Real Estate Glossary
acceleration
clause
A provision in a mortgage that gives the lender the right to
demand
payment of the entire principal balance if a monthly payment
is missed.
acceptance
An
offeree’s consent to enter into a contract and be bound by the terms of the
offer.
additional principal
payment
A payment by a borrower of more than the
scheduled principal amount due in order to reduce the remaining balance on the
loan.
adjustable-rate mortgage
(ARM)
A mortgage that permits the lender to adjust
its interest rate periodically on the basis of changes in a specified index.
adjusted basis
The original cost of a property plus the value of any capital
expenditures
for improvements to the property minus any depreciation
taken.
adjustment date
The
date on which the interest rate changes for an adjustable-rate mortgage (ARM).
adjustment period
The period that elapses between the adjustment dates for an
adjustable-rate mortgage (ARM).
administrator
A
person appointed by a probate court to administer the estate of a person who
died intestate.
affordability analysis
A detailed analysis of your ability to afford the purchase of
a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of
mortgage you
plan to use, the area where you want to purchase a home, and
the closing costs that you might expect to pay.
amenity
A feature of real property that enhances its attractiveness
and increases the occupant’s or user’s satisfaction although the feature
is not essential to the property’s use. Natural amenities include a
pleasant
or desirable location near water, scenic views of the
surrounding area, etc. Human-made amenities include swimming pools, tennis
courts, community buildings, and other recreational facilities.
amortization
The
gradual repayment of a mortgage loan by installments.
amortization schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and
principal and shows the remaining balance after each payment is made.
amortization term
The amount of time required to amortize the mortgage loan. The
amortization term is expressed as a number of months. For example, for a
30-year fixed-rate mortgage, the amortization term is 360 months.
amortize
To repay a
mortgage with regular payments that cover both principal and interest.
annual mortgagor
statement
A report sent to the mortgagor each year. The report shows how
much was paid in taxes and interest during the year, as well as the
remaining mortgage loan balance at the end of the year.
annual percentage rate
(APR)
The cost of a mortgage stated as a yearly rate; includes such
items as interest, mortgage insurance, and loan origination fee
(points).
annuity
An amount
paid yearly or at other regular intervals, often on a guaranteed dollar basis.
application
A form used to apply for a mortgage loan and to record
pertinent information concerning a prospective mortgagor and the
proposed security.
appraisal
A written
analysis of the estimated value of a property prepared by a qualified
appraiser. Contrast with home inspection.
appraised value
An
opinion of a property's fair market value, based on an appraiser's knowledge,
experience, and analysis of the property.
appraiser
A person
qualified by education, training, and experience to estimate the value of real
property and personal property.
appreciation
An increase
in the value of a property due to changes in market conditions or other causes.
The opposite of depreciation.
assessed value
The
valuation placed on property by a public tax assessor for purposes of taxation.
assessment
The process of placing a value on property for the strict
purpose of taxation. May also refer to a levy against property for a
special purpose, such as a sewer assessment.
assessment rolls
The
public record of taxable property.
assessor
A public
official who establishes the value of a property for taxation purposes.
asset
Anything of monetary value that is owned by a person. Assets include
real property, personal property, and enforceable claims against
others (including bank accounts, stocks, mutual funds, and so on).
assignment
The
transfer of a mortgage from one person to another.
assumable mortgage
A
mortgage that can be taken over ("assumed") by the buyer when a home
is sold.
assumption
The
transfer of the seller’s existing mortgage to the buyer. See assumable
mortgage.
assumption clause
A provision in an assumable mortgage that allows a buyer to
assume responsibility for the mortgage from the seller. The loan
does not need to be paid in full by the original borrower upon sale or
transfer of the property.
assumption fee
The
fee paid to a lender (usually by the purchaser of real property) resulting from
the assumption of an existing mortgage.
balance
sheet
A financial statement that shows
assets, liabilities, and net worth as of a specific date.
balloon mortgage
A mortgage that has level monthly payments that will amortize
it over a stated term but that provides for a lump sum payment to be
due at the end of an earlier specified term.
balloon payment
The
final lump sum payment that is made at the maturity date of a balloon mortgage.
bankrupt
A person, firm, or corporation that, through a court
proceeding, is relieved from the payment of all debts after the surrender
of all assets to a court-appointed trustee.
bankruptcy
A proceeding in a federal court in which a debtor who owes
more than his or her assets can relieve the debts by transferring his or
her assets to a trustee.
before-tax income
Income before taxes are deducted.
beneficiary
The
person designated to receive the income from a trust, estate, or a deed of
trust.
bequeath
To transfer
personal property through a will.
betterment
An
improvement that increases property value as distinguished from repairs or
replacements that simply maintain value.
bill of sale
A
written document that transfers title to personal property.
biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two
weeks (instead of the standard monthly payment schedule). The 26
(or possibly 27) biweekly payments are each equal to one-half of the
monthly payment that would be required if the loan were a standard 30-year
fixed-rate mortgage, and they are usually drafted from the borrower’s
bank account. The result for the borrower is a substantial
savings in interest.
blanket insurance policy
A single policy that covers more than one piece of property (or more than
one person).
blanket mortgage
The
mortgage that is secured by a cooperative project, as opposed to the share
loans on individual units within the project.
bona fide
In good
faith, without fraud.
bond
An interest-bearing certificate of debt with a maturity date.
An obligation of a government or business corporation. A real
estate bond is a written obligation usually secured by a mortgage or a
deed of trust.
breach
A violation
of any legal obligation.
bridge loan
A form of second trust that is collateralized by the
borrower's present home (which is usually for sale) in a manner that allows the
proceeds to be used for closing on a new house before the present
home is sold. Also known as "swing loan."
broker
A person who, for a commission or a fee, brings parties together and
assists in negotiating contracts between them. See mortgage broker.
budget
A detailed plan of income and expenses expected over a certain
period of time. A budget can provide guidelines for managing future
investments and expenses.
budget category
A
category of income or expense data that you can use in a budget. You can
also define your own budget categories and add them to some or
all of the budgets you create. "Rent" is an example of an
expense category.
"Salary" is a typical income category.
building code
Local regulations that control design, construction, and materials
used in construction. Building codes are based on safety and health
standards.
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.
capital
(1) Money
used to create income, either as an investment in a business or an
income property. (2) The money or property comprising the wealth
owned or used by a person or business enterprise. (3) The accumulated
wealth of a
person or business. (4) The net worth of a business
represented by the amount by which its assets exceed liabilities.
capital expenditure
The cost of an improvement made to extend the useful life of a property or
to add to its value.
capital improvement
Any structure or component erected as a permanent improvement to real
property that adds to its value and useful life.
cash-out refinance
A refinance transaction in which the amount of money received
from the new loan exceeds the total of the money needed to repay the
existing first mortgage, closing costs, points, and the amount
required to satisfy any outstanding subordinate mortgage liens. In other
words, a refinance transaction in which the borrower receives
additional cash that can be used for any purpose.
certificate of title
A statement provided by an abstract company, title company, or
attorney stating that the title to real estate is legally held by the
current owner.
chain of title
The
history of all of the documents that transfer title to a parcel of real
property, starting with the earliest existing document and ending with
the most recent.
change frequency
The
frequency (in months) of payment and/or interest rate changes in an
adjustable-rate mortgage (ARM).
chattel
Another name
for personal property.
clear title
A title
that is free of liens or legal questions as to ownership of the property.
closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
closing cost item
A
fee or amount that a home buyer must pay at closing for a single
service, tax, or product. Closing costs are made up of individual closing
cost items such as origination fees and attorney's fees. Many closing
cost items
are included as numbered items on the HUD-1 statement.
closing costs
Expenses (over and above the price of the property) incurred by
buyers and sellers in transferring ownership of a property. Closing
costs normally include an origination fee, an attorney's fee, taxes, an
amount placed in escrow, and charges for obtaining title insurance and a
survey.
Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.
closing statement
An
accounting of disbursment of funds related to a Real Estate transaction.
cloud on title
Any conditions revealed by a title search that adversely affect
the title to real estate. Usually clouds on title cannot be removed
except by a quitclaim deed, release, or court action.
collateral
An asset (such as a car or a home) that guarantees the
repayment of a loan. The borrower risks losing the asset if the loan is not
repaid according to the terms of the loan contract.
collection
The efforts used to bring a delinquent mortgage current and to
file the necessary notices to proceed with foreclosure when
necessary.
co-maker
A person who signs a promissory note along with the borrower.
A co-maker's signature guarantees that the loan will be
repaid, because the borrower and the co-maker are equally responsible for
the repayment. See endorser.
commission
The fee charged by a broker or agent for negotiating a real estate
or loan transaction. A commission is generally a percentage of the
price of the property or loan.
commitment letter
A formal offer by a lender stating the terms under which it
agrees to lend money to a home buyer. Also known as a "loan
commitment" or pre-approved mortgage loan.
common area assessments
Levies against individual unit owners in a condominium or planned
unit development (PUD) project for additional capital to defray
homeowners' association costs and expenses and to repair, replace,
maintain, improve, or operate the common areas of the project.
common areas
Those portions of a building,
land, and amenities owned (or
managed) by a planned unit development (PUD) or condominium project's
homeowners' association (or a cooperative project's cooperative
corporation) that are used by all of the unit owners, who share in the
common
expenses of their operation and maintenance. Common areas include
swimming pools, tennis courts, and other recreational facilities, as
well as
common corridors of buildings, parking areas, means of ingress and
egress, etc.
common law
An
unwritten body of law based on general custom in England.
community property
A form of ownership under which property acquired during a
marriage is presumed to be owned jointly unless acquired as separate
property of either spouse.
comparables
An
abbreviation for "comparable properties"; used for comparative
purposes in the appraisal process. Comparables are properties like the
property under consideration; they have reasonably the same size, location,
and amenities and have recently been sold. Comparables help the
appraiser determine the approximate fair market value of the subject
property.
compound interest
Interest paid on the original principal balance and on the accrued and
unpaid interest.
condemnation
The determination that a building is not fit for use or is
dangerous and must be destroyed; the taking of private property for a
public purpose through an exercise of the right of eminent domain.
condominium
A real estate project in which each unit owner has title to a
unit in a building, an undivided interest in the common areas of the
project, and sometimes the exclusive use of certain limited common areas.
condominium conversion
Changing the ownership of an existing building (usually a rental project)
to the condominium form of ownership.
condominium hotel
A condominium project that has rental or registration desks,
short-term occupancy, food and telephone services, and daily cleaning
services and that is operated as a commercial hotel even though the units
are individually owned.
construction loan
A short-term, interim loan for financing the cost of
construction. The lender makes payments to the builder at periodic intervals
as the work progresses.
consumer reporting agency (or
bureau)
An organization that prepares reports that are used by lenders
to determine a potential borrower's credit history. The agency
obtains data for these reports from a credit repository as well as
from other sources.
contingency
A
condition that must be met before a contract is legally binding. For example,
home purchasers often include a contingency that specifies that
the contract is not binding until the purchaser obtains a satisfactory
home
inspection report from a qualified home inspector.
contract
An oral or
written agreement to do or not to do a certain thing.
conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
Contrast with government mortgage.
convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that
allows the borrower to change the ARM to a fixed-rate mortgage at
specified timeframes after loan origination.
convertible ARM
An
adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage
under specified conditions.
cooperative (co-op)
A type of multiple ownership in which the residents of a
multiunit housing complex own shares in the cooperative corporation
that owns the property, giving each resident the right to occupy a
specific apartment or unit.
cooperative corporation
A business trust entity that holds title to a cooperative project and
grants occupancy rights to particular apartments or units to
shareholders through proprietary leases or similar arrangements.
cooperative mortgages
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but
occasionally describes the share loans on the individual units.
cooperative project
A residential or mixed-use building wherein a corporation or
trust holds title to the property and sells shares of stock representing
the value of a single apartment unit to individuals who, in turn,
receive a proprietary lease as evidence of title.
corporate relocation
Arrangements under which an employer moves an employee to another area as
part of the employer's normal course of business or under which it
transfers a substantial part or all of its operations and employees to
another area because it is relocating its headquarters or expanding its
office capacity.
covenant
A clause in
a mortgage that obligates or restricts the borrower and that, if violated, can
result in foreclosure.
credit
An agreement
in which a borrower receives something of value in exchange for a promise to
repay the lender at a later date.
credit history
A record of an individual's open and fully repaid debts. A
credit history helps a lender to determine whether a potential borrower has
a history of repaying debts in a timely manner.
credit life insurance
A type of insurance often bought by mortgagors because it will
pay off the mortgage debt if the mortgagor dies while the policy is
in force.
creditor
A person to
whom money is owed.
credit report
A report of an individual's credit history prepared by a credit
bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.
credit bureau
An organization that gathers, records, updates, and stores
financial and public records information about the payment records of
individuals who are being considered for credit.
debt
An amount owed
to another. See installmentloan and revolving liability.
deed
The legal
document conveying title to a property.
deed of trust
The
document used in some jurisdictions instead of a mortgage; title is conveyed to
a trustee.
default
Failure to
make mortgage payments on a timely basis or to comply with other requirements
of a mortgage.
delinquency
Failure
to make mortgage payments when mortgage payments are due.
deposit
A sum of money given to bind the sale of real estate, or a sum
of money given to ensure payment or an advance of funds in the
processing of a loan. See earnest money deposit.
depreciation
A
decline in the value of property; the opposite of
appreciation.
discount points
See
point.
down payment
The
part of the purchase price of a property that the buyer pays in cash and does
not finance with a mortgage.
due-on-sale provision
A provision in a mortgage that allows the lender to demand
repayment in full if the borrower sells the property that serves as
security for the mortgage.
due-on-transfer provision
This terminology is usually used for second mortgages. See due-on-sale
provision.
earnest money
deposit
A deposit made by the potential
home buyer to show that he or she is serious about buying the house.
easement
A right of
way giving persons other than the owner access to or over a property.
effective age
An appraiser’s estimate of the physical condition of a
building. The actual age of a building may be shorter or longer than its
effective age.
effective gross income
Normal annual income including overtime that is regular or guaranteed. The
income may be from more than one source. Salary is generally the
principal source, but other income may qualify if it is significant and
stable.
expropriation
The right of a government to take private property for
public use upon payment of its fair market value.
encroachment
An
improvement that intrudes illegally on another’s property.
encumbrance
Anything
that affects or limits the fee simple title to a property, such as mortgages,
leases, easements, or restrictions.
endorser
A person
who signs ownership interest over to another party. Contrast with co-maker.
equity
A homeowner's financial interest in a property. Equity is the
difference between the fair market value of the property and the amount
still owed on its mortgage.
escrow collections
Funds collected by the servicer and set aside in an escrow account
to pay the borrower’s property taxes, mortgage insurance, and hazard
insurance.
estate
The ownership interest of an individual in real property. The
sum total of all the real property and personal property owned by an
individual at time of death.
eviction
The lawful
expulsion of an occupant from real property.
examination of title
The report on the title of a property from the public records or an
abstract of the title.
exclusive listing
A written contract that gives a licensed real estate agent the
exclusive right to sell a property for a specified time, but reserving
the owner’s right to sell the property alone without the payment
of a commission.
executor
A person
named in a will to administer an estate. The court will appoint an
administrator if no executor is named. "Executrix" is the
feminine form.
Fair Credit
Reporting Act
A consumer protection law that regulates the disclosure of
consumer credit reports by consumer/credit reporting agencies and
establishes procedures for correcting mistakes on one's credit
record.
fair market value
The highest price that a buyer, willing but not compelled to
buy, would pay, and the lowest a seller, willing but not compelled to
sell, would accept.
fee simple
The
greatest possible interest a person can have in real estate.
fee simple estate
An unconditional, unlimited estate of inheritance that
represents the greatest estate and most extensive interest in land that can
be enjoyed. It is of perpetual duration. When the real estate
is in a condominium project, the unit owner is the exclusive owner
only of the air space within his or her portion of the building (the
unit) and is an owner in common with respect to the land and other common
portions of the property.
CMHC coinsured mortgage
A mortgage for which the Federal Government and the
originating lender share the risk of loss in the event of the mortgagor's
default.
Bonus
A fee or commission paid to a mortgage broker for finding a
mortgage loan for a prospective borrower.
first mortgage
A
mortgage that is the primary lien against a property.
fixed installment
The monthly payment due on a mortgage loan. The fixed installment includes
payment of both principal and interest.
fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire
term of the loan.
fixture
Personal
property that becomes real property when attached in a permanent manner to real
estate.
flood insurance
Insurance that compensates for physical property damage resulting from
flooding. It is required for properties located in federally
designated flood areas.
foreclosure
The
legal process by which a borrower in default under a mortgage is deprived of
his or her interest in the mortgaged property. This usually involves a
forced sale of the property at public auction with the proceeds of the
sale being applied to the mrotgage debt.
forfeiture
The loss
of money, property, rights, or privileges due to a breach of legal obligation.
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.
grantee
The person to
whom an interest in real property is conveyed.
grantor
The person
conveying an interest in real property.
ground rent
The amount of money that is paid for the use of land when title
to a property is held as a leasehold estate rather than as a fee
simple estate.
group home
A
single-family residential structure designed or adapted for occupancy by
unrelated developmentally disabled persons. The structure provides
long-term housing and support services that are residential in nature.
guarantee mortgage
A
mortgage that is guaranteed by a third party.
guaranteed loan
Also
known as a CMHC mortgage.
hazard
insurance
Insurance coverage that
compensates for physical damage to a property from fire, wind, vandalism, or
other hazards.
Reverse Mortgage
A special type of mortgage that enables older home owners to
convert the equity they have in their homes into cash, using a variety
of payment options to address their specific financial needs. Unlike
traditional home equity loans, a borrower does not qualify on the basis
of income but on the value of his or her home. In addition, the loan
does not have to be repaid until the borrower no longer occupies the
property. Sometimes called a reverse mortgage.
home equity line of
credit
A mortgage loan, which is usually in a subordinate position,
that allows the borrower to obtain multiple advances of the loan
proceeds at his or her own discretion, up to an amount that represents a
specified percentage of the borrower's equity in a property.
home inspection
A thorough inspection that evaluates the structural and
mechanical condition of a property. A satisfactory home inspection is
often included as a contingency by the purchaser. Contrast with
appraisal.
homeowners' association
A nonprofit association that manages the common areas of a
planned unit development (PUD) or condominium project. In a condominium
project, it has no ownership interest in the common elements. In a PUD
project, it holds title to the common elements.
homeowner's insurance
An insurance policy that combines personal liability insurance and hazard
insurance coverage for a dwelling and its contents.
home
warranty
A type of insurance that covers repairs to specified parts of
a house for a specific period of time. It is provided by the builder or
property seller as a condition of the sale.
home improvement mortgage
loan
A mortgage that enables eligible borrowers to obtain financing
to remodel, repair, and upgrade their existing homes or homes
that they are purchasing. The financing takes the form of a
conventional second mortgage or a Federal Housing Administration (FHA) Section
203(k) first mortgage.
income
property
Real estate developed orimproved
to produce income.
inflation
An increase in the amount of money or credit available in
relation to the amount of goods or services available, which causes an
increase in the general price level of goods and services. Over time,
inflation reduces
the purchasing power of a dollar, making it worth less.
variable interest rate
The original interest rate of the mortgage at the time of
closing. This rate changes for an adjustable-rate mortgage (ARM).
Sometimes known as "start rate" or "teaser."
installment
The
regular periodic payment that a borrower agrees to make to a lender.
installment loan
Borrowed money that is repaid in equal payments, known as
installments. A furniture loan is often paid for as an installment loan.
insurable title
A
property title that a title insurance company agrees to insure against defects
and disputes.
insurance
A contract that provides compensation for specific losses in
exchange for a periodic payment. An individual contract is known as an
insurance policy, and the periodic payment is known as an insurance
premium.
insurance binder
A document that states that insurance is temporarily in
effect. Because the coverage will expire by a specified date, a permanent
policy must be obtained before the expiration date.
insured mortgage
A mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults
on the loan, the insurer must pay the lender the lesser of the loss
incurred or the insured amount.
interest
The fee
charged for borrowing money.
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, although it is not used for an adjustable-rate mortgage
(ARM) with payment change limitations.
interest rate
The
rate of interest in effect for the monthly payment due.
interest rate buydown
plan
An arrangement wherein the property seller (or any other party)
deposits money to an account so that it can be released each month to
reduce the mortgagor's monthly payments during the early years of a
mortgage. During the specified period, the mortgagor's effective
interest rate is "bought down" below the actual interest rate.
investment property
A property that is not occupied by the owner.
joint
tenancy
A form of co-ownership that gives each tenant equal interest
and equal rights in the property, including the right of survivorship.
judgment
A decision made by a court of law. In judgments that require
the repayment of a debt, the court may place a lien against the
debtor's real property as collateral for the judgment's creditor.
judgment lien
A lien
on the property of a debtor resulting from the decree of a court.
judicial foreclosure
A type of foreclosure proceeding used in some states that is
handled as a civil lawsuit and conducted entirely under the auspices of a
court.
late
charge
The penalty a borrower must pay when
a payment is made a stated number of days.
lease
A written agreement between the property owner and a tenant
that stipulates the conditions under which the tenant may possess
the real estate for a specified period of time and rent.
leasehold estate
A way of holding title to a property wherein the mortgagor
does not actually own the property but rather has a recorded
long-term lease on it.
lease-purchase mortgage
loan
An alternative financing option that allows low- and
moderate-income home buyers to lease a home from a nonprofit organization 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 is earmarked for deposit to a savings account in
which money for a downpayment will accumulate.
legal description
A
property description, recognized by law, that is sufficient to locate and
identify the property without oral testimony.
liabilities
A person's financial obligations. Liabilities include
long-term and short-term debt, as well as any other amounts that are owed
to others.
liability insurance
Insurance coverage that offers protection against claims alleging that
a property owner's negligence or inappropriate action resulted in
bodily injury or property damage to another party.
lien
A legal claim
against a property that must be paid off when the property is sold.
line of credit
An agreement by a commercial bank or other financial institution
to extend credit up to a certain amount for a certain time to a
specified borrower. See home equity line of credit.
liquid asset
A cash
asset or an asset that is easily converted into cash.
loan
A sum of
borrowed money (principal) that is generally repaid with interest.
loan commitment
See
commitment letter.
loan origination
The
process by which a mortgage lender brings into existence a mortgage secured by
real property.
loan-to-value (LTV)
percentage
The relationship between the principal balance of the mortgage
and the appraised value (or sales price if it is lower) of the
property. For example, a $100,000 home with an $80,000 mortgage has a LTV
percentage of 80 percent.
lock-in
A written
agreement in which the lender guarantees a specified interest rate if
a mortgage goes to closing within a set period of time. The lock-in
also usually specifies the number of points to be paid at closing.
lock-in period
The
time period during which the lender has guaranteed an interest rate to a
borrower. See lock-in.
Strata Council
A homeowners' association in a large condominium or planned unitdevelopment (PUD) project that is made up of
representatives fromassociations covering specific areas within the project.
In effect, itis a "second-level" association that handles
matters affecting theentire development, while the "first-level"
associations handle mattersaffecting their particular portions of the project.
maturity
The date on
which the principal balance of a loan, bond, or other financial instrument
becomes due and payable.
maximum financing
A mortgage amount that is within 5 percent of the highest
loan-to-value (LTV) percentage allowed for a specific product. Thus,
maximum financing on a fixed-rate mortgage would be 90 percent or
higher, because 95 percent is the maximum allowable LTV percentage
for that product.
merged credit report
A credit report that contains information from three credit bureaus.
When the report is created, the information is compared for duplicate
entries. Any duplicates are combined to provide a summary of a your
credit.
modification
The act
of changing any of the terms of the mortgage.
money market account
A savings account that provides bank depositors with many of
the advantages of a money market fund. Certain regulatory
restrictions apply to the withdrawal of funds from a money market
account.
money market fund
A mutual fund that allows individuals to participate in
managed investments in short-term debt securities, such as
certificates of deposit and Treasury bills.
monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
mortgage
A legal
document that pledges a property to the lender as security for payment of a
debt.
mortgage banker
A
company that originates mortgages exclusively for resale in the secondary
mortgage market.
mortgage broker
An individual or company that brings borrowers and lenders
together for the purpose of loan origination. Mortgage brokers typically
require a fee or a commission for their services.
mortgagee
The lender
in a mortgage agreement.
mortgage insurance
A contract that insures the lender against loss caused by a
mortgagor's default on a government mortgage or conventional mortgage.
Mortgage insurance can be issued by a private company or by a
government agency such as the Federal Housing Administration (FHA). Depending
on the type of mortgage insurance, the insurance may cover a percentage
of or virtually all of the mortgage loan. See private mortgage
insurance (MI).
mortgage insurance premium
(MIP)
The amount paid by a mortgagor for mortgage insurance, either to
a government agency such as CMHC or to a private mortgage
insurance company.
mortgage life insurance
A type of term life insurance often bought by mortgagors. The amount
of coverage decreases as the principal balance declines. In the event
that the borrower dies while the policy is in force, the debt is
automatically satisfied by insurance proceeds.
mortgagor
The
borrower in a mortgage agreement.
multidwelling units
Properties that provide separate housing units for more than one family,
although they secure only a single mortgage.
multifamily mortgage
A residential mortgage on a dwelling that is designed to house more than
four families, such as a high-rise apartment complex.
negative
amortization
A gradual increase in mortgage debt that occurs when the
monthly payment is not large enough to cover the entire principal and
interest due. The amount of the shortfall is added to the remaining balance to
create "negative" amortization.
net worth
The value of all of a person's assets, including cash, minus all
liabilities.
nonliquid asset
An asset that cannot easily be converted into cash.
note rate
The interest rate stated on a mortgage note.
original principal
balance
The total amount of principal owed
on a mortgage before any payments are made.
origination fee
A fee paid to a lender for processing a loan application. The
origination fee is stated in the form of points. One point is 1 percent
of the mortgage amount.
owner financing
A
property purchase transaction in which the property seller provides all or part
of the financing.
partial payment
A payment that is not sufficient to cover the scheduled monthly payment on
a mortgage loan.
personal
property
Any property that is not real property.
PIT
See
principal, interest andt axes.
planned unit
development
See PUD.
prepayment
penalty
A fee that may be charged to a borrower who
pays off a loan before it is due.
promissory note
A written promise to repay a specified amount over a specified period of
time.
qualifying
ratios
Calculations that are used indetermining whether a borrower can qualify
for a mortgage. They consistof two separate calculations: a
housing expense as a percent of incomeratio and total debt obligations as a
percent of
income ratio.
quitclaim deed
A
deed that transfers without warranty whatever interest or title a grantor may
have at the time the conveyance is made.
radon
A
radioactive gas found in some homes that in sufficient concentrations can cause
health problems.
trust
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.
trust account
The
account in which a mortgage servicer holds the borrower’s escrow payments prior
to paying property