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GLOSSARY
 
A  
 
Abstract (of title) 
A written summary of the title history of a particular piece of real estate.  
 
Acceleration Clause  
A provision of a mortgage or note which provides that the entire outstanding balance will become due and payable in the event of default.  
 
ARM (Adjustable Rate Mortgage)  
A mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index.  
 
Amortization  
Repayment of loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.  
 
APR (Annual Percentage Rate)  
The annual percentage rate refers to the total cost of the loan, expressed as a yearly rate.  
 
Application Fee  
That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.  
 
Appraisal  
A report ordered by the lender and made by a qualified person as to the value of a property as of a given date.  
 
Assessed Value  
The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.  
 
Assumption of Mortgage  
The purchaser takes over mortgage payments for the balance of the loan, assuming primary liability. Unless specifically released by the lender, the seller remains secondarily liable.  
 
B 
 
Balloon Mortgage  
A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the term.  
 
Bi-Weekly 
The Biweekly Mortgage is perfect for the consumer interested in retiring mortgage debt earlier.  This product is great for the first-time homebuyer, borrowers nearing retirement or borrowers who are paid every two weeks. 
 
Bridge Loan  
A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.  
 
Broker  
The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.  
 
C  
 
Cap (interest rate)  
The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative amortization.  
 
Cap (payment rate)  
The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.  
 
Certificate Of Title  
A statement that shows ownership of property, stating that the seller has clear legal title.  
 
Closing  
The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.  
 
Closing Costs  
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called 'settlement costs.'  
 
Closing Statement  
A financial disclosure giving an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account.  
 
Commission  
An agent's or broker's fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.  
 
Commitment  
An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.  
 
Comparables  
Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.  
 
Condominium  
Ownership of a single unit in a multi-unit building or complex of buildings. Along with this goes a share of ownership of the common areas.  
 
Construction Loan 
The construction loan consist of two phases: construction and permanent.  One application with two loan closings, one with the construction and the other for the permanent.   
 
Contingency  
A condition that must be met for a contract or a commitment to remain binding.  
 
Conventional Mortgage  
Any mortgage loan that is not insured by FHA, guaranteed by VA, or funded by a government authorized bond sale or grant.  
 
Convey  
To transfer real estate from one person to another.  
 
Credit Report  
The report to a prospective lender on the credit standing of a prospective borrower.  
 
D  
 
Deed  
A legal written document by which title to property is transferred.  
 
Default  
Failure to fulfill the terms as agreed to in the mortgage of note.  
 
Denial 
If your application is denied, ECOA requires your lender or mortgage company to give you a statement of the specific reasons why it denied your application or tell you how you can obtain such a statement. 
 
Down Payment  
The difference between the sale price of a property and the mortgage amount.  
 
Due-On-Sale  
A clause in a mortgage which gives the lender the right to require immediate repayment of a mortgage balance if the property changes hands.  
 
E 
 
Earnest Money  
The deposit money given to seller or his agent by the potential buyer at the time of the purchase offer. If the offer is accepted, the money will become part of the down payment.  
 
Easement  
A right to the limited use of land owned by another. An electric company, for example, could have an easement to put up electric power lines over someone's property.  
 
Encumbrance  
Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.  
 
Equity  
The value in which the owner has in real estate over and above the mortgages against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in his property.  
 
Escrow  
Funds and/or deed left in trust to a third party. Generally, a portion of the monthly mortgage payment is held in escrow by the lender to pay for taxes, hazard insurance and yearly mortgage insurance premiums.  
 
F  
 
First Mortgage  
A mortgage that has a primary lien against a property.  
 
Fixed-Rate Mortgage  
A mortgage with an interest rate and monthly principal and interest payments that remain constant over the life of the loan.  
 
Fixture  
Property, such as a hot water heater or plumbing fixture, that has become permanently attached to piece of real estate and goes with the property when it is sold.  
 
Flood Certification  
An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.  
 
Foreclosure  
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.  
 
G  
 
Good Faith Estimate 
An estimate of itemized charges that you will likely have to pay when you obtain a mortgage loan. 
 
Gross Income  
Normal income, including overtime, prior to any payroll deductions, that is regular and dependable. This income may come from more than one source.  
 
H  
 
Hazard Insurance  
Insurance protection against damage to a property from fire, windstorms, and other common hazards.  
 
Home Inspection (Pest and Mold) 
Points out possible deficiencies in home or remaining expectancy of furnace, roof, water heater, windows, etc.  
 
Homeowners Insurance  
An insurance policy that covers the dwelling and its contents in case of fire or wind damage, theft, liability for property damage and personal liability.  
 
HUD-1 Form  
See Real Estate Settlement Statement.  
 
I  
 
Income Property  
Real estate that is owned for investment purposes and not used as the owner's residence.  
 
Interest  
A charge paid for the use of money.  
 
Interim Financing  
See Bridge Loan.  
 
J  
 
No terms listed.  
 
K  
 
No terms listed.  
 
L  
 
Land Contract (also known as Contract for Deed) 
When the buyer agrees to make payments directly to the seller at pre-negotiated terms. The seller agrees to deed the property to the buyer upon completion of the agreement. The buyer becomes the owner of equity in this type of sale. (Also see Owner Financing.)  
 
Lien  
A legal claim on a property used as security for a debt.  
 
Loan-To-Value Ratio  
The relationship between the amount of the mortgage and property value, usually shown as a percentage.  
 
M  
 
Manufactured Homes 
A manufactured home is defined as any dwelling unit built on a permanent chassis and attached to a permanent foundation system, to include connection to a septic tank, sewage system or public sewer and other utilities in accordance with local, state, and federal requirements. 
 
Market Value  
The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure.  
 
Mortgage  
A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis.  
 
Mortgage Note  
A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.  
 
Mortgagee  
The lender in a mortgage contract.  
 
Mortgagor  
The borrower in a mortgage contract.  
 
My Community Mortgage 
My Community Mortgage is ideal for borrowers with limited funds for down payment and closing costs and those needing flexibilities on credit, income sources and access to special options. 
 
N  
 
Negative Amortization  
A loan in which the outstanding principal balance goes up instead of down because the monthly payments are not large enough to cover the full amount of interest due. Also called deferred interest.  
 
O  
 
Offer to Purchase  
A written proposal to buy a piece of real estate that becomes binding when accepted by the seller. Also called a sales contract.  
 
Origination Fee  
A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.  
 
Owner Financing (also known as Contract for Deed) 
A purchase in which the seller provides all or part of the financing.  
 
P  
 
PITI  
An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.  
 
Plat  
A map of a piece of land showing boundary lines, streets, actual measurements and easements.  
 
PMI (Private Mortgage Insurance)  
Insurance written by a private mortgage insurance company to protect the lender against losses caused by mortgage default. This is commonly required on loan transactions involving less than a 20% down payment or equity position.  
 
Point  
A fee paid to the lender on closing day to increase the effective yield of the mortgage. A point is one percent of the amount of the mortgage loan. Also called a discount point.  
 
Prepayment Penalty  
A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.  
 
Pre-Approval  
A commitment by a lender to extend credit provided that specific conditions are met.  
 
Pre-Qualification  
A preliminary assessment of a buyer's ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.  
 
Prime Rate  
The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.  
 
Principal  
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.  
 
Purchase Agreement 
Is an agreement between the seller and buyer.  Both parties must agree on several items such as sales price, title, inspections, points and both parties must sign the purchase agreement when it has been accepted. 
 
Q  
 
Qualifying Ratios  
Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt-to-income ratios (or DTI).  
 
R 
 
Rate Lock 
“Locking in” your rate or points at the time of application or during the processing of your loan will keep the rate and/or points from changing until settlement or closing of the escrow process.  Ask your lender if there is a fee to lock-in the rate and whether the fee reduces the amount you have to pay for points.  Find out how long the lock-in is good, what happens if it expires, and whether the lock-in fee is refundable if your application is rejected. 
 
Real Estate Settlement Statement  
Final settlement statement often referred to as the HUD-1 form, used to itemize buyer, seller, broker, and lender charges and credits at closing.  
 
Realtor  
A real estate broker or sales associate affiliated with the National Association of Realtors.  
 
Recording Fee  
The charges made by the register of deeds to record the legal documents.  
 
Refinancing  
Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.  
 
Reverse Mortgage 
Is a mortgage loan the provides cash for a fixed term or as long as the borrower lives in the home.  Borrower  
must be 62 years of age or older to qualify for this product. 
 
Rural Development 
A guaranteed loan to serve families seeking financing for home ownership.  Borrowers may borrow up to  100% of purchase price.  2% funding fee to Rural Development can be financed or paid by seller’s.   
 
S  
 
Second Mortgage  
A loan issued on property that is already encumbered by an existing mortgage (ie: the first mortgage). The second mortgage is subordinate to the first.  
 
Secondary Mortgage Market  
The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.  
 
Survey  
A map prepared by an engineer or surveyor charting a particular piece of real estate.  
 
T  
 
Title  
Ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances which could impair the title.  
 
Title Insurance Policy  
A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.  
 
Title Search  
A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.  
 
Transfer Tax  
In some areas city, county or state taxes imposed when property passes from one person to another.  
 
Truth-In-Lending  
Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.  
 
U  
 
Underwriting  
The process of evaluating a loan application to determine the risk involved for the lender.  
 
V  
 
No terms listed. 
 
 
W  
 
Warranty 
A legal, binding, promise, given at the time of a sale, whereby the seller gives the buyer certain assurances as to the condition of the property being sold.  Warranties as to real property have taken on a lesser role with the increase of the use of title insurance. 
 
X  
 
No terms listed. 
 
Y  
 
No terms listed. 
 
Z  
 
No terms listed. 


 
 
 
Ask us about the New Homebuyers Tax Credit legislation.   
 
It is a new tax credit for both first time home buyers and repeat homebuyers. 


FDIC
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