Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

A document in which the purchaser agrees to buy certain estate (or personal property) and the sellar agrees to sell under stated terms and conditions. Also called sales contract, binder or earnest money contract.

Gradual debt reduction. Normally, the reduction is made according to a pre-determined schedule for installment payments

A term used in the Truth in Lending Act to represent the full cost of a loan including interest and loan fees.

A formal, written estimation of the current market value of a home.

The appraiser decides the market value of a home based on its condition and the selling prices of comparable homes recently sold in the area. His of her job is to compute a fair estimate of market value to help the lender decide a reasonable loan amount.

An increase in value, the opposite of depreciation.

The value that a taxing authority places upon personal property for the purposes of taxation.

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller.

Usually a short-term fixed-rate loan which involves a set interest rate for a certain period of time (usually 5 or 7 years), and one large payment for the remaining amount of the principal at the conclusion of that time frame (may be able to convert or refinance).

A mortgagor who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.

One who receives a commission or fee for bringing buyer and seller together and assisting in the negotiation of contracts between them.

The local regulations that control design, construction and materials used in construction. Building codes are based on safety and health standards.

Cashing out refers to the refinancing of a loan where the borrower will take out money on their own home. If a home is appraised at $100,000 and the borrower’s outstanding mortgage loan is $60,000, it is possible to enter into an 80% cash-out refinance transaction for a loan of $80,000 (80% of $100,000). The new mortgage of $80,000 will pay off the $60,000 loan and leave $20,000 cash-out to the borrowers.

Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be inhabited.

Personal Property.

The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.

All of the costs to the buyer and seller individually that are associated with the purchase, sale or financing of real property. They include, but are not limited to, prorating of agreed items such as taxes and rents, the cost of title insurance policies, and the cost of credit reports, recording fees and escrow fees.

A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.

Property pledged as security for a debt, such as real estate as security for a mortgage.

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to compliance with stated conditions.

A condition that must be met before a contract is binding. For example, the sale of a house might be contingent upon the seller paying for certain repairs.

A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been made.

A conventional loan is the most common type of mortgage. With low down payments, conventional mortgages are usually insured by private mortgage insurance companies (PMI). Private mortgage insurance adds a relatively small cost to your financing ( about 6/10 of one percent of the loan amount per year, or $600 per year on a $100,000 loan), but it allows you to buy a home with a lower down payment.

A rating given to a person to establish willingness to pay obligations based upon one’s past history of timely payment.

A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness.

A form of debt refinancing that entails taking out one loan to pay off many others. 

Long-term debt expenses as a percentage of monthly income. Lenders use this ratio to qualify borrowers for mortgage loans, typically setting a maximum debt-to-income ratio of 36%.

In many states, this document is used in place of a mortgage to secure the payment of a note.

An independent agency of the federal government created in 1930. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.

In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give the borrower a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.

When you borrow money for a home, any lender will ask you to contribute some of your own money to the purchase of the house. A lender will usually require a down payment of at least 20% of the sales price unless the buyer purchases mortgage insurance.

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

A sum of money given to bind a sale of real estate; a deposit.

The home owner’s interest in a property; the difference between fair market value and the current amount the owner owes on the property.

An amount set up by the lender into which the borrower makes periodic payments, usually monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums.

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

FEDERAL NATIONAL MORTGAGE ASSOCIATION – A private corporation created by Congress to support the secondary mortgage market. FNMA sells mortgage-backed securities backed by pools of conventional loans. Payment of principal and interest on these securities is backed by the US Government. Popularly known as Fannie Mae.

FEDERAL HOUSING ADMINISTRATION – A division of the Department of Housing and Urban Development. It’s main activity is the insuring of residential mortgage loans made by private lenders.

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans (loan amount varies by region), they are generous enough to handle moderately-priced homes almost anywhere in the country.

The Federal Housing administration, a government agency created in 1934, provides insurance on some types of mortgage loans. An FHA-insurance loan also allows you to buy a house with a low down payment, ranging from 3% to 5% depending on the price of the home. The buyer pays a one-time fee of 3.8% of the loan amount for the mortgage insurance premium at closing time, and there is an additional annual fee for low down payment loans.

FEDERAL HOME LOAN MORTGAGE CORPORATION – A private corporation created by Congress to support the secondary mortgage market. It sells participation certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through the FHLMC. Popularly known as the Freddie Mac.

FEDERAL NATIONAL MORTGAGE ASSOCIATION – A private corporation created by Congress to support the secondary mortgage market. FNMA sells mortgage-backed securities backed by pools of conventional loans. Payment of principal and interest on these securities is backed by the US Government. Popularly known as Fannie Mae.

FEDERAL HOME LOAN MORTGAGE CORPORATION – A private corporation created by Congress to support the secondary mortgage market. It sells participation certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through the FHLMC. Popularly known as the Freddie Mac.

A mortgage on which the interest rate is set for the term of the loan.

A mortgage on which the interest rate is set for the term of the loan.

In the event that the borrower fails to pay back the loan through mortgage payments, the lender has the right to put the home up on the market for sale to recover the money owed to the lender. This is known as foreclosure.

An estimate of all the costs associated with a purchase, or refinance. This may include points, closing costs, escrow.

Also known as Ginnie Mae.

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

The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount includes overtime pay, bonuses, commissions and income from dividends or interest, provided that the individual can show a consistent history of receiving such income.

The relationship between the amount of a home loan and the total value of the property. For example, if you receive a loan of $80,000 on a home that costs $100,000, the loan-to value ratio is 80%.

A commitment from a lender to make a loan at a pre-set interest rate at some future date, usually for not more than 90 days.

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

The highest price that a willing buyer would pay and the lowest a willing seller would accept.

An interest in real property given as security for the payment of an obligation.

A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to full re-pay a loan. Mortgage insurance makes it possible to buy a home with as little as 5% down.

Any person or institution that invests in mortgages. By buying mortgage loans from lenders, the mortgage investor gives the lender funds that can be used for more lending.

A type of term life insurance. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds.

A lender to whom property is conveyed as security for a loan.

A dollar amount paid to a lender for making a loan. A point is one percent of the loan amount. Also called discount points.

A legal document authorizing one person to act on behalf of another.

Necessary to create an escrow account or to adjust the seller’s existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

The closing of a mortgage loan.

The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed. Title may be acquired through purchase, inheritance, gift, or through foreclosure of a mortgage.

A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search (Owners Title Insurance). The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller. Policies are also available to protect the lender’s interests (Lenders Title Insurance).

He/she who performs the analysis of the risk involved in making a loan to a potential home buyer based on credit, employment, assets, and other factors; and the matching of this risk to an appropriate rate and term or loan amount.

A loan that is not backed by collateral (property).

If you are current in the United States military, or if you have ever served in U.S. armed forces, you may be eligible to get a loan insured by the Veterans Administration. If you qualify, this special government benefit to veterans might be a good option.

Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

A document signed by the borrower’s employer verifying his/her position and salary.

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