Quick Find - click on a letter A | B | C

A

Acceleration clause -
The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagee defaults under the terms of the contract. top of page

Acquisition cost -
Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs. top of page

Adjustable Rate Mortgage (ARM) -
A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage. top of page

Adjustment_date -
The date the interest rate changes on an ARM (adjustable rate mortgage).top of page

Adjustment Interval -
For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years. top of page

Adjusted book basis -
The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale. top of page

Amortization -
Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.top of page

Annual Percentage Rate (APR) -
A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.
top of page

Annuity -
A series of income payments of receipts over a period of years. top of page

Application -
A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more. top of page

Application Fee -
The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs. top of page

Appraisal -
The determination of property value based on recent sales information of similar properties.top of page

Assessment -
Determining a property's value for the purpose of taxation. top of page

Assumable Loan -
These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.top of page

Assumption -
Buying property and assuming the responsibility of the exiting mortgage. top of page

Appreciation -
Increases in property value due to fluctuations in the market, inflation, et al. top of page

Asset -
Valuable items, encumbered or not, owned by a person, corporation, or entity. top of page

Assumable Mortgage -
A mortgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan. top of page

B

Balloon Mortgage -
Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time. top of page

Balloon Payment -
The final lump sum that is paid at the end of the balloon mortgage. top of page

Bankruptcy -
A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re-establishment of credit.
top of page

Best Faith Estimate -
An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing. top of page

Bill of Sale -
A written document that transfers a title to personal property. top of page

Biweekly Mortgage -
Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off. top of page

Blanket Mortgage -
A mortgage secured by the pledging of more than one property or collateral. top of page

Book Value -
Acquisition costs less any accrued depreciation. top of page

Broker -
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. top of page

Bridge Loan -
An equity loan secured to solve short-term financing problem. top of page

Budget Mortgage -
A mortgage that includes a portion for taxes and insurance as well as principal and interest. top of page

Buydown -
Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In oder to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate. top of page

C

Callable Debt -
A debt security in where the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date. top of page

Caps -
A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.
Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Two-Step loans are quoted with a single cap, which is the amount by which the loan may adjust at its single adjustment date.
top of page

Carryback Loan -
A loan in which a seller agrees to finance a buyer in order to complete a property sale. top of page

Certificate of Eligibility -
A veteran's evidence of entitlement for a VA-guaranteed loan. top of page

Certificate of Reasonable Value (CRV) -
An appraisal that has been performed on a property that is being paid for a VA loan. After the property has been appraised, the Veterans Administration issues a CRV. top of page

Clear Title -
A title that is free of liens or any legal question as to the ownership of the property. top of page

Closing -
Final arrangements to transfer title of property as well as allocate charges and credits. top of page

Closing Costs -
Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate. top of page

Cloud -
An outstanding claim or encumbrance, that, if valid, would affect or impair the owner's property title. top of page

Collateral -
Property, real or personal, pledged as a security to back up a promise. In a home loan, the property is considered collateral that can be revoked if loan is not repaid according to the terms of the mortgage or deed of trust. top of page

Commitment -
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home. top of page

Conforming Loan -
A mortgage loan for up to $322,700 in the continental United States (Alaska and Hawaii limits are higher). top of page

Construction Loan -
A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses. top of page

Conversion -
The right of a borrower to convert an adjustable or balloon loan into a fixed loan. The Conversion Option column on Monstermoving.com balloon tables indicates the right of a borrower to convert this balloon loan. The possible options are as follows...

Option Description

Not Available Borrower May Not Convert This Loan.

Must Requalify Borrower May Convert But Must Requalify.
Conversion Fee Applies

Auto-Qualify Borrower May Convert And Is Automatically Qualified.
Conversion Fee Applies
top of page

Conventional Mortgage -
A mortgage loan that is obtained without any additional guarantees for repayment, such as FHA insurance, VA guarantees, or private insurance. This is usually given at an 80% loan-to-value ratio. top of page

Credit Loan -
A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral. top of page

Credit-Loss Ratio -
The ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation. top of page

Credit Rating -
Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower. top of page

Credit-Related Expenses -
The sum of foreclosed property expenses plus the provision for losses.top of page

Credit-Related Losses -
The sum of foreclosed property expenses plus charge-offs. top of page

Credit Report -
A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here. top of page

Quick Find - click on a letter A | B | C

A-C | D-F | G-J | L-N | O-Q | R-S | T-Z

Get Pre-Approved | Mortgage types | Mortgage Calculator | Mortgage Glossary