment of federal taxes. (top)

Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by someone's will or be inherited. (top)

Federal Housing Administration
A federal Agency which insures first mortgages. This allows a lender to offer a loan at a high percentage of the property's purchase price. (top)

FHA Loan
A mortgage insured by the Federal Housing Administration. (top)

First Mortgage
The mortgage that has first claim in the event that the mortgage is placed in default. (top)

Fixed-Rate Mortgage
A mortgage where the interest rate is fixed and does not change during the entire life of the loan. (top)

Flood Insurance
For properties being purchased in federally designated flood areas, flood insurance is required. (top)

Forbearance
A lender gives the borrower time to catch up on overdue payments rather than beginning the foreclosure process. (top)

Foreclosure
When a mortgage is in default, a property may be sold by the lender or Mortgagee. (top)

General Lien
A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property. (top)

Ginnie Mac (GNMA) or Government National Mortgage Association
A federal association that works with the FHA to help offer special assistance in getting a mortgage. (top)

Home Equity Line of Credit
A mortgage loan, usually in second position, that allows the borrower to obtain a pre-determined amount of cash drawn against the equity of his home. (top)

Home Inspection
An inspection by a professional home inspector or company that evaluates the structure and condition of a property before a house is sold/bought. (top)

Homeowner's Insurance
An insurance policy that combines hazard insurance and liability coverage for the contents of a house and the house itself. (top)

Homeowner's Warranty
An insurance policy that covers repairs to portions of a property for a specific period of time. It normally covers repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. (top)

Judgment
The decision of a court of law. Money judgments, when recorded, become a lien on real property. (top)

Jumbo Loan
Also called a nonconforming loan. This is a loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits. (top)

Lien
A legal claim against a property. (top)

Lifetime Cap
A provision of an adjustable-rate mortgage that limits the total increase in interest rates over the "life of the loan". (top)

Loan-To-Value Ratio (LTV)
This is the proportional relationship of a mortgage loan to the value of a home, expressed as a percentage. Example: a $300,000 property purchased with a $240,000 mortgage would have an LTV of 80%. (top)

Lock-in
A written contract with a lender guaranteeing the home buyer a specified interest rate provided the loan closes within a set period of time. (top)

Mortgage Insurance
Insurance paid for by the borrower that protects lenders against a loss if the borrower defaults. This insurance is normally required on all loans with an LTV greater than 80%. (top)

Mortgagee
The lender in a mortgage agreement. (top)

Mortgagor
The borrower in a mortgage agreement. (top)

No-Cost Loan
Some lenders provide loans that can be obtained at no cost. When inquiring, check to see if it also covers other costs you would normally incur in a purchase or refinance transaction such as title insurance, settlement fees, escrow fees, appraisal fees, recording fees, etc. (top)

Notice of Default
A formal written notice to a borrower that a default has occurred and that legal action may be taken if the problem is not dealt with. (top)

Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. The interest rate stated on the note is called the "note rate". (top)

Owner Financing
A purchase of a property in which the seller provides part of or all of the financing. (top)

Points
A one-time charge by the lender to increase or decrease the stated interest rate on a loan. The borrower "pays" points up front to decrease the overall interest rate. A borrower can also receive points (cash) up front if they are willing to go with a larger interest rate. (top)

Prepayment Penalty
A fee charged to a borrower who pays off a loan before it is due. Most loans nowadays do not include that penalty but check with your loan officer to make sure before agreeing to the loan. (top)

Prequalification
The process of determining how much money a prospective home buyer is eligible to borrow before a loan is actually applied for. (top)

Principal
The part of the monthly payment that reduces the outstanding balance on a mortgage. Principal payments go to payoff a loan while the interest payments go directly to the lender. (top)

Quitclaim Deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. (top)

Real Estate Agent
An individual licensed to represent a borrower and/or a seller and negotiate the transactation and sale of real estate on their behalf. (top)

Real Estate Settlement Procedures Act
A consumer protection law that requires lenders to give borrowers advance notice of closing costs and loan percentage rates. (top)

Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property. This is most often done to get the better interest rates offered by the new loan.

Settlement Sheet
The list of costs payable at closing which determines the seller's net proceeds and the buyer's net payment. (top)

Survey
A two-dimensional line drawing showing the legal boundaries of a property and any easements, encroachments, etc. (top)

Tenancy in Common
A form of joint property ownership without right of survivorship. (top)

Title
A legal document establishing the right of ownership. (top)

Title Company
A company that specializes in title searches and insuring the title of a property. (top)

Title Insurance
Insurance to protect the lender and/or buyer against loss arising from disputes over ownership of a property. (top)

Title Search
A check of the title records normally done by the Title Company to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding against the property. (top)

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

Truth-In-Lending
A federal law that requires lenders to fully disclose the terms and conditions of a mortgage including the interest rate, any applicable fees, etc. (top)

VA Loan
A loan that is guaranteed by the Veterans Administration. (top)