View PhoneOps Mortgage Glossary to understand the most important lending and mortgage terms & abbreviations. Mortgages can be confusing so let us help explain. Below, you’ll find explanations for most of the mortgage industry terms.


Abstract of Title
A written history of ownership to a specific area of land. An abstract of title covers the period from the original source of title to the present time and summarizes all subsequent documents that have been recorded against that area.
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower) or by using the right vested in the Due on Sale Clause.
Accrued interest
Interest earned but not yet paid.
Automated Clearing House (ACH)
Electronic system that debits an authorized bank account and electronically transfers funds scheduled for remittance.
Acquisition Costs
Costs of acquiring property other than purchase price, for example, attorney fees, title insurance, and lender’s fees.
Acquisition Loan
See Land Acquisition Loan.
An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.
Additional Principal Payment
A payment by a borrower of more than the scheduled payment due in order to reduce the remaining balance on the loan.
Adjustable rate
An interest rate that changes periodically according to an index.
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.
Adjusted Basis
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
Adjusted Gross Income
A person’s total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions, and expenses.
Adjustment Date
The date that the interest rate changes on an adjustable rate mortgage (ARM).
Adjustment Interval
On an adjustable rate mortgage the time between changes in the interest rate and/or monthly payment typically one three or five years depending on the index.
Adjustment Period
The period of time between the adjustment dates for an adjustable rate mortgage (ARM).
Affordability Analysis
An analysis of a buyer liabilities and available funds and considers the type of mortgage you plan to use the area where you want to purchase a home and the closing costs that are likely.


After Repair Loan To Value (ARLTV)
ARLTV stands for After Repair Loan To Value, and it is the same exact concept as LTARV. Some private lenders use ARLTV, others use LTARV in their communications.

One that acts for or represents another.
See Purchase Contract.
Agricultural Property
Unimproved property available for farming activities.
Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse.
See American Land Title Association.
Alternative documentation
A method of documenting a loan file that relies on information the borrower is likely to be able to provide, instead of waiting on verification sent to third parties for confirmation of statements made in the application.
American Land Title Association (ALTA)

A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
Payment of a debt in regular, periodic installments of combined principal and interest.
Amortization re-cast period
Pre-determined period of time (expressed either in a number of months and/or a percent of increase from original principal balance) after which any/all accumulated “negative amortization” (aka “deferred interest”) is accounted for in a re-amortization of the loan balance over the remaining term of the mortgage at the then prevailing rate of interest. Amortization is also re-casted at each adjustment even if no negative amortization. Typically, any payment cap that would otherwise factor in is disregarded in the event of re-casting.
Amortization re-cast limitation
Amortization is most often “capped” at 110 or 125 percent of the original principal balance. Re-amortization typically occurs every 60 months and/or at such time as the balance reaches the pre-determined “cap.”
Amortization Schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance after each payment is applied.
Amortization Term
The length of time required to amortize the mortgage loan expressed as a number of months. For example 360 months is the amortization term for a 30-year fixed rate mortgage.
Annual Percentage Rate (APR)
A measure of the cost to borrow money expressed as a yearly percentage. For mortgage loans, excluding home equity lines of credit, it includes the interest rate plus other charges or fees (such as mortgage insurance, discount points, and origination fees). For home equity lines, the APR simply reflects the interest rate. When shopping for a mortgage, you can use the APR to compare the costs of similar loans between lenders.
A prospective borrower who has completed an application.
A printed form (or verbal collection of data) used by a mortgage lender to record necessary information concerning a prospective mortgage.
Application Fee
A sum of money paid towards estimated initial mortgage processing expenses, such as appraisal and credit report.
A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.
Appraisal fee
A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date.
Appraised Value
An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.
A person qualified by education, training, and experience to estimate the value of real and personal property.
An increase in the value of property due to either a positive improvement of real estate in the area or the elimination of negative factors. Commonly used to describe an increase in value through inflation.
See Annual Percentage Rate.
See Adjustable Rate Mortgage.
ARM Assumbility
Some ARM products feature “assumability” to a qualified applicant. The assumability of an ARM loan may make it more attractive to an applicant who envisions selling their home at a later date. By incorporating an assumable mortgage product, they may be able to make their home more attractive to potential buyers.
ARM disclosure
An additional disclosure specific to adjustable-rate mortgages that must be prepared and presented to the consumer within three days of application whenever an adjustable-rate mortgage transaction is contemplated (Note: home equity lines have their own unique disclosure).
ARM handbook
The Consumer Handbook to Adjustable-Rate Mortgages (“CHARM” booklet) must be presented to the consumer within three days of applying for an ARM loan (in addition to the ARM disclosure referenced above).
Arm’s-Length Transaction
Legal slang meaning that there existed no special relationship between the parties involved in a transaction which would contaminate the result.


ARR – Appraisal Risk Review
The ARR makes it simple to confirm or disprove the credibility of the original appraisal and appraiser, providing you with an easy to understand summary, risk flags and recommended next steps based on your policies and tolerances.

As Separate Property
Ownership in real property that is to be specifically excluded from community property.
Assessed Valuation
The value that a taxing authority places on real or personal property for the purpose of taxation.
A charge against a property for purpose of taxation. This may take the form of a levy for a special purpose, or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her property.
Anything of monetary value that a person owns. Assets include real property, personal property and enforceable claims against others (including bank accounts, stocks, mutual funds and so on).
The transfer of a mortgage from one person to another.
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due on sale clause it may not be assumed by a new buyer.
Assumable Mortgage
A mortgage that can be taken over (assumed) by the buyer when a home is sold.
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt unlike a new mortgage where closing cost and new probably higher market rate interest charges will apply.
Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.
Attorney Fee
The amount a real estate lawyer charges for such transaction-related services as title research, contract review, registering all legal documents, and arranging for the transfer of security deposits and insurance certificates.


Balance sheet
A document showing the financial situation-assets, liabilities and net worth of a person at a specific point in time.
Balloon Mortgage
A mortgage that has level monthly payments that would fully amortize over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.
Balloon Payment
A large lump-sum payment due at the end of some types of mortgages, home equity lines of credit, or home equity loans.
Bank check
See cashier’s check.
A proceeding in a federal court in which a debtor, who owes more than his or her assets, can discharge personal liability for his or her debts. This may affect a borrower’s personal liability for a mortgage debt but not the lien of the mortgage.
Basis point
A unit of measure: 1/100th of one percent. For example, the difference between a 9.0 percent loan and a 9.5 percent loan is 50 basis points. 10 basis points is the same as 1% or 1 point.
The legal owner of a piece of property.
A gift of personal property by will.
Bill of sale
A document that transfers ownership of goods from one person to another.
Biweekly Mortgage
A mortgage with payments due every two weeks, totaling 26 payments a year.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage.
Bona fide
In good faith.
A document representing a right to certain payments on underlying collateral.
A person (also known as “the mortgagor”) who receives funds in the form of a loan with an obligation to repay principal balance with interest.
Borrower Paid Mortgage Insurance (BPMI)
Insurance in which the cost of the mortgage insurance is added to the monthly mortgage payment. Borrowers have the right to request a cancellation of BPMI when the loan-to-value ratio reaches 80% of the original value. When the loan-to-value ratio reaches 78% of the original value, BPMI will be automatically terminated.
Break-Even Point
The point at which a revenue or gain is equal to total expenses.
Bridge Loan
A second trust that is collateralized by the borrower’s present home allowing the proceeds to be used to close on a new house before the present home is sold. Also known as “swing loan.”
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.
Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years.
Buyer’s broker
An agent hired by a buyer to locate a property for purchase and to represent the buyer in negotiations with the seller’s broker for the best possible deal for the buyer.
Buyer’s market
Market conditions that favor buyers. With more sellers than buyers in the market, buyers have ample choice of properties and can negotiate lower prices.


Call option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
Caps (interest)
Consumer safeguards which limit the amount of change to the interest rate for an adjustable rate mortgage.
Caps (payment)
Consumer safeguards which limit the amount of change to the monthly payments for an adjustable rate mortgage.


Capital Gains
The term capital gain refers to the increase in the value of a capital assetwhen it is sold. Put simply, a capital gain occurs when you sell an asset for more than what you originally paid for it.

Cash Flow
The amount of cash derived over a certain period of time from an income producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment maintenance utilities etc…).
Cash-Out Refinancing
When the principal amount of a new mortgage is greater than the outstanding balance of the existing mortgage being refinanced, and a portion of the equity is converted to loan proceeds for the borrower’s use.
Cash Reserve
The portion of assets that a borrower will have after the loan closing. Cash reserves may be required as part of the loan process to ensure the borrower has financial flexibility after the transaction.
Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in closing a mortgage transaction.
Cashier’s check (or bank check)
A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank’s account instead of the customer’s.
See Covenants, Conditions and Restrictions


CDA – Collateral Desktop Analysis
Collateral Desktop Analysis (CDA) is a third-party re-evaluation of an appraisal. It is designed to remove pre-funding uncertainty and mitigate potential bias, weak internal controls, and conflicts of interest that may otherwise allow a loan to be funded that objectively should be rejected. CDA is an exhaustive review and analysis of any appraisal, from any time period. It is an efficient, cost-effective method to determine if the appraisal under review is adequately supported.

The maximum allowable interest rate of an adjustable-rate mortgage.
Certificate of occupancy
Document issued by local government agency stating that a property meets the requirements of health and building codes.
Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes business and mobile homes. Certificates of eligibility may be obtained by sending form DADA (Separation Paper) to the local VA office with VA form 1880 (Request for Certificate of Eligibility).
Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property’s current market value.
Certificate of title
Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.
Certificate of Veteran Status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). It may be obtained by sending DD 214 to the local VA office with form 26-8261a (Request for Certificate of Veteran Status). This document enables veterans to obtain lower down payments on certain FHA insured loans.
Certified check
A check drawn on the issuer’s account for funds that have been segregated by the bank, guaranteeing payment.
See Consumer Financial Protection Bureau
Chain of title
The chronological order of conveyance of a property from the original owner to the present owner.
Changed Circumstance
A situation that requires the lender to provide a revised Loan Estimate or Closing Disclosure before closing, that describes any changes in fees or other loan terms.
Change Frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable rate mortgage (ARM).
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Clear title
A marketable title, free of clouds and disputes.
The closing includes the delivery of a deed, the signing of loan documentation, and the disbursement of funds necessary to complete the sale and loan transaction. Also known as “settlement.”
Closing Costs
Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination charge, discount points, and fees for required third-party services, taxes, and government recording fees.
Closing Date
The approximate date your loan transaction is completed, or closed.
Closing Disclosure
A document provided to customers at least 3 business days before closing that shows the actual terms and costs of the loan. These costs may include hazard and/or mortgage insurance premiums and escrow deposits for property taxes.
Closing Statement
A form used at closing that gives an account of the funds received and paid at the closing, including the sales price, closing costs, escrow deposits for taxes, hazard insurance, and mortgage insurance.
Cloud on title
An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title.
See Combined loan-to-value
Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appear on documents with equal legal obligations.
An adjustable-rate mortgage with a rate that adjusts based on a cost-of-funds index often the 11th District Cost of Funds.
Property pledged as security for a debt, such as the real estate pledged as security for a mortgage.
The servicing procedure followed to bring a delinquent mortgage “current” and to file the required notices to bring foreclosure when necessary.
Combined loan-to-value (CLTV)
The ratio of the total mortgage liens against the subject property to the lesser of either the appraised value or the sales price.
Money paid to a real estate agent or broker by the seller (usually 6 to 7 percent of a home’s sale price).
Commitment (Loan)
A binding pledge made by the lender to the borrower to make a loan, at certain (or maximum) loan terms within a given period of time for a given purpose, subject to various stated conditions.
Commitment Letter
A formal letter sent by a lender stating the terms and conditions under which the lender agrees to loan money to a potential borrower.
Comparable Properties
Properties used for comparative purposes in the appraisal process that have been recently sold and have characteristics similar to property being appraised, thereby indicating the approximate fair market value of the subject property.
Compensating Factors
Positive characteristics of a borrower’s credit, employment, or savings history which may be used to offset high debt-to-income ratios in the underwriting process.
A discount or other incentive given by a landlord or seller to a prospective tenant or buyer to induce them to sign a lease or purchase property.
A form of property ownership in which the homeowner holds title to an individual dwelling unit and an interest in common areas and facilities of a multi-unit project.
Conforming Loan
Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA, also known as “Fannie Mae”) or the Federal Home Loan Mortgage Corporation (FHLMC, also known as “Freddie Mac”). These agencies generally purchase first mortgages up to loan amounts mandated by Congressional directive.
Construction Loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses.
Consumer Financial Protection Bureau (CFPB)
A federal agency that enforces laws that protect consumers of financial products and services such as mortgages, credit cards and deposit accounts.
Consumer Reporting Agency (or Bureau)
An organization that handles the preparation of reports used by lenders to determine a potential borrower’s credit history. The agency gets data for these reports from a credit repository and other sources.
A condition that must be met before a contract is legally binding.
Contract Sale or Deed
A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.
Conventional Mortgage
A mortgage not obtained under a government program (such as FHA or VA).
Conversion Clause
A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.
Convertible ARM
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.
The transfer of a deed or possibly a lease or mortgage.
A building of two or more dwelling units that is owned by a corporation made up of people in the building. The right to occupy a unit is obtained by buying shares of stock in the corporation and signing an occupancy agreement known as a “proprietary lease”.
Cost of funds index (COFI)
An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.
A clause in a contract that obligates or restricts the parties and which, if violated, can result in legal action.
Covenants, conditions and restrictions (CC&Rs)
A document defining the use, requirements and restrictions of a property.
Credit Limit
The maximum amount a customer is approved to borrow for a home equity line of credit.
Credit Report
A report detailing an individual’s credit history.
Credit Risk Score
A credit risk score is a statistical summary of the information contained in a consumer’s credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.
See Certificate of reasonable value.


Debt-to-Income Ratio (DTI)
Often used in qualifying a consumer for a home loan, DTI reflects the consumer’s monthly debt and debt-related costs, such as taxes, fees, and insurance premiums as a percentage of their monthly gross income.

Debt-Service Coverage Ratio (DSCR)
DSCR stands for debt-service coverage ratio, which is a measure of a company’s ability to pay its current debt obligations with its available cash flow. It is calculated by dividing the net operating income by the total debt service. A higher DSCR indicates that the company has more income to cover its debts, while a lower DSCR indicates that the company may struggle to pay its debts.

The legal document conveying title to a real property.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.
The failure to satisfy the terms as agreed in a contract.
Deferred interest
Interest added to the balance of a loan when monthly payments are not sufficient to cover it. (See Negative amortization.)
A loan payment that is overdue, but within the period allowed before actual default is declared.
De Minimis PUD
A Planned Unit Development (PUD) in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units.
Department of Housing and Urban Development (HUD)
A governmental entity responsible for the implementation and administration of housing and urban development programs. HUD was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency.
Department of Veterans Affairs (VA)
A cabinet-level agency of the federal government. The Servicemen’s Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long-term, no-down-payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.
A sum of money given to bind a sale of real estate. Also known as “earnest money.”
A loss of value in real property brought about by age, physical deterioration, functional, or economic obsolescence.
Information relevant to specific transactions that is required by law.
Discount Points
Discount points are charges paid to the lender voluntarily, usually at closing by the borrower or seller, to reduce the interest rate. One point is equal to 1 percent of the principal amount of the mortgage.
Discounted Loan
When the interest rate on a loan is less than the market rate, it is a discounted loan. However, the lender requires additional discount points to raise the yield or return on the loan to the market rate.
Documentary stamps
A state tax, in the forms of stamps, required on deeds and mortgages when a real estate title passes from one owner to another.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.
Draw Period
The fixed period of time — usually 10 to 15 years — during which a borrower may access or “draw” money from a home equity line of credit.
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.


Earnest Money
Funds delivered to the seller or an escrow agency by the purchaser with the purchase agreement as evidence of good faith.
See Equal Credit Opportunity Act.
Effective interest rate
The cost of a mortgage expressed as a yearly rate, usually higher than the interest rate on the mortgage since this figure includes up-front costs.
An improvement that illegally violates another’s property or right to use that property.
Anything that affects or limits the fee simple title to property, such as mortgages, liens, leases, easements, or restrictions.
End of Draw
For a home equity line of credit, end of draw is the point at which the draw period ends and the borrower can no longer access the funds. Most line of credit plans have a 10- or 15-year draw period. Depending on the original contract, the borrower may be required to repay the outstanding balance with fully amortized monthly payments that include principal and interest or a single balloon payment.
End of Term
For a balloon home equity line of credit or an existing balloon home equity loan, end of term refers to the date the outstanding balance becomes due in full. See also Maturity Date.
The VA home loan benefit is called an entitlement (i.e. entitlement for a VA guaranteed home loan). This is also known as eligibility.
Equal Credit Opportunity Act (ECOA)
A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs, or past exercising of rights under the Consumer Credit Protection Act.
The ownership interest; the portion of a property’s value over and above the liens against it. Equity is determined by subtracting the amount owed from the value of the home and would register as a percentage when the difference is divided by the value of the home.
An item of value, money, or documents, deposited with a third party, to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some parts of the country, escrows of taxes and insurance premiums are called impounds or reserves.
Escrow Account
The segregated trust account in which escrow funds are held.
Escrow Agent
The person or organization having a responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called escrow company or escrow depository.
Escrow Disbursements
The use of escrow funds to pay real estate taxes hazard insurance mortgage insurance and other property expenses as they become due.
Escrow Payment
That portion of a mortgagor’s monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.
Escrow waiver
Escrow Waiver is waiver of the requirement to fund an escrow account with lender and instead pay insurance and taxes separately. This waiver may require a fee and is not available with all loan programs.
Estimated Closing Date
See Closing Date.
Estimated Settlement Charges
See Closing Costs.


Fannie Mae
See Federal National Mortgage Association.
Fair Credit Reporting Act (FCRA)
This law requires consumer reporting agencies to exercise fairness, confidentiality, and accuracy in preparing and disclosing credit information.
Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
Federal Home Loan Mortgage Corporation – FHLMC (Freddie Mac)
A stockholder-owned corporation created by Congress that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA, or “Ginnie Mae”) bonds to raise funds to finance the purchase of mortgages. Popularly known as “Freddie Mac”.
Federal Housing Administration (FHA)
The federal agency in the Department of Housing and Urban Development (HUD) that insures residential mortgages.
Federal National Mortgage Association- FNMA (Fannie Mae)
A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.
Federal Reserve
The central bank of the United States and major regulatory agency for many commercial banks.
Fee Simple
The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one’s heirs.
See Federal Housing Administration.
FHA Loan
A loan insured by the FHA open to all qualified home purchasers.
FHA Mortgage Insurance
Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount paid in monthly installments. The lower the down payment the more years the fee must be paid.
The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as “Freddie Mac.”
Fully Indexed Accrual Rate (Index + Margin).
Financial Risk Manager (FRM)
Financial Risk Manager (FRM) is a professional designation issued by the Global Association of Risk Professionals (GARP).

Firm Commitment
A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.
First Adjusted Payment
The estimated monthly payment due when the interest rate on an adjustable-rate mortgage is reset. After the initial fixed-rate period, the interest rate can increase or decrease annually according to the market index. Any change may significantly impact the monthly payment.
First Mortgage
A real estate loan that has priority over any subsequently recorded mortgages.
Fixed Interest Rate
An interest rate that does not change during the loan term.
Fixed-rate Advance (FRA)
A variable-rate home equity line of credit feature that allows the mortgagor to secure, or “fix”, the interest rate on all or a portion of their balance.
Fixed-rate mortgage
A mortgage with an interest rate that doesn’t change for the life of the loan, guaranteeing fixed payments.
Fixed Installment
The monthly payment due on a mortgage loan including payment of both principal and interest.
Flood insurance
A form of hazard insurance required by lenders to cover properties in flood zones.
The minimum rate of interest payable on an adjustable-rate mortgage.
Floor (Interest – ARM)
A pre-determined amount that establishes the minimum interest rate life of a loan. This can be expressed as a percentage below the start rate, as a rate of interest independent of the start rate, or, quite typically, the “Floor” may be established as being equal to the Margin.
See Farmer’s Home Administration.
See Federal National Mortgage Association.
Fixed-rate Mortgage (FRM)
A mortgage in which the interest rate and monthly payments remain the same for the life of the loan.
Grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower’s debt.
Freddie Mac
See Federal Home Loan Mortgage Corporation
Fully Amortized ARM
An adjustable rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance at the interest accrual rate over the amortization term.


General Contractor (GC)
A person or company responsible for overseeing a construction project.

Gift Letter

A written explanation signed by the individual giving the gift stating, “This is a bona fide gift, and there is no obligation expressed or implied to repay this sum at any time.”
Ginnie Mae
Created in 1968 by an amendment to Title III of the National Housing Act (12 USC 1716 et seq.), this federal government corporation is a constituent part of the Department of Housing and Urban Development. Among other governmental functions, it guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Also called Government National Mortgage Association (GNMA).
Good Faith Estimate (GFE)
For purchase and refinance applications taken before October 3, 2015, lenders must deliver or mail a Good Faith Estimate (GFE) to the customer within 3 business days of application. The GFE shows approximate costs the customer will pay at or before closing. Note: For new purchase and refinance applications taken on or after October 3, 2015, customers receive a Loan Estimate within 3 business days of application outlining the approximate costs and terms of the loan.
Government National Mortgage Association (GNMA)
See Ginnie Mae.
Grace period
Period of time during which a loan payment may be made after its due date without incurring a late penalty.
Graduated Payment Mortgage (GPM)
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.
Gross Income
Total income before any expenses are deducted.
Gross Monthly Income
Total monthly income earned before tax and other deductions.
Growing Equity Mortgage (GEM)
A fixed rate mortgage that provides scheduled payment increases over an established period of time. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage.
To assume liability for another’s debts in the event of default.
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
Guarantee Mortgage
A mortgage that is guaranteed by a third party.


A haircut is the lower-than-market value placed on an asset when it is being used as collateral for a loan. The size of the haircut is largely based on the risk of the underlying asset.

Hazard Insurance

Contract with an insurance provider that specifically covers damage to a property due to certain hazards such as fire.
High-Ratio Loan
Mortgage loan with a loan- to-value higher than 80 percent. Calculated using the loan amount divided by the lower of the sales price or appraised value.
Home Equity Conversion Mortgage (HECM)
Or called “Reverse Mortgage”. and it is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner’s insurance. Reverse mortgages allow elders to access the home equity they have built up ion their homes now, and defer payment of the loan until they die, sell or move out of the home.
Home Equity Line of Credit (HELOC)
A form of revolving credit secured by a borrower’s home. A borrower is approved for a specific credit limit and can draw on those funds up to the limit as needed during the draw period, making monthly payments as required according to the signed contract.  
Home Equity Loan
A loan secured by a customer’s home. The customer receives the full loan amount upfront, then makes monthly payments as required by the loan terms. Note: Although we continue to service existing home equity loans, Wells Fargo does not currently offer new home equity loans.
Home Mortgage Disclosure Act (HMDA)
Federal legislation that requires certain types of lenders to compile and disclose data on where and to whom their mortgage and home improvement loans are being made.
Home Valuation Code of Conduct (HVCC)
The Home Valuation Code of Conduct establishes standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence. It became effective May 1, 2009, for any mortgage that will be sold to Fannie Mae or Freddie Mac; Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.
Homeowners’ Association Dues
The fees imposed by a condominium or homeowners’ association for maintenance of common areas.
Homeowner’s Insurance
An insurance policy that combines liability coverage and hazard insurance.
Homeowner’s Insurance Policy
A multiple-peril insurance policy available to owners of private dwellings that covers the dwelling and its contents, as well as personal liability.
Homeowners warranty
A type of insurance that covers repairs to specified parts of a house for a specific period of time
Housing and Economic Recovery Act (HERA)
Federal legislation enacted in 2008 to address the subprime mortgage crisis . It was intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding.
Housing and Urban Development (HUD)
See Department of Housing and Urban Development.
Housing code
Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.
Housing Expense Ratio
The relationship of a borrower’s monthly housing payment (PITI and other housing expenses), divided by the borrower’s gross monthly income, expressed as a percentage. Also called the “top ratio.”
See Department of Housing and Urban Development


Impound account
Savings account for accumulating that portion of a borrowers monthly payments designated for future payments of taxes and insurance. (Required by certain lenders or with certain types of financing.)
Impounds or Reserves
Terms used to mean “escrow” in some parts of the country. See Escrow.
Income/Expense Ratio
See Debt-to-Income Ratio (DTI)
Index/Index Rate
A published interest rate, such as the prime rate, LIBOR, T-Bill rate, or the 11th District COFI. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns. On ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.
Initial Interest Rate
This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable rate mortgage (ARM). It’s also known as “start rate” or “teaser.”
Condition of a person who is unable to pay his debts as they fall due.
The regular payment that a borrower agrees to pay a mortgage lender.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
Amount of money paid for the use of funds provided by another party. Also a right, share, or title in property.
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases it is also the rate used to calculate the monthly payments.
Interest Rate
The percentage of an amount of money that is paid for its use for a specified time.
Interest Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage.
Interest Rate Cap
A provision of an ARM limiting how much the interest rate may increase per adjustment period. See also Lifetime Cap.
Interest Rate Ceiling
For an adjustable rate mortgage (ARM) the maximum interest rate as specified in the mortgage note.
Interest rate change date
Dates upon which the rate of interest is subject to change. Initial change date and subsequent change dates may feature different terms.
Interest Rate Floor
On a floating-rate loan or line of credit, the lowest the interest rate may go.
Interest Rate Range
See Rate Lock Option.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
A money source for a lender.
Investment Property
Real estate owned with the intent of supplementing income and not intended for owner occupancy.


Joint liability
Liability shared among two or more people, each of whom is liable for the full debt.
Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Final determination by a court of the rights and claims of the parties to an action.
Jumbo Loan
A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies they usually carry a higher interest rate.


Land Acquisition Loan
A loan made for the purpose of purchasing land only, not improvements on or to the land. Also called an “acquisition loan” or “lot loan.”
Late Charge
The penalty a borrower must pay when a payment is made after its due date or courtesy period.
Lender Paid Mortgage Insurance (LPMI)
Mortgage insurance with its cost included in the interest rate. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a potential tax deduction. (Consult your tax advisor).
Lease-Purchase Mortgage Loan
An alternative financing option that allows low and moderate income home buyers to lease a home with an option to buy. Each month’s rent payment consists of principal interest taxes and insurance (PITI) payments on the first mortgage plus an extra amount that accumulates in a savings account for a down payment.
The bank, mortgage company or mortgage broker offering a loan
Letter of Explanation (LOX)
A Borrower have to explain a situation. Normally about 2-4 sentences. Could be longer depending on the situation.
A person’s financial obligations. Liabilities include long term and short term debt.
Liability Coverage
Insurance designed to protect against expenses incurred due to bodily injury or property damage resulting from acts of, or neglect by, the insured.
LIBOR (London Interbank Offered Rate)
The interest rate charged among banks for short-term Eurodollar loans, and a common index for ARMs.
A legal claim or attachment against property as security for payment of an obligation.
Lifetime Payment Cap
For an adjustable rate mortgage (ARM) a limit on the amount that payments can increase or decrease over the life of the mortgage.
Lifetime Rate Cap
For an adjustable rate mortgage (ARM) a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.
Limited Partnership
A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.
Line of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain length of time, based upon the loan’s purpose, the borrower’s ability to repay, and the collateral for the line. (See also Home Equity Line of Credit.)


Liquid assets
Are the most basic type of asset. They’re used by consumers and businesses alike. Several factors must be present for an asset to be considered liquid. It must be an item in an established market with a large number of interested buyers. Ownership must be easily transferred.

The ability to readily convert assets or investments to cash.
A sum of borrowed money (principal) that is generally repaid with interest.
Loan administration
The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).
Loan application
A document required by lenders prior to loan approval containing detailed information about the borrower and property.
Loan Estimate
A document delivered or mailed to customers by a lender within 3 business days of mortgage application. The Loan Estimate provides an estimate of closing costs and fees as well as the loan terms.
Loan Product
Describes the type of loan and includes fixed- or adjustable-rate (ARM) options; the loan term, which is the time you will spend repaying the loan; and whether the loan is insured by a government agency (such as the FHA or VA), or non-government loan.
Loan Purpose
Indicates whether the loan is intended for purchasing or refinancing real estate.
Loan origination fee
A fee a lender charges to process a mortgage, usually expressed as a percentage of the loan (or points), which pays for the work in evaluating and processing the loan.
Loan servicing
See Loan administration.

Loan to After Repair Value (LTARV)
LTARV means Loan To After Repair Value. This acronym is commonly used by private lenders and commercial lenders who finance fix and flip and rental property investors.

Loan- to-Value (LTV)
The ratio of the amount of a potential mortgage to the value of the property it is intended to finance, expressed as a percentage.
A lender’s guarantee that the mortgage rate quoted will be good for a specific number of days from the day of application.
Lock Expiration Date
The interest rate range can only be locked for a set number of days. The rate lock option will expire after the lock expiration date.
Lock-in Period
The number of days before a loan closing in which a customer’s loan is protected from financial market fluctuations in interest rates. Locking in an interest rate range doesn’t guarantee the specific rate that applies at closing. The final interest rate is determined by specific transaction characteristics and the borrower’s credit profile up until loan closing.
London Interbank Offered Rate (LIBOR)
The rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. A common interest rate index; one of the most valid barometers of the international cost of money.
Loss Payable Clause
An insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.


Manufactured Home
Factory-built or prefabricated housing, including mobile homes.

The set percentage the lender adds to the index rate to determine the interest rate of an ARM.
Market Price
The price people agree to pay for something at a given moment at a given place.
Market Rate
Estimated average interest rate being charged by lenders for conventional loans.
Market Value
The most probable price that a ready, willing, and able buyer would pay and a willing seller would accept, assuming each is fully informed and under no pressure to act. The market value may be different from the price for which a property can actually be sold at a given time (market price).
Marketable title
A title free and clear of liens, clouds or other defects that would prevent the sale of the property.
Maturity Date
The date when a loan’s final payment or loan balance must be paid in full. For a balloon home equity line of credit or an existing balloon home equity loan, the maturity date is when the outstanding balance becomes due in full.
Mobile Home
A factory-assembled residence consisting of one or more modules and a chassis and wheels that are an integral part of the structure and need not be removed in order to make the module(s) occupiable.
Modular House
A factory-assembled residence built in units or sections, transported to a permanent site, and erected on a foundation. Excludes mobile homes.
Monthly housing expense
Total monthly expense of principal, interest, taxes and insurance.
Monthly Fixed Installment
The portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes the monthly fixed installment does not include any amount for principal reduction and doesn’t cover all of the interest. The loan balance therefore increases instead of decreasing.
Monthly Payment
Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.
The transfer of an interest in real property, given as security for the payment of a loan.
Mortgage Banker
A company that originates mortgages for resale in the secondary mortgage market.
Mortgage Broker
A company that matches borrowers with lenders for a fee.
Mortgage Commitment
An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term, and amount.
Mortgage Insurance
See Private Mortgage Insurance.
Mortgage Insurance Premium (MIP)
The consideration a mortgagor (borrower) pays to either the FHA or a private insurer for mortgage insurance.
Mortgage Life Insurance
A type of term life insurance. In the event that the borrower dies while the policy is in force the mortgage debt is automatically paid by insurance proceeds.
Mortgage loan
A loan for which real estate serves as collateral to provide for repayment in case of default.
Mortgage Note
A written agreement to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.
The lender on a mortgage transaction.
The borrower in a mortgage transaction. The mortgagor pledges property as security for the debt.
Mortgage Loan Originator
According to federal regulations, a Mortgage Loan Originator (MLO) is defined as anyone who takes a mortgage loan application and presents or negotiates the terms of a residential mortgage loan for compensation or gain.


National Do Not Call Registry
Is intended to give U.S. consumers an opportunity to limit the telemarketing calls they receive. To register by phone, (US) consumers may call 1-888-382-1222 or they may register via the web at the registration page. The laws provides exceptions to a blanket don-not-call ruling. Separate laws and regulations apply to robocalls in the United States.
Nationwide Mortgage Licensing System and Registry (NMLSR)
The Nationwide Mortgage Licensing System and Registry (NMLSR) is a repository developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The purpose of the NMLSR is to streamline the licensing process, improve supervision, and increase transparency in residential lending .
Negative Amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.
Negative Points
A cash rebate paid by lenders to a mortgage broker or the borrower for a mortgage with an interest rate above the lender’s par interest rate. A rebate credited to the borrower is typically used to defray loan settlement costs. The rebate may not exceed loan settlement costs, nor be used as part of the down payment.
Neighborhood Stabilization Program (NSP)
A program funded by the Department of Housing and Urban Development (HUD) through the American Recovery and Reinvestment Act (ARRA) of 2009 and designed to provide funds to assist homebuyers in purchasing foreclosed residential properties in targeted areas for the purpose of stabilizing neighborhood property values.
After taxes.


Net Cash Flow (NCF)
Net cash flow is the difference between a company’s cash inflows and outflows within a given time period. A company has a positive cash flow when it has excess cash after paying for all operating costs and debt payments.

Net Effective Income
The borrower’s gross income minus federal income tax.
A number or other identifier that permanently identifies a registered residential loan originator. The Unique Identifier is assigned by protocols established by the Nationwide Mortgage Licensing System and Registry and other agencies. It also may be referred to as a Unique ID.
Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.
Non-Conforming Loan
Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines.
Non-dischargeable debt
Debt, such as taxes, that cannot be forgiven in a bankruptcy liquidation.
A general term for any kind of paper or document signed by a borrower that is an acknowledgment of a debt, and is, by inference, an agreement to repay that debt. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee. (See Mortgage Note)
Notice of default
Written notice to a borrower that a default has occurred and that legal action may be taken.


The use of a property as a full-time residence, either by the titleholder (owner-occupied) or by another party through a formal agreement (rental).
Office of Comptroller Currency
The federal financial regulatory body that oversees the nation’s federally chartered banks and savings institutions.
Office of Thrift Supervision (OTS)
The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board
One Year Adjustable Rate Mortgage
Mortgage where the annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin chosen by the lender.
The act of securing a completed mortgage application from a commercial or residential borrower and seeing that loan through to loan closing.
Origination Charge
One amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved in the transaction will receive for originating the loan. This includes any application, processing, underwriting fees, and payments from the lender to the broker for origination.
Origination Fee
The fee charged by a lender to prepare loan documents make credit checks inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.
Owner Financing
A property purchase transaction in which the party selling the property provides all or part of the financing.


Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally the payment change date occurs in the month immediately after the adjustment date.
The amount that will pay off a loan in full. In general, a borrower can pay off a loan more quickly by making larger or more principal payments than required. Borrowers should check their contract terms to determine if there are any early payoff fees or penalties.
Payoff Figures
The unpaid principal balance and escrow amounts to be used in calculating full payment of the mortgage or for the closing sale of the property.
Percentage Point
One percent of the loan or a measure of the interest rate.
Periodic Payment Cap
A limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate Cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period regardless of how high or low the index might be.
Permanent Loan
A long term mortgage usually ten years or more. Also called an “end loan.”
Personal Property
Usually considered to be property that is moveable, as opposed to real property such as vacant or improved land.


Piggyback Mortgage
A piggyback mortgage is any additional loan taken out on a property alongside a first mortgage.

PITI (Principal, Interest, Taxes, and Insurance)
Principal, interest, taxes and insurance are the most common components of a monthly mortgage payment.
Planned Unit Development (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, and commercial, office and industrial areas. A PUD may also be a subdivision with lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. See also De minimis PUD.
Plans and Specifications
Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.
Pledged Account Mortgage (PAM):
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.
Points (Loan Discount Points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100000 mortgage would cost $2000).
Power of Attorney
A legal document authorizing one person to act on behalf of another.
A preapproval letter indicates that you have been preapproved for a specified mortgage amount based on a preliminary review of your credit information .
Preliminary Title Report
The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.
A portion of the total closing costs related to the mortgage loan that are collected at loan closing, including per diem pre-paid interest and initial deposits of monthly escrows for taxes and insurance.
A full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property or refinances the existing loan.
Prepayment Fee or Penalty
A provision in the lending contract that states the borrower will pay a fee in the event the borrower pays off the loan earlier than was originally agreed.
The process of estimating how much money a prospective homebuyer may be eligible to borrow prior to applying for the loan. Prequalification does not include a credit check and should not be confused with Preapproval.
Primary Mortgage Market
Lenders such as savings and loan associations commercial banks and mortgage companies who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to the secondary mortgage markets such as FNMA or GNMA etc Interest Taxes and Insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance whether these amounts are paid into an escrow account each month or not.
Primary Residence
The residence that the borrower intends to occupy as their principal residence.
Prime rate
Lowest commercial interest rate charged by a bank on short-term loans to its most credit-worthy customers.
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Principal Balance
The remaining balance due on a debt, exclusive of accrued interest.
Principal Payment
The portion of a monthly payment that goes toward reducing the principal balance. Borrowers should strive to make additional principal payments whenever possible to pay down a loan balance faster and possibly reduce the amount of interest paid over the term of the loan.
Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.
Profit and loss statement
A financial statement showing revenue, expenses and profits over a period of time.
Property tax
A government tax based on the market value of a property.
Property Usage
Denotes whether a property is a first home, second home, vacation home or a rental property.
Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a “sales contract.”


Qualifying rate
Adjustable-rate mortgages often employ a “qualifying fate” that differs from the “start rate.” The qualifying rate may be a pre-determined percentage of interest (i.e. “8 percent”), expressed as the “highest possible rate of interest at the beginning of the 2nd year”, based on the start rate (i.e. “start rate + 2 percent), expressed as the “Fully Indexed Accrual Rate” (“FIAR”) or another amount.
Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a homebuyer. See Housing Expense Ratio, Income/Expense Ratio and Debt-to-income Ratio.
Quitclaim Deed
A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty.


Rate Lock Option
Your interest rate range can either be locked or not locked. The interest rate range on the date and time you lock remains available to you for a set period of time and is unaffected by financial market fluctuations during this time. If your interest rate range is locked, the interest rate on your application will generally remain the same if there are no subsequent changes to the loan. If there are changes, your final interest rate at closing may be different, but will still fall within your interest rate range, as long as your rate lock period has not expired.
Real Assets
Real estate or real property owned by an individual or business.
Real Estate
See Real Property
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Owned (REO)
A foreclosed property, also known as a Real Estate Owned (REO) property, is a home that was once customer owned but is now owned by a bank. A foreclosure can occur when mortgage payments are not made over a period of time and measures taken to help are not satisfied.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.
Real Property
Property that includes land and anything affixed to the land, such as buildings and leasehold improvements. It may also include whatever is beneath the land (e.g., minerals, natural gas) and rights to the use of the property.
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
The cancellation of a contract. With respect to mortgage refinancing the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.
The right of the person with title to a property to recover it from the debtor in case of a bankruptcy.
The transfer of property back to the owner when a mortgage is fully repaid.
Recording Fees
Money paid to the lender for recording a home sale with the local authorities thereby making it part of the public records.
The repayment of a debt from the proceeds of a new loan using the same property as security.
Reissue or Refinance Rate (for Title Insurance)
A reissue or refinance rate is a reduced rate for title insurance that a homeowner may be eligible for on a refinance. The reduced rate may be applicable if the property was previously insured within a certain number of years.
Renegotiable Rate Mortgage
A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.
Rent with option to buy
See Lease-purchase mortgage loan.
Repayment Period
For a standard home equity line of credit, the point at which a borrower must begin to make fully amortizing monthly payments, or principal-and-interest payments that will completely repay the outstanding balance during a certain period of time.
Repossession (or foreclosure)
Legal process by which the lender forces the sale of a property because the borrower has not met the mortgage terms.
Rescission Period
Under federal law, certain loan transactions secured by your home are subject to a rescission, or cancellation, period. Following receipt of all required disclosures and consummation of the contract, each owner of the property has up to three full business days to cancel the transaction. The right to cancel does not apply to loans made to purchase, construct, or acquire a primary residence, or to transactions secured by a secondary residence, vacation home, or rental property.
Reserves or Impounds
Terms used to mean “escrow” in some parts of the country. See Escrow.
Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish the information after application only.


Return on Investment (ROI)
Return on investment is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as collateral for and repayment of the loan.
Reverse Mortgage
A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.
Revolving Liability
A credit arrangement such as a credit card that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services.
Revolving Line of Credit
A line of credit that gives the borrower the ability to access available funds during the specified draw period. As the borrower pays down the principal, more credit becomes available during the draw period, up to the total amount of the approved line of credit.


Sales Contract
See Purchase Contract.
Satisfaction of Mortgage
The document issued by the lender verifying full payment of a mortgage debt.
Second Home (Vacation Home, Weekend Home)
A residence other than the borrower’s primary residence which the borrower intends to occupy for a portion of each year. The residence must be occupiable year-round.
Second Mortgage
A mortgage that has rights that are subordinate to the rights of the first mortgage holder. Home equity loans are often referred to as second mortgages because the borrower typically is still paying off their home mortgage; if the home mortgage is paid off, the home equity loan is then considered to be a first mortgage.
Secondary Mortgage Market
A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated.
Section 203(k) Loan Program
HUD’s primary program for the rehabilitation and repair of single-family properties. A 203(k) loan is a first mortgage that covers the costs of rehabilitation and purchase or refinance of an eligible property. The goals of the Section 203(k) loan program are community and neighborhood revitalization and expanded opportunities for homeownership for low- and moderate-income families.
Collateral or property given, deposited, or pledged to secure the repayment of a loan.
Security Instrument
Mortgage or Deed of Trust evidencing the pledge of real estate as collateral for the loan.
Security Interest
The interest of a creditor in the security acting as collateral for an investment.


Seller 2nd Financining
Seller Financing is a real estate agreement in which the seller handles the mortgage process in a 2nd lien position.

Seller Carry Back
An agreement in which the owner of a property provides financing often in combination with an assumable mortgage. See owner financing.
Seller’s broker
An agent hired by a seller to represent him/her in negotiations to sell property.
Seller’s market
Market conditions that favor sellers. With more buyers than sellers in the market, sellers have the negotiating power as demand exceeds supply.
Seller Contributions
Payment by the seller or any other interested party of some or all of the purchaser’s usual closing costs. Investors and insurers sometimes limit the amount of seller contributions and require lenders to adjust the property’s value if contributions exceed limitations. Undisclosed seller contributions (such as decorating allowances, appliances, or payment of moving expenses) are made to borrowers outside of closing and are also subject to investor and insurer restrictions.
An organization that collects principal and interest payments from borrowers and manages borrower escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
All the steps and operations a lender performs to keep a loan in good standing such as collection of payments payment of taxes insurance property inspections and the like.
Servicing Released
A stipulation in the agreement for the sale of mortgages in which the seller is not responsible for loan administration.
See Closing.
Settlement Costs
Money paid by borrowers and sellers to effect the closing of a mortgage loan, including payments for title insurance, survey, attorney fees, and such prepaid items as escrow for taxes and insurance.
Settlement Services
Services provided by the lender at the closing of a loan.
Settlement Sheet
The computation of costs payable at closing that determines the seller’s net proceeds and the buyer’s net payment.
Settlement Statement (HUD-1)
For purchase and refinance applications taken before October 3, 2015, customers receive a HUD-1 Settlement Statement at closing that details the fees associated with closing the loan. Note: For new purchase and refinance applications taken on or after October 3, 2015, at closing customers will receive a Closing Disclosure detailing the terms and closing costs of the transaction.
Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.
Simple Interest
Interest which is computed only on the principle balance.
Site Value
The value of land without improvements, as if vacant.
Standard Payment Calculation
The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
Start rate
A pre-determined rate of interest that will be applied to the loan until the date of the first interest rate change.
Step Rate Mortgage
A mortgage that allows for the interest rate to increase according to a specified schedule (i.e. seven years) resulting in increased payments as well. At the end of the specified period the rate and payments will remain constant for the remainder of the loan.
Improved or unimproved land divided into a number of parcels for sale, lease, financing, or development.
To make subject or junior to. For example, a loan on vacant land is made subject to a subsequent construction loan. Also described as a Second Mortgage. See First Mortgage.
Subsidized second mortgage
Alternative financing option for low- and moderate-income households that also includes a down payment and a first mortgage, with funds for the second mortgage provided by city, county or state housing agencies, foundations or nonprofit corporations. Payment on the second mortgage is often deferred and carries low interest rates (if any). Part of the debt may be forgiven for each year the family remains in the home.
The measurement and description of land by a registered surveyor.
Sweat Equity
Equity created by a purchaser performing work on a property being purchased.


Tax impound
Money paid to and held by a lender for annual tax payments. See Impound Account.
Tax Lien
A claim against property for unpaid taxes.
Tax sale
Public sale of property by a government authority as a result of nonpayment of taxes.
The use of real estate under any kind of right of title.
The time limit within which a loan must be repaid.
Third Party Origination
When a lender uses another party to completely or partially originate process underwrite close fund or package the mortgages it plans to deliver to the secondary mortgage market.
The legal evidence of ownership rights to real property.
Title (Insurance) Company
A company that confirms the legal owner of a property and insures a homeowner and lender against a loss that could result from a title dispute.
Title Insurance
An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner’s coverage) against any loss resulting from a title error or dispute. On a refinance, if the property has had a recent title insurance policy, a homeowner may sometimes be eligible for a reduced rate on the title insurance (also known as the reissue or refinance rate) .
Title Insurance Policy
A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.
Title Search
An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.
Top Ratio
See Housing Expense Ratio.
Torrens Certificate
A certificate issued by a public authority called a registrar of titles, establishing title of an indicated owner. Used when title to property is registered under the Torrens system of land registration.
Total Expense Ratio
Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.
Transfer Tax
State or local tax payable when the title passes from one owner to another.
Trust account
An account maintained by a broker or escrow company to handle all money collected for clients.
Trust Deed
See Deed of Trust.
Someone given legal responsibility to hold property in the best interest of another.
Truth-in-Lending Act
A Federal law requiring full disclosure of credit terms using a standard format. This is intended to facilitate comparisons between lending terms and financial institutions.
Two Step Mortgage
A mortgage in which the borrower receives a-below-market interest rate for a specified number of years (most often seven or 10) and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. Also called “Super Seven” or “Premier” mortgage.


Underwriting (U/W)
Analysis of risk and setting of appropriate rate and terms for a mortgage on a specific property for specific borrowers.
Uniform Residential Loan Application (URLA)
Also known as a Fannie Mae Form 1003 or a Freddie Mac (65). Required for all mortgage applications; information includes income, assets, and a description of the home.


UPB – Unpaid Principal Balance
The actual balance of the mortgage of the last paid installment date

Interest charged in excess of the legal rate established by law.


VA Loan
A long term low-or-no down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.
VA Mortgage Funding Fee
A premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a fixed rate loan. On a $75000 fixed-rate mortgage with no down payment this would amount to $1406 either paid at closing or added to the amount financed.
Variable rate
An interest rate that changes periodically in relation to an index.
Variable Rate Mortgage (VRM)
See adjustable rate mortgage
Verification of Deposit (VOD)
A document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts.
Verification of Employment (VOE)
A document signed by the borrower’s employer verifying his/her position and salary.
Verification of Mortgage (VOM)
A document of a borrower’s mortgage payment history that is often required when applying for a loan.
Verification of Rent (VOR)
A document of a borrower’s rental history that is often required when applying for a loan.


Wage assignment
Wage assignment is a clause in some loan agreements that gives the lender the right to deduct payments from the borrower’s wages if the borrower defaults. When the borrower agrees to this clause, he’s essentially using his future earnings as collateral for the loan.
The intentional action of giving up one’s right’s and claims.
Wall Street Journal prime rate
The wavering interest rate as posted daily in the Wall Street Journal which is derived from several banks to arrive at its number.
Warehouse Fee
Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans the mortgage firm has an economic loss which is offset by charging a warehouse fee.
Warehouse lending
Warehouse lending is the practice of offering revolving credit to loan originators, who draw money to fund mortgage loans. The originator repays those funds when the mortgage is sold on the secondary market.
A mortgage in which basic terms: interest rate, term and monthly payment, have been altered to prevent a foreclosure.
Workout assumption
Workout assumption is the transfer of an existing mortgage from an at-risk borrower to a qualified third-party. A workout assumption is usually only a consideration when a borrower has serious financial problems that aren’t likely to be resolved. The lender must approve a workout assumption.
Wraparound loan
A wraparound loan is a refinancing technique used with mortgages. A lender makes a new loan to the homeowner, and places the loan in a subordinate position to the existing first mortgage. After funding (rather than at funding), the borrower uses the proceeds from the new loan to pay off the old first mortgage.
Wraparound Mortgage
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 the additional amount off the .
WSJ Prime Rate
WSJ prime rate is a consensus prime rate published by the Wall Street Journal, which obtains the information via a survey of financial institutions. The prime rate is a benchmark lending rate that generally remains 3 percentage points higher than the fed funds rate.


Yield curve
A yield curve is a graph that shows the relationship between interest rates and time.
Yield spread premium
Yield spread premium is the difference between the interest rate a borrower pays on a mortgage loan, and the lender’s par rate for which that borrower qualifies. This difference is the broker’s compensation for originating the mortgage. Yield spread premiums are disclosed on the HUD-1 Form.
Yield to Maturity
The lender’s percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.
Yupcap is a slang term for a young, educated, working professional who can’t afford to buy a home. Yupcaps have reliable, competitive income, but are kept out of homeownership due to the rising cost of real estate in the U.S.


Zero balance
The wonderful appearance of a zero balance occurs when a borrower has paid of their loans and there is nothing left to repay.
Zero capital gains rate
Zero capital gains rate is the 0 percent tax rate that’s applied when an individual sells property in a designated enterprise zone. The existence of the zero capital gain rate is intended to stimulate investment in designated communities.

Zero-down-payment mortgage
A zero-down-payment mortgage is a real estate property loan that finances 100 percent of the purchase price. A borrower who funds a zero-down-payment mortgage will be required to purchase private mortgage insurance.
Zero-lot line
When a house is built on a lot so that one wall is on the property boundary.
Zero Point Option
An option allowing a borrower to pay a slightly higher loan interest rate instead of paying the loan origination points generally charged for the particular loan product.
Zeros – Zero-coupon CDs
Zeros, or zero-coupon CDs, are time deposits that pay interest at maturity, rather than at regular intervals.
Zone of possible agreement
Zone of possible agreement describes the potential common ground between two negotiating parties. Each party in a negotiation should have points on which they will and will not compromise. The zone of possible agreement encompasses the points on which both sides are willing to compromise.
Areas that are designated by the local government where certain types of land uses are allowed. An area may be zoned for residential or commercial building.
Zoning ordinances
Local laws that establish building codes and usage regulations for properties in a specified area.
Zoning variance
When an exception is made in a zoning ordinance by the local government. These are granted on a case by cases basis.