Adjustable Rate Mortgage (ARM)
Also known as variable-rate mortgages, have an interest rate that can change at any time, usually in response to changes in a corresponding financial index that’s associated with the loan.
Annual Percentage Rate (APR)
The APR includes the interest rate as well as other fees that will be included over the life of the loan (closing costs, fees, etc.) and shows your total annual cost of borrowing. As a result, the APR is higher than the simple interest of the mortgage.
A person whose job it is to assess the monetary value of something.
An increase in the value of property for any reason, except inflation.
The amount of money that a home seller wants a home buyer to pay in order to purchase a property.
A balloon payment is a larger-than-usual one-time payment at the end of the loan term. If you have a mortgage with a balloon payment, your payments may be lower in the years before the balloon payment comes due, but you could owe a big amount at the end of the loan.
A legal process where individuals or businesses who cannot repay debts to creditors seek relief from some or all of their debts. In most cases bankruptcy is imposed by a court order, often initiated by the debtor.
A type of debt, similar to an I.O.U. between a lender and borrower that includes the details of the loan and its payments. Bonds are used by sovereign governments, municipalities, or corporations. The issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal when the bond becomes due after an agreed period.
Various fees required to conclude a home purchase.
The delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete a real estate transaction.
A Condominium (condo) is a privately-owned individual unit within a community of other units. Condo owners share common areas, such as pools, garages, elevators, gym and hallways among others. Most condos are found in highrise buildings, however in some markets they are detached.
In real estate, mortgage financing that is not insured or guaranteed by a government agency.
A data collection agency that for a fee provides historical credit records of individuals provided to them by creditors subscribing to their services.
A credit report is a detailed account of your credit history such as loan-paying history and the status of your credit accounts. It is a statement about your credit activity and current credit situation.
A credit score predicts how likely you are to pay back a loan on time. Companies use a formula to create your credit score from the information in your credit report. Your scores depend on your credit history, the type of loan product, and even the day when it was calculated.
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income.
A legal document under which ownership of a property is conveyed.
Department of Veterans Affairs (VA)
The Department of Veterans Affairs runs programs benefiting veterans and members of their families. It offers education and rehabilitation services and provides compensation payments for disabilities or death related to military service, home loan guaranties, pensions, burials, and health care that includes the services of nursing homes, clinics, and medical centers.
The decrease of fair value of an asset, building or other real estate improvement, resulting from physical wear and external factors that render a property obsolete or no longer competitive.
The initial up-front partial payment that a borrower may need to pay in order to buy a piece of property. Typically paid in cash or equivalent at the time of the transaction followed by a loan to finance the remaining payment.
Down payment assistance program
Down payment assistance (DPA) helps home buyers reduce the amount they need to save for a down payment by providing grants, loans at no-interest, low- interest, and in some cases, forgivable loans. Down payment assistance programs are typically provided through federal, state and local government agencies, as well as private non-profit organizations.
The difference between the home’s market value and the outstanding balance of the mortgage loan (as well as any other liens on the property).
A contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the parties.
Fair Housing Act
The Fair Housing Act prohibits discrimination against people who are renting or buying a home, getting a mortgage, housing assistance or other housing-related services. This act protects people from discrimination due to: race, color, national origin, religion, gender, familial status and disability.
Federal Housing Administration (FHA)
Congress created the FHA in 1934 and became a part of the Department of Housing and Urban Development’s (HUD) Office in Housing in 1965. The FHA collects mortgage insurance premiums from borrowers through FHA-approved lenders in the United States and its territories. FHA insures mortgages on single-family, multifamily, and manufactured homes and hospitals.
Federal Housing Administration Loan (FHA Loan)
An FHA Loan is a US Federal Housing Administration mortgage insurance backed mortgage loan provided by an FHA-approved lender. FHA mortgage insurance protects lenders against losses.
A first mortgage is the primary lien on a property. A first mortgage is not defined as the mortgage on the first home of a borrower; rather it is the original mortgage taken on any one property. The primary mortgage has priority over all other liens or claims on a property in the event of a default.
An individual who purchases a principal residence for the first time or for the first time in three years. As a first- time homebuyer they may qualify for special benefits such as grants, closing cost assistance or low down payment options.
Fixed-Rate Mortgage (FRM)
A mortgage loan where the interest rate stays the same for the entire term of the loan.
The legal proceeding that removes a mortgagor’s right of redeeming a mortgaged property or estate.
Funds given to a home buyer without any expectation of being paid back. Gifts often need to be accompanied by a gift letter if a homebuyer intends to use a monetary gift towards a down payment.
A fund provided by an entity, typically a government agency, charitable organization or institution for a specific purpose and, unlike a loan, does not need to be paid back.
Insurance coverage that pays for the loss or damage on a person’s home or property (due to fire, natural disasters, etc.). This is usually added as a supplement to homeowners insurance.
A written estimate or opinion of a property’s value prepared by an appraiser.
A home inspection examines and reports on the condition of a property, typically when it is for sale.
Home Purchase Price
The final price a home sold for.
This type of insurance covers a home’s structure and personal belongings inside in the event of loss or theft. It can also pay for repairs and replacement.
Refers to the yearly cost of a loan to a borrower and is expressed as a percentage.
An organization or individual that makes funds available to a person or a business with the expectation that it will be repaid, generally with interest.
A legal hold or claim of a creditor against the property as collateral to satisfy a debt.. Liens are always against property, usually real property and is public record.
Advisors that evaluate and authorize loans to people and businesses.
A financial term typically used by lenders to describe the ratio of a loan to the value of an asset purchased. For real estate purposes the term is commonly used by financial institutions to describe the ratio of the first mortgage line as a percentage of the total appraised value of the property.
A legal document that pledges property to the mortgage company as security for the repayment of the loan. The term is also used to refer to the loan itself.
Mortgage insurance premium
Paid by the borrower if they were to make a down payment of less than 20 percent on a home loan. It is paid by the borrower and used to protect the lender from losses if the borrower defaults on the loan. Mortgage insurance premium is typically paid on FHA- backed loans.
Mortgage loan application
A document that a borrower submits to a lender when they apply for a mortgage to purchase a property.
Pre-approval is a preliminary evaluation of a potential borrower by a lender to determine if they can receive a pre-qualification offer. Pre-approvals are facilitated through soft inquiries by credit bureaus on a borrower's credit report.
The amount a person borrows and has to pay back (This does not include interest).
Private mortgage insurance (PMI)
An insurance policy which compensates lenders in mortgage-backed securities for losses due to the default of a mortgage loan. A borrower may be required to pay private mortgage insurance if they have a conventional loan and provide a down payment of less than 20 percent of the home’s price.
A legally binding document stating that the borrower promises to repay the lender for the full loan amount plus interest.
The amount individuals pay to their local city/municipality and sometimes county, based on the value of their property.
Refinance (refi) mortgage
Refinancing is when a homeowner gets a new mortgage to replace their current loan. Most people refinance their mortgage to lower their interest rate and reduce their mortgage payments.
Revolving charge account
An account that sets a credit limit- a set amount that you can spend on that specific account. You can either pay off the balance in full at the end of each billing cycle or carry a balance from one month to the next.
Revolving debt is all debt that doesn’t have a set loan amount for a set period of time and refers to the balance you carry from any revolving credit. Examples include credit cards, personal lines of credit, home equity lines of credit.
Real estate professional
A licensed professional who represents buyers and sellers in real estate transactions.
A residential building that stands alone for one family, person or household and where the owner has an undivided interest in the single family unit.
A secured loan is a loan protected by an asset. The item purchased can be used as collateral, meaning the lender would hold the deed until the loan is paid in full.
A second mortgage is a lien that is taken out on a home that already has a primary mortgage on it. Some reasons to take out a second mortgage are: to avoid paying primary mortgage insurance, home equity line of credit and debt consolidation.
Secondary mortgage market
A marketplace where mortgages and servicing rights are bought and sold between lenders and investors.
A sale of a home that takes place when the homeowner is in financial hardship and needs to sell their home for less than the amount due on the mortgage. In this type of sale, all proceeds go to the lender and the lender can either forgive the remaining balance or require the homeowner to pay all or a part of the difference.
A document proving that a person or organization has ownership of real property.
Insurance through a title company to protect a homeowner or lender from loss if there are defects to a title.
A person who occupies a property and rents from a landlord.
A townhouse, or townhome, is a house with two or three levels, attached to a similar unit by a shared wall.
Truth-in-lending Act (TILA)
An act, established in 1968 designed to protect consumers from inaccurate or unfair credit billing and credit card practices. This act requires lenders to give consumers loan cost details so that a consumer can shop and compare amongst various loan options.
In mortgage banking, underwriting is a lender’s process of assessing the risk of lending money to a potential borrower.
An unsecured loan is a type of loan that does not require any type of collateral. These types of loans are typically contingent upon the borrower's creditworthiness.
VA Guaranteed Loan (VA)
A loan that is guaranteed by the US department of Veteran Affairs. VA loans are provided by private lenders, such as financial institutions and mortgage companies. VA guarantees a portion of the loan allowing the lender to give the borrower more favorable terms.