House Refinance Center
Mortgage Glossary
| This mortgage glossary will help increase your financial vocabulary and give you more leverage in loan negotiating |
A
Annual Percentage Rate (APR): The cost of a loan or other financing as an
annual rate. The APR includes the interest rate, points, broker fees and certain
other credit charges a borrower ia required to pay.
Application Fee: The fee that a mortgage lender or broker charges to apply for a
mortgage to cover processing costs.
Appraisal: A professional analysis used to estimate the value of the property.
This includes examples of sales of similar properties.
Appreciation: An increase in the market value of a house due to changing
market conditions and/or home improvements.
Assessed Value: The value placed on a property for the purpose of taxation.
Asset: Anything of monetary value owned by a person or company. Assets
include real estate, jewelry, paintings, stocks, bonds and mutual funds.
Assignment of Mortgage: A document evidencing the transfer of ownership of a
mortgage from one person to another.
Assumable Mortgage: A mortgage loan that can be taken over by the buyer
when the house is sold. In short, the buyer takes over the seller's mortgage. The
seller remains liable unless released by the lender. If the mortgage contains a
due-on-sale clause, the loan can not be assumed without the lender's consent.
Assumption: A homebuyer's agreement to take on the primary responsibility for
paying an existing mortgage from a home seller.
Assumption Fee: A fee a lender charges a buyer who will assume the seller's
existing mortgage.
B
Balloon Mortgage: A mortgage with monthly payments often based on a 30-year
amortization schedule, with the unpaid balance due in a lump-sum payment at
the end of a specific period. The mortgage may contain an option to reset the
interest rate to the current market rate and to extend the due date if certain
conditions are met.
Balloon Payment: A final lump sum payment that is due at the maturity date of a
balloon mortgage.
Biweekly Payment Mortgage: A mortgage with payments due every two weeks,
instead of monthly.
Bridge Loan: A short-term loan secured by the borrower's current home (which
is usually for sale) that allows the proceeds to be used for building or closing on
a new house before the current house is sold. Sometimes referred to as a
swing loan.
Broker: An individual or firm that acts as an agent between providers and users
of products or services, such as a mortgage broker or real estate broker.
Buydown: An arrangement whereby the property developer or another third party
provides an interest subsidy to reduce the borrower's monthly payments
typically in the early years of the loan.
C
Cash-out Refinance: A refinance transaction in which the borrower receives
additional funds over and above the amount needed to repay the existing
mortgage, closing costs, points, and any subordinate liens.
Clear Title: Ownership that is free of liens, defects, or other legal encumbrances.
Closing: The process of completing a financial transaction. For mortgage loans,
the process of signing mortgage documents, disbursing funds, and if
applicable, transferring ownership of the property. In some jurisdictions, closing
is referred to as "escrow".
Closing Costs: The upfront fees charged in connection with a mortgage loan
transaction. Money paid by a buyer (and/or seller or third party, if applicable) to
effect the closing of a mortgage loan, generally including, a loan origination fee,
title examination, insurance, survey,attorney's fee, and prepaid items, such as
escrow deposits for taxes and insurance.
Co-borrower: Any borrower other than the first borrower whose name appears
on the application and mortgage note, even when that person owns the property
jointly with the first borrower and shares liability for the note.
Commitment Letter: A binding offer from your lender that includes the amount
of the mortgage, the interest rate and repayment terms.
Comparables: An abbreviation for "comparable properties", which are used as a
comparison in determining the current value of a property that is being
appraised.
Conventional Mortgage: A mortgage loan that is not insured or guaranteed by
the Federal Government or one of its agencies.
Credit Score: A numerical value that ranks a borrower's credit risk at a given
time based on statistical evaluation of information in the individual's credit
history that has been proven to be predictive of loan performance.
Creditor: A person who extends credit to you.
D
Debt: Money owed from one person or company to another person or company.
Debt-to-income Ratio: The percentage of gross monthly income that goes
toward paying for your monthly housing expense, alimony, child support, car
payments and other installment debts, and payments on revolving or
open-ended accounts, such as credit cards.
Debt-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to
satisfy the mortgage debt and avoid foreclosure. Also called a "voluntary
conveyance".
Deed of Trust: A legal document in which the borrower transfers the title to a
third party (trustee) to hold as security for the lender. When theloan is paid in full,
the trustee transfers title back to the borrower. If the borrower defaults on the
loan the trustee will sell the property and pay the lender the mortgage debt.
Discount Point: A fee paid by the borrower at closing to reduce the interest rate.
A point equals one percent of the loan amount.
Due-on-Sale Clause: A provision in a mortgage that allows the lender to
demand repayment in full of the outstanding balance on the mortgage when the
property securing the mortgage is sold.
E
Earnest Money Deposit: The deposit to show that you are committed to buying
the house. The deposit will not be refunded after you make an offer and the offer
is accepted.
Encumbrance: Any claim on a property, such as a lien, mortgage or easement.
Equity: The value in your home above the total amount of the liens against your
home. If you owe $90,000 and the house is valued at $290,000, your equity is
$200,000.
Executor: A person named in a will and approved by a probate court to
administer the deposition of an estate in accordance with the instructions of the
will.
F
Fair Market Value: The price at which property would be transferred between a
willing buyer and willing seller, each of whom has a reasonable knowledge of
all pertinent facts and is not under any compulsion to buy or sell.
First Mortgage: A mortgage that is the primary lien against a property.
Fixed-Rate Mortgage: A mortgage with an interest rate that does not change
during the entire term of the loan.
Flood Insurance: Insurance that compensates for physical property damage
resulting from flooding. It is required for properties located in federally
designated as flood zones.
Foreclosure: A legal action that ends all ownership rights in a home when the
homebuyer fails to make the mortgage payments or is otherwise in default
under the terms of the mortgage.
Fully Amortized Mortgage: A mortgage in which the monthly payments are
designed to retire the obligation at the end of the mortgage term
G
Gift Letter: A letter that a family member writes verifying that she or he has given
you a specific sum of money as a gift and that you do not have to repay this
money. You can use the money towards your downpayment.
Good-Faith Estimate: A form required by the Real Estate Settlement Procedures
Act that discloses an estimate of the amount or range of charges, for specific
settlement services the borrower is likely to incur in connection with the
mortgage transaction.
Annual Percentage Rate (APR): The cost of a loan or other financing as an
annual rate. The APR includes the interest rate, points, broker fees and certain
other credit charges a borrower ia required to pay.
Application Fee: The fee that a mortgage lender or broker charges to apply for a
mortgage to cover processing costs.
Appraisal: A professional analysis used to estimate the value of the property.
This includes examples of sales of similar properties.
Appreciation: An increase in the market value of a house due to changing
market conditions and/or home improvements.
Assessed Value: The value placed on a property for the purpose of taxation.
Asset: Anything of monetary value owned by a person or company. Assets
include real estate, jewelry, paintings, stocks, bonds and mutual funds.
Assignment of Mortgage: A document evidencing the transfer of ownership of a
mortgage from one person to another.
Assumable Mortgage: A mortgage loan that can be taken over by the buyer
when the house is sold. In short, the buyer takes over the seller's mortgage. The
seller remains liable unless released by the lender. If the mortgage contains a
due-on-sale clause, the loan can not be assumed without the lender's consent.
Assumption: A homebuyer's agreement to take on the primary responsibility for
paying an existing mortgage from a home seller.
Assumption Fee: A fee a lender charges a buyer who will assume the seller's
existing mortgage.
B
Balloon Mortgage: A mortgage with monthly payments often based on a 30-year
amortization schedule, with the unpaid balance due in a lump-sum payment at
the end of a specific period. The mortgage may contain an option to reset the
interest rate to the current market rate and to extend the due date if certain
conditions are met.
Balloon Payment: A final lump sum payment that is due at the maturity date of a
balloon mortgage.
Biweekly Payment Mortgage: A mortgage with payments due every two weeks,
instead of monthly.
Bridge Loan: A short-term loan secured by the borrower's current home (which
is usually for sale) that allows the proceeds to be used for building or closing on
a new house before the current house is sold. Sometimes referred to as a
swing loan.
Broker: An individual or firm that acts as an agent between providers and users
of products or services, such as a mortgage broker or real estate broker.
Buydown: An arrangement whereby the property developer or another third party
provides an interest subsidy to reduce the borrower's monthly payments
typically in the early years of the loan.
C
Cash-out Refinance: A refinance transaction in which the borrower receives
additional funds over and above the amount needed to repay the existing
mortgage, closing costs, points, and any subordinate liens.
Clear Title: Ownership that is free of liens, defects, or other legal encumbrances.
Closing: The process of completing a financial transaction. For mortgage loans,
the process of signing mortgage documents, disbursing funds, and if
applicable, transferring ownership of the property. In some jurisdictions, closing
is referred to as "escrow".
Closing Costs: The upfront fees charged in connection with a mortgage loan
transaction. Money paid by a buyer (and/or seller or third party, if applicable) to
effect the closing of a mortgage loan, generally including, a loan origination fee,
title examination, insurance, survey,attorney's fee, and prepaid items, such as
escrow deposits for taxes and insurance.
Co-borrower: Any borrower other than the first borrower whose name appears
on the application and mortgage note, even when that person owns the property
jointly with the first borrower and shares liability for the note.
Commitment Letter: A binding offer from your lender that includes the amount
of the mortgage, the interest rate and repayment terms.
Comparables: An abbreviation for "comparable properties", which are used as a
comparison in determining the current value of a property that is being
appraised.
Conventional Mortgage: A mortgage loan that is not insured or guaranteed by
the Federal Government or one of its agencies.
Credit Score: A numerical value that ranks a borrower's credit risk at a given
time based on statistical evaluation of information in the individual's credit
history that has been proven to be predictive of loan performance.
Creditor: A person who extends credit to you.
D
Debt: Money owed from one person or company to another person or company.
Debt-to-income Ratio: The percentage of gross monthly income that goes
toward paying for your monthly housing expense, alimony, child support, car
payments and other installment debts, and payments on revolving or
open-ended accounts, such as credit cards.
Debt-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to
satisfy the mortgage debt and avoid foreclosure. Also called a "voluntary
conveyance".
Deed of Trust: A legal document in which the borrower transfers the title to a
third party (trustee) to hold as security for the lender. When theloan is paid in full,
the trustee transfers title back to the borrower. If the borrower defaults on the
loan the trustee will sell the property and pay the lender the mortgage debt.
Discount Point: A fee paid by the borrower at closing to reduce the interest rate.
A point equals one percent of the loan amount.
Due-on-Sale Clause: A provision in a mortgage that allows the lender to
demand repayment in full of the outstanding balance on the mortgage when the
property securing the mortgage is sold.
E
Earnest Money Deposit: The deposit to show that you are committed to buying
the house. The deposit will not be refunded after you make an offer and the offer
is accepted.
Encumbrance: Any claim on a property, such as a lien, mortgage or easement.
Equity: The value in your home above the total amount of the liens against your
home. If you owe $90,000 and the house is valued at $290,000, your equity is
$200,000.
Executor: A person named in a will and approved by a probate court to
administer the deposition of an estate in accordance with the instructions of the
will.
F
Fair Market Value: The price at which property would be transferred between a
willing buyer and willing seller, each of whom has a reasonable knowledge of
all pertinent facts and is not under any compulsion to buy or sell.
First Mortgage: A mortgage that is the primary lien against a property.
Fixed-Rate Mortgage: A mortgage with an interest rate that does not change
during the entire term of the loan.
Flood Insurance: Insurance that compensates for physical property damage
resulting from flooding. It is required for properties located in federally
designated as flood zones.
Foreclosure: A legal action that ends all ownership rights in a home when the
homebuyer fails to make the mortgage payments or is otherwise in default
under the terms of the mortgage.
Fully Amortized Mortgage: A mortgage in which the monthly payments are
designed to retire the obligation at the end of the mortgage term
G
Gift Letter: A letter that a family member writes verifying that she or he has given
you a specific sum of money as a gift and that you do not have to repay this
money. You can use the money towards your downpayment.
Good-Faith Estimate: A form required by the Real Estate Settlement Procedures
Act that discloses an estimate of the amount or range of charges, for specific
settlement services the borrower is likely to incur in connection with the
mortgage transaction.
| Quick Poll: How many times have you refinanced? |
| Mortgage Tip Your Private Mortgage Insurance (PMI) premiums are tax deductible. This benefit has been extended through 2010. To be eligible you must have bought or refinanced the house January 1, 2007 to December 31, 2010. The house must be your principal residence, and your income must be $100,000 or less. You can deduct 100% of the premiums. If you make more than $100,000 but less than $110,000 you can still get a partial deduction. So, remember to claim your money. |
| Mortgage Tip If you are getting an Adjustable Rate Mortgage Ask the lender: What is the initial rate? What are the rate and payment caps each year, and also for the life of the mortgage? How often will my rate change? What index are you using? And what margin will you be adding to the index? |
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