Mortgage Glossary

Form 1003 is the common name for the Uniform Residential Loan Application — the industry standard form used by mortgage lenders in the United States. See sample Form 1003: [pdfjs-viewer(...)

A 30-Day Account refers to a credit arrangement that requires the Borrower to pay off the outstanding balance on the account every month.

Form 4506-T is the Request for Transcript of Tax Return. 4506-T authorizes the mortgage lender to verify with the IRS that the documentation supporting mortgage applicants income verification matches those in the possession of the IRS.

IRS Tax Transcripts, also known as 4506-T transcripts summarizes an individual's tax return information and includes Adjusted Gross Income (AGI). They are available for the most current tax year after the IRS has processed the return. Lenders can also get them for the past three years. The(...)

A-credit is the best credit grade borrowers can have. Generally, a FICO score of 760 or above helps borrowers attain the lowest interest rates.

Abstract of Title lists all the legal activities associated with a specific real property, including transfers, grants, wills and conveyances, liens and encumbrances. The abstract of title also provides any evidence or proof of satisfaction or other facts or information pertinent to the property.

Acceleration Clause typically included in a mortgage note, gives the lender the right to immediately demand the full outstanding balance (the principal balance and any accrued interest) of the loan if certain conditions are met. For instance, if the borrower misses a mortgage payment, the(...)

Accrued interest is interest that a borrower has accumulated on a mortgage but not yet paid to the lender. Mortgage interest accrues daily or weekly depending on the loan type, and is based on the loan’s principal balance and the mortgage rate.

The Acquisition Cost is the purchase price of the Property, including closing costs, prepaid costs, and commissions, if paid by the purchaser, but not including the cost of any repairs that the purchaser makes to the Property subsequent to acquisition.

Active Duty refers to a status where a person has a full-time military occupation.

Adjustable-Rate Mortgage (ARM) is a mortgage in which the interest rate and monthly payments may change periodically over the life of the loan, based on changes in an index. Typically, adjustable rate mortgages have a rate cap, limiting how much the rate can increase on every adjustment(...)

Adjustable-Rate Mortgage (ARM) is a mortgage in which the interest rate and monthly payments may change periodically over the life of the loan, based on changes in an index. Typically, adjustable rate mortgages have a rate cap, limiting how much the rate can increase on every adjustment(...)

Adjustment Period, also known as adjustment interval is the period between rate changes for Adjustable Rate Mortgages. For instance, a mortgage with an adjustment period of 1 year is called a 1-year ARM, and the interest rate and payment can change once every year; a loan with a 3-year(...)

Adjustment Period, also known as adjustment interval is the period between rate changes for Adjustable Rate Mortgages. For instance, a mortgage with an adjustment period of 1 year is called a 1-year ARM, and the interest rate and payment can change once every year; a loan with a 3-year(...)

Adjustments and Other Credits is the total amount of all items in the Loan Costs and Other Costs tables that are paid by persons other than the loan originator, creditor, consumer, or seller, together with any other amounts that are required to be paid by the consumer at closing pursuant to(...)

Affordable Housing Program Plan (AHPP) refers to a program plan, as described in a written proposal submitted to FHA, operated by a nonprofit in specific geographical areas in which the nonprofit provides affordable homeownership opportunities for low- to moderate-income buyers by purchasing,(...)

After Improved Value refers to the value as determined by the Appraiser based on a hypothetical condition that the repairs or alterations have been completed.

Aggregate adjustment is the calculation a mortgage lender uses to prevent collecting more money for a borrower's escrow account than is allowed under the Real Estate Settlement Procedures Act (RESPA). Under RESPA, mortgage lenders can’t keep more than 1/6 of the annual property tax and(...)

Agreement of Sale, also known as Purchase Agreement, Sales Agreement, Contract of Purchase, Contract for Sale or Contract Agreement is a contract between a buyer and a seller that states the terms and conditions for the sale of a property. The Agreement of Sale states the purchase amount(...)

Affordable Housing Program Plan (AHPP) refers to a program plan, as described in a written proposal submitted to FHA, operated by a nonprofit in specific geographical areas in which the nonprofit provides affordable homeownership opportunities for low- to moderate-income buyers by purchasing,(...)

Alimony, Child Support, and Maintenance Income refers to income received from a former spouse or partner or from a non-custodial parent of the Borrower’s minor dependent.

Amortization is the process of repaying a loan over a fixed period of time. Each repayment installment consists of both principal and interest. In most mortgages, at the beginning of the loan term, a greater amount of the monthly payment is applied to interest than to the principal(...)

Amortization Term or amortization period is the total length of time it will take the borrower to pay off the mortgage, usually expressed in months or years.

Amortization Schedule shows how much money the borrower will pay in principal and interest over time.

Amortization Term or amortization period is the total length of time it will take the borrower to pay off the mortgage, usually expressed in months or years.

Amount Financed is the difference of loan amount and any prepaid finance charges. The amount financed is assuming that the borrower will keep the loan to maturity and make only the minimum required monthly payments. Amount Financed is used to calculate the Annual Percentage Rate (APR).

Annual Adjustment Cap is the limit to how much a variable interest rate can increase or decrease in a single adjustment period.

Annuity Income refers to a fixed sum of money periodically paid to the Borrower from a source other than employment.

Application Fee refers to the non-refundable fees paid when borrowers apply for their loan. These fees may include charges for items such as, application drafting fee, a credit report fee and property appraisal fee.

Appraisal is the professional assessment the value of a property, performed by an independent licensed appraiser.

Appraisal Conditions refer to anything the Appraiser requires to occur or be known before the value of conclusion can be considered valid.

Appraisal Contingency protects the buyer and is used to ensure a property is valued at a minimum, the contingency specified amount. If the property does not appraise for at least the specified amount, the contract can be terminated, and in many cases, the earnest money is refunded to the buyer.

Appraisal Fee covers the cost of having a licensed and certified appraiser evaluate a property and estimate the appraised value of the property. Appraisal fee can vary depending on a number of factors, including the number of units in the property and appraisal report specification: FHA,(...)

Appraised Property Value is the professional assessment the value of a property on a given date, as performed by a licensed appraiser.

Appraiser refers to a Conventional or FHA Roster Appraiser who observes, analyzes, and reports the physical and economic characteristics of a Property and provides an opinion of value to the Government Sponsored Entities, Fannie Mae, Freddie Mac or the FHA. An Appraiser's observation is(...)

Appreciation refers to the increase in property value over time.

Approved Condo Project refers to a Condominium Project that meets the Conventional (or FHA) Condominium Project Approval requirements as determined by review under Fannie Mae Condominium Project Standards for conventional mortgages (or DELRAP or HRAP for FHA mortgages). Note that a(...)

Approved term refers to the duration (usually expressed in number of months) that it will take to pay off the mortgage. The approved term is used to determine the payment amount, repayment schedule and total interest paid over the life of the loan.

Annual percentage rate (APR) is the annualized representation of the interest rate. When deciding between mortgage offers, APR can help borrowers compare how expensive one offer will be in comparison to other.

Adjustable-Rate Mortgage (ARM) is a mortgage in which the interest rate and monthly payments may change periodically over the life of the loan, based on changes in an index. Typically, adjustable rate mortgages have a rate cap, limiting how much the rate can increase on every adjustment(...)

Adjustable-Rate Mortgage (ARM) is a mortgage in which the interest rate and monthly payments may change periodically over the life of the loan, based on changes in an index. Typically, adjustable rate mortgages have a rate cap, limiting how much the rate can increase on every adjustment(...)

An Arm’s Length Transaction refers to a transaction between unrelated parties who are each acting in their own best interest.

Articles of Incorporation refers to articles of organization, charter, articles of association, constitution, trust instrument, or any other written instrument by which an organization is created.

As-Is Property Value in the context of an FHA loan refers to the Adjusted As-Is Value as determined by the FHA Roster Appraiser except in the case of Property Flipping.

Assessed Value is the value assigned to a property to measure applicable property taxes. Assessed valuation determines the value of a residence for tax purposes and takes comparable home sales and inspections into consideration.

Assignment of mortgage is the document which indicates that a mortgage has been transferred from the original lender or borrower to a third party. Assignments of mortgage are commonly seen when lenders sell mortgage servicing rights to other servicing lenders.

Assumable mortgage is the scenario wherein the outstanding mortgage and its terms are transferable from the current borrower to a new buyer. By assuming the current borrower's remaining debt, the new buyer can avoid having to obtain their own mortgage.

Assumption occurs when the buyer of a property agrees to become responsible for repaying an existing loan on the property. To do this, the buyer must pay the seller for any equity in the home. Then, the buyer assumes the loan with the existing interest rate and monthly payment. When a borrower(...)

Automated Underwriting System (AUS) is the technology-driven underwriting process that generates an underwriting response regarding eligibility of the mortgage purchase in the secondary markets. Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector are the commonly used(...)

Automated Underwriting System (AUS) is the technology-driven underwriting process that generates an underwriting response regarding eligibility of the mortgage purchase in the secondary markets. Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector are the commonly used(...)

Automated Valuation Model (AVM) provides an automated or computer-generated property value report. AVM property valuations are based on sales price of comparable properties in the neighborhood, title records and other market factors. However, AVM property values aren’t able to factor in(...)

Backup offer is solicited and reviewed by a property seller after the seller and a potential buyer are already under contract. A seller may accept backup offers to prevent having to list the property again if they are concerned that the current offer might fall through.

Balance refers to the net amount of a loan that is left to be paid. Mortgage balance is the difference of loan amount and the sum of all payments made to date towards the principal.

Balance Sheet is a financial statement that reports an entity's assets, liabilities and shareholders' equity. The Balance Sheet is one of the three core financial statements used to evaluate an entity, the other two being Income Statement and Statement of Cash Flows.

Balloon Mortgage is a mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period.

A cashier’s check also known as bank check is a secure way to make a payment. The check itself is written by a depository institution such as a bank or credit union against its own funds. When an individual requests a cashier's check from the depository institution e.g. a bank or credit(...)

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. When a person declares bankruptcy, their assets are turned over to a trustee and the assets used to pay off outstanding debt. A bankruptcy will stay on a person's credit(...)

The Base Loan Amount for an FHA loan is the mortgage amount prior to the addition of any financed Upfront Mortgage Insurance Premium (UFMIP).

Basis Point (bps) refers to a common unit of measurement for interest rates. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the change in interest rate in lieu of expressing it as fractional percentages.

Bequest refers to money or personal property that is given as a gift through a will.

In biweekly mortgage payment, a borrower pays half of the monthly mortgage payment every other week. With 52 weeks in the year, biweekly mortgage payments adds up to 52/2, i.e. 26 half payments, or 13 full payments, each year. Since only 12 payments are required to be made per year, the 13th(...)

A blanket mortgage is a single mortgage covering two or more pieces of land financed by the same borrower. Rather than mortgaging each real property separately, a blanket mortgage can be used to reduce costs and save time. One can use a blanket mortgage to access the equity in the current(...)

Boarder refers to an individual renting space inside the Borrower’s Dwelling Unit.

Bond is a document representing a right to certain payments on underlying collateral.

Mortgagor, also known as a borrower, is an individual who applies for and receives funds in the form of a loan. The borrower is obligated to repay the loan in full under the terms of the loan.

Basis Point (bps) refers to a common unit of measurement for interest rates. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the change in interest rate in lieu of expressing it as fractional percentages.

Bridge Loan is a short-term loan, enabling financing a new house before borrower sell their current home.

Mortgage broker is an individual or firm that acts as an intermediary between a borrower and a mortgage lender.

Mortgage broker Fees is the lender-paid or borrower-paid fee charged by mortgage brokerage to help the borrower with mortgage financing.

Discount Points also known as points, are an upfront fee paid to the lender at the time that you get your mortgage to lower the interest rate over the life of the loan. One point equals 1% of the total loan amount. In general, the more points borrowers pay, the lower the interest rate is.(...)

Discount Points also known as points, are an upfront fee paid to the lender at the time that you get your mortgage to lower the interest rate over the life of the loan. One point equals 1% of the total loan amount. In general, the more points borrowers pay, the lower the interest rate is.(...)

Buyer's Market occurs when the housing supply (available homes for sale) exceeds the demand (the number of buyers seeking to purchase homes). Buyer's market benefits the buyers by offering them the ability to buy a great home for a lower cost than they would in a seller’s market.

Cap controls how the interest rates in adjustable-rate mortgages (ARMs) can adjust. There are three kinds of caps: Initial adjustment cap: how much the interest rate can increase the first time it adjusts after the fixed-rate period expires; Subsequent adjustment cap: how much the(...)

Cash Available for Closing refers to borrower funds that are available to cover down payment and closing costs. If mortgage underwriting guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from specified sources, the borrower’s(...)

Cash on Hand refers to cash held by the borrower outside of a depository financial institution.

Cash-Out Refinance is a refinance transaction in which the new loan amount exceeds the sum of the payoff amount of existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower at closing(...)

Cash Reserves include all non-retirement liquid assets available for withdrawal or liquidation from all financial institutions. Such accounts include, but are not limited to, the following: Brokerage, mutual funds, checking, savings, money market or certificate of deposits, other(...)

Cash to Close is the net amount a homebuyer needs in cash at the closing of the loan. This includes down payment and closing costs.

A cashier’s check also known as bank check is a secure way to make a payment. The check itself is written by a depository institution such as a bank or credit union against its own funds. When an individual requests a cashier's check from the depository institution e.g. a bank or credit(...)

Closing Disclosure is the key closing document which provides information such as interest rate, monthly payments, and costs to close the loan. In compliance with Truth in Lending Act-Real Estate Settlement Procedures Act "Know Before You Owe" rules, mortgage lenders are required to issue(...)

Ceiling is the maximum interest rate that can accrue on a variable rate loan or adjustable-rate mortgage (ARM).

A certificate of completion is required when borrowers a loan for home renovation or for the construction of a new home. Upon construction completion, a competent authority, such as an architect or appraiser, signs the certificate of completion to evidence that the project meets the(...)

Certificate of Eligibility (COE) is the VA home loan eligibility document evidencing to the lender that the applicant qualifies for a VA loan based on the eligible veteran's service history and duty status.

Chain of Title is the sequence of historical transfers of title to a property. It is a valuable tool to identify and document past owners of a property and serves as a property's historical ownership timeline. The "chain" runs from the present owner back to the original owner of the property.

A Charge Off Account refers to a Borrower’s loan or debt that has been written off by the creditor.

A Common Interest Housing Development (CIHD) refers to a planned residential community that may consist of Units within a two- to four-unit building and/or contain multiple housing types, structured with different ownership interests, managed by a common Condominium Association or HOA, and(...)

Clear Title is a title without any type of lien or levy from creditors or other parties that would pose a question as to legal ownership. A clear title is also referred to as a "clean title", a "just title", and a "free and clear title".

Cleared to Close means the Underwriter has signed-off on mortgage approval documents and issued a final approval. The Closing Disclosure is the standardized document that details the finalized terms for the loan, including a breakdown of all costs and fees.

To close the transaction, in a mortgage context refers to the signing of mortgage documents by the borrowers. Close step is different from Funding/Disbursement step, because for owner-occupied property refinance transaction, the three business days right of rescission applies, allowing(...)

Closing in a mortgage context refers to the signing of mortgage documents by the borrowers. Also referred to as Settlement Date.

A Closing Agent is the Entity responsible for conducting the closing of the real estate property sales transaction, including submitting closing packages, and wiring sales proceeds.

Closing Costs are the costs incurred for completing the real estate transaction. For purchase transactions, these costs also include ownership transfer of any collateral property from the seller to borrower. Costs may include and are not limited to attorney’s fees, preparation and title(...)

Closing Date also known as Settlement Date is the date when borrowers sign their mortgage loan documents.

Closing Disclosure is the key closing document which provides information such as interest rate, monthly payments, and costs to close the loan. In compliance with Truth in Lending Act-Real Estate Settlement Procedures Act "Know Before You Owe" rules, mortgage lenders are required to issue(...)

Closing Protection Letter also known as CPL is a contract between a title insurance underwriter and a lender. In this agreement, the title underwriter agrees to indemnify the lender for actual loss of funds incurred within a specific transaction due to misconduct by the closing(...)

Combined Loan-to-Value Ratio (CLTV) is the sum of all mortgage loans on a property expressed as a percentage of the property value.

Co-borrowers is any additional borrower whose name appears on loan documents and whose income and credit history are used to qualify for the loan. Under this arrangement, all parties involved have an obligation to repay the loan. For mortgages, the names of applicable co-borrowers also appear(...)

Co-signer is a person who is obligated to pay back the loan just as the borrower. Co-signer could be the borrower's spouse, parent, or friend. Mortgage lenders cannot require borrower's spouse to be a co-signer unless both are applying for the loan.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a health insurance program providing eligible employees and their dependents the option of continued health insurance coverage when an employee loses their job or experiences a reduction of work hours.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a health insurance program providing eligible employees and their dependents the option of continued health insurance coverage when an employee loses their job or experiences a reduction of work hours.

Certificate of Eligibility (COE) is the VA home loan eligibility document evidencing to the lender that the applicant qualifies for a VA loan based on the eligible veteran's service history and duty status.

Collateral is the asset pledged as security for a debt. When borrowers get a mortgage, the home is considered collateral. Borrowers risk losing the collateral if they don’t repay the debt according to the terms of the mortgage.

CLTV (Combined Loan to Value) ratio is the sum of all mortgage loans on a property expressed as a percentage of the property value.

Combined Loan-to-Value Ratio (CLTV) is the sum of all mortgage loans on a property expressed as a percentage of the property value.

Commercial/Non-Residential Space refers to floor area allocated to: Retail and commercial square footage (excludes Live/Work Units); Multi-level parking garage square footage that is separate from multi-level parking garage square footage allocated to residential Unit owners; (...)

Commission Income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service.

Loan Commitment is an agreement by a lender to lend a to an individual a specified sum of money.

Common Elements refer to the Condominium Project’s common areas and facilities including underlying land and buildings, driveways, parking areas, elevators, outside hallways, recreation and landscaped areas, and other elements described in the condominium declaration.

A Common Interest Housing Development (CIHD) refers to a planned residential community that may consist of Units within a two- to four-unit building and/or contain multiple housing types, structured with different ownership interests, managed by a common Condominium Association or HOA, and(...)

A Community Water System refers to a central system that is owned, operated and maintained by a private corporation or a nonprofit property owners association.

Comparables are recently sold properties used by appraisers to determine the fair market value of a specific property being appraised. Comparables are similar in size, locations and amenities as the property being appraised.

Comparables are recently sold properties used by appraisers to determine the fair market value of a specific property being appraised. Comparables are similar in size, locations and amenities as the property being appraised.

Condo or condominium is a property in which you have interest in or use of the common areas. The units may be attached or detached. The term condominium refers to the type of ownership in the property, not the type of construction.

Condo Questionnaire (also known as Condominium Project Questionnaire) is a questionnaire utilized by mortgage lender to help review the eligibility of Fannie Mae / Freddie Mac or FHA approved mortgage financing on one of the units of the condominium.

Condo or condominium is a property in which you have interest in or use of the common areas. The units may be attached or detached. The term condominium refers to the type of ownership in the property, not the type of construction.

Conforming Mortgage is a mortgage whose loan amount is equal to or less than the maximum dollar amount established by the limit set by the Federal Housing Finance Agency (FHFA) and meets the funding criteria of Freddie Mac and Fannie Mae. For 2020, the conforming loan limit for one unit(...)

Conforming Mortgage is a mortgage whose loan amount is equal to or less than the maximum dollar amount established by the limit set by the Federal Housing Finance Agency (FHFA) and meets the funding criteria of Freddie Mac and Fannie Mae. For 2020, the conforming loan limit for one unit(...)

Construction Loan are short-term loans used to finance the construction of a home or other real estate project. The builder or home buyer takes out a construction loan to cover the costs of the project before obtaining long-term financing.

Agreement of Sale, also known as Purchase Agreement, Sales Agreement, Contract of Purchase, Contract for Sale or Contract Agreement is a contract between a buyer and a seller that states the terms and conditions for the sale of a property. The Agreement of Sale states the purchase amount(...)

Agreement of Sale, also known as Purchase Agreement, Sales Agreement, Contract of Purchase, Contract for Sale or Contract Agreement is a contract between a buyer and a seller that states the terms and conditions for the sale of a property. The Agreement of Sale states the purchase amount(...)

Agreement of Sale, also known as Purchase Agreement, Sales Agreement, Contract of Purchase, Contract for Sale or Contract Agreement is a contract between a buyer and a seller that states the terms and conditions for the sale of a property. The Agreement of Sale states the purchase amount(...)

Conventional Mortgage is a home buyer's loan that is not offered or secured by a government agency, such as the FHA or VA. Conventional mortgages are either offered/guaranteed by a private lender or Fannie Mae and Freddie Mac.

Conventional Mortgage is a home buyer's loan that is not offered or secured by a government agency, such as the FHA or VA. Conventional mortgages are either offered/guaranteed by a private lender or Fannie Mae and Freddie Mac.

Co-signer is a person who is obligated to pay back the loan just as the borrower. Co-signer could be the borrower's spouse, parent, or friend. Mortgage lenders cannot require borrower's spouse to be a co-signer unless both are applying for the loan.

Closing Protection Letter also known as CPL is a contract between a title insurance underwriter and a lender. In this agreement, the title underwriter agrees to indemnify the lender for actual loss of funds incurred within a specific transaction due to misconduct by the closing(...)

Credit Bureau are agencies providing credit report information to creditors and mortgage lenders, who in turn use the credit information to make important lending decisions. In the US, three credit reporting bureaus, Equifax, Experian and TransUnion publish "tri-merge credit reports" used in(...)

Credit Inquiry occurs when a borrower applies for credit and grant permission to the lender/creditor to check their credit. A "Soft Pull" credit inquiry may not lower credit scores, but a "Hard Pull" credit inquiry often causes credit scores to drop.

Credit Limit is the maximum amount of credit a financial institution extends to an individual.

Credit Report is a detailed summary of a borrower's credit history. It shows previous and current credit accounts, along with payment history. When borrowers apply for a mortgage, lenders use credit report to score the credit risk involved and determine whether to grant credit to the borrower.

Credit Risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations.

Credit Score is a numeric score that depicts a borrower's creditworthiness. In US, credit scores published from three bureaus, Equifax, Experian and TransUnion are used in mortgage underwriting.

Creditor is a company or a person to whom money is owed.

Creditworthiness refers to the extent to which a person or company is considered suitable to receive financial credit, often based on their reliability in paying money back in the past.

Cleared to Close means the Underwriter has signed-off on mortgage approval documents and issued a final approval. The Closing Disclosure is the standardized document that details the finalized terms for the loan, including a breakdown of all costs and fees.

Debt Consolidation is the process of restructuring a set of currently outstanding debt into one loan. Loans such as credit card debt or car loans, Home Equity Line of Credit that carry a higher interest rate than the first lien mortgage can be paid off using debt consolidation loan. This(...)

Debt Consolidation is the process of restructuring a set of currently outstanding debt into one loan. Loans such as credit card debt or car loans, Home Equity Line of Credit that carry a higher interest rate than the first lien mortgage can be paid off using debt consolidation loan. This(...)

Debt Elimination plans are strategies to eliminate outstanding debts efficiently. A well structured debt elimination program utilzing refinancing is an excellent way to work at paying off debts responsibly. A well-managed debt elimination program can help borrowers protect their credit score,(...)

DTI (Debt-to-Income Ratio) is the personal finance measure that compares an individual's monthly debt payment to their monthly gross income.

Debt-to-Income Ratio, often referred to as DTI is the personal finance measure that compares an individual's monthly debt payment to their monthly gross income.

Deed of Trust is an agreement between a lender and a borrower to give the property to a neutral third party who will serve as a trustee.

Default in lending context refers to the failure to fulfill an obligation, especially to repay a loan.

Negative Amortization Loan also known as deferred interest loan is a loan that lets borrowers pay less than the entire interest owed for that month. The unpaid interest is then added to the loan amount to be paid off later, increasing the overall loan amount.

Delinquency is the failure to make payments as laid out in a loan agreement.

Discount Points also known as points, are an upfront fee paid to the lender at the time that you get your mortgage to lower the interest rate over the life of the loan. One point equals 1% of the total loan amount. In general, the more points borrowers pay, the lower the interest rate is.(...)

Down Payment is the amount of home's purchase price that borrowers pay in cash upfront to get the loan. A down payment that’s at least 20% of the home's value will generally prevent borrowers from having to private mortgage insurance. However, many mortgage programs, like HomeReady, Home(...)

DTI (Debt-to-Income Ratio) is the personal finance measure that compares an individual's monthly debt payment to their monthly gross income.

Due-on-sale is a provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance when the property is sold.

Duplex in real estate refers to a structure used for residential purposes and consisting of two distinct residences with a common wall.

Earnest Money is a deposit home buyers make toward down payment as evidence of good faith when signing a purchase agreement. The earnest money becomes part of the down payment if the offer is accepted. If the offer is rejected, the earnest money is given back. Earnest money is forfeited if(...)

Encumbrance is a claim against a property by a party that is not the owner of the property. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is fulfilled. The most common types of encumbrance apply to real estate include(...)

Equal Credit Opportunity Act (ECOA) is a United States law that makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the(...)

Equity in mortgage context refers to the difference between what the home is worth and what borrowers owe on the home. With a new mortgage loan, the down payment represents the equity in the home.

Escrow or impound account is a special account that mortgage lenders use to hold borrower's monthly payments toward property taxes and insurance. Instead of paying for the property tax and insurance payments in one lump sum, borrowers can pay for them as part of their monthly mortgage(...)

Impound Account also known as an Escrow account is a special account that mortgage lenders use to hold borrower's monthly payments toward property taxes and insurance. Instead of paying for the property tax and insurance payments in one lump sum, borrowers can pay for them as part of their(...)

Escrow Analysis is a review of the escrow account to ensure enough funds are collected to pay upcoming installments of insurance premium(s) and/or property taxes. If property taxes are reduced or increased, an escrow analysis can help borrowers reduce their target escrow amount held towards(...)

Escrow Waiver refers to borrowers opting to pay their property taxes and homeowners insurance on their own and not opting for a lender-established escrow account.

Fair Credit Reporting Act (FCRA) is a federal law that protects consumers against unfair, inaccurate credit reporting and gives consumers the right to examine their own credit history. The FCRA bars credit bureaus from reporting negative information that is older than seven years, with the(...)

Fair Market Value is the price that a property would sell for in an open market. An appraisal can help determine the fair market value of a home.

Fannie Mae is a US government-sponsored enterprise that buys mortgages from lenders and sells them to investors on the open market. This helps replenish mortgage lenders' funds so that they have more money available to lend for home purchases and refinances.

Fair Credit Reporting Act (FCRA) is a federal law that protects consumers against unfair, inaccurate credit reporting and gives consumers the right to examine their own credit history. The FCRA bars credit bureaus from reporting negative information that is older than seven years, with the(...)

Freddie Mac, the Federal Home Loan Mortgage Corporation is a government-sponsored enterprise that buys mortgages from lenders. By selling mortgages to Freddie Mac, lenders can replenish their funds so they can lend money to other borrowers, increasing the money available for new home purchases.

The Federal Housing Administration (FHA) is a United States government agency that sets standards for underwriting, construction and provide mortgage insurance on loans made by FHA-approved lenders. FHA goals are to improve housing standards and conditions; to provide an adequate home(...)

Fee Simple means absolute ownership of real property. The term shows that the property is owned without any limitations or conditions.

The Federal Housing Administration (FHA) is a United States government agency that sets standards for underwriting, construction and provide mortgage insurance on loans made by FHA-approved lenders. FHA goals are to improve housing standards and conditions; to provide an adequate home(...)

FHA mortgage are mortgages insured by the Federal Housing Administration. FHA loans are designed to make housing more affordable, especially for first-time home buyers. FHA mortgages offer low down payment options, low closing costs and easy credit qualifications.

Federal Housing Finance Agency, abbreviated FHFA was established by the Housing and Economic Recovery Act of 2008 (HERA).FHFA is responsible for the effective supervision, regulation, and housing mission oversight of Fannie Mae, Freddie Mac (the Enterprises) and the Federal Home Loan Bank(...)

Freddie Mac, the Federal Home Loan Mortgage Corporation is a government-sponsored enterprise that buys mortgages from lenders. By selling mortgages to Freddie Mac, lenders can replenish their funds so they can lend money to other borrowers, increasing the money available for new home purchases.

FICO® score is a type of credit score created by the Fair Isaac Corporation (FICO®). FICO® is the most common credit-scoring model used by creditors. According to this model, the higher a consumer's FICO score, the less likely they are to default on the loan. The FICO® score is(...)

Finance Charge is any fee representing the cost of credit, or the cost of borrowing. It is interest accrued on, and fees charged for, some forms of credit. It includes not only interest but other charges as well, such as financial transaction fees. Finance Charge includes the total of(...)

Fixed-rate Mortgage is a loan with an interest rate that doesn’t change over the life of the loan. With a fixed-rate mortgage, the monthly principal and interest payment will be fixed for the life of the loan, as opposed to Adjustable Rate Mortgage (ARM), where interest may vary over the life(...)

Floating Rate is an interest rate that moves up and down with the rest of the market or along with an index. It can also be referred to as a variable interest rate because it can vary over the duration of the debt obligation. This contrasts with a fixed rate, in which the interest rate(...)

Flood Certification is a document that states the flood zone status of real property. A flood certification provider can certify, based on the property's location on the map, whether it's situated in a flood zone.

Flood Insurance compensates for physical damage to a property that results from floods. Flood damage is typically not covered by standard homeowners insurance.

Federal Open Market Committee is a committee within the US Federal Reserve System (the Fed), is charged under United States law with overseeing the nation's open market operations (e.g., the Fed's buying and selling of United States Treasury securities). This Federal Reserve committee makes(...)

Forbearance Agreement is an agreement between a lender and a borrower where the lender suspends payments on the mortgage to allow borrower to make up for delinquent payments. Instead of initiating the foreclosure process, the lender may negotiate this option with the borrower if the borrower(...)

Foreclosure also known as repossession, is the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments. The mortgaged property may be sold to pay off the loan that's in default.

Freddie Mac, the Federal Home Loan Mortgage Corporation is a government-sponsored enterprise that buys mortgages from lenders. By selling mortgages to Freddie Mac, lenders can replenish their funds so they can lend money to other borrowers, increasing the money available for new home purchases.

Free and Clear refers to outright ownership of an asset. It implies all loans on the asset are completely paid off and no creditor has a claim on it.

FRM is an acronym for Fixed-rate Mortgage — loan with an interest rate that doesn’t change over the life of the loan. With a fixed-rate mortgage, the monthly principal and interest payment will be fixed for the life of the loan, as opposed to Adjustable Rate Mortgage (ARM), where interest may(...)

Funding Date refers to the date on which funding of the loan happens. Note that this may differ from Closing Data / Settlement Date for owner-occupied properties' refinances, as they have a three day right of rescission.

Garnishment is a court order directing that money or property of a third party (usually wages paid by an employer) be seized to satisfy a debt owed by a debtor to a plaintiff creditor.

Government National Mortgage Association commonly referred to as Ginnie Mae and abbreviated as GNMA, is a US government corporation that guarantees the timely payment of principal and interest on mortgages issued by Ginnie Mae-approved lenders.

Government National Mortgage Association commonly referred to as Ginnie Mae and abbreviated as GNMA, is a US government corporation that guarantees the timely payment of principal and interest on mortgages issued by Ginnie Mae-approved lenders.

GSE is an abbreviation for Government-Sponsored Enterprise. GSEs are financial services corporation created by the United States Congress with a goal of enhancing the flow of credit to targeted sectors of the economy, to make those segments of the capital market more efficient and transparent,(...)

GSE is an abbreviation for Government-Sponsored Enterprise. GSEs are financial services corporation created by the United States Congress with a goal of enhancing the flow of credit to targeted sectors of the economy, to make those segments of the capital market more efficient and transparent,(...)

Home Insurance also known as hazard insurance is coverage that protects a real estate owner against damage caused by fires, severe storms, hail/sleet, or other natural events. As long as the specific weather event is covered within the policy, the property owner will receive compensation to(...)

Home Equity Combined Loan to Value ratio, abbreviated HCLTV, is determined by dividing the sum of the following items by the lesser of the sales price or appraised value of the property: The original loan amount of the first mortgage; The full amount of any HELOCs (whether or not funds(...)

Home Equity Line of Credit (abbreviated HELOC) is a line of credit secured by the home that gives the borrower a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards.

Housing Expense Ratio is the ratio comparing total housing expenses to gross income. Mortgage lenders use it in qualifying borrowers for loans.

Reverse Mortgage (also known as a Home Equity Conversion Mortgage/HECM) is a loan that allows borrowers to get money from the equity in their home without having to make monthly payments. As time goes on, the debt will increase and home’s equity will decrease. The amount borrowers receive from(...)

Home Equity Line of Credit (abbreviated HELOC) is a line of credit secured by the home that gives the borrower a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards.

Home Equity Loan is a consumer loan secured by a second mortgage, allowing homeowners to borrow against their equity in the home.

Home Insurance also known as hazard insurance is coverage that protects a real estate owner against damage caused by fires, severe storms, hail/sleet, or other natural events. As long as the specific weather event is covered within the policy, the property owner will receive compensation to(...)

Homeowners Insurance also known as hazard insurance is coverage that protects a real estate owner against damage caused by fires, severe storms, hail/sleet, or other natural events. As long as the specific weather event is covered within the policy, the property owner will receive(...)

Housing Expense Ratio is the ratio comparing total housing expenses to gross income. Mortgage lenders use it in qualifying borrowers for loans.

HUD refers to the United States Department of Housing and Urban Development, a Cabinet department in the executive branch of the United States federal government, with the aim of developing and executing policies on housing and metropolises.

Home Valuation Code of Conduct abbreviated HVCC is a set of federal guidelines designed to make the home appraisal process more reliable. The HVCC prohibits mortgage brokers and real estate agents from selecting or paying appraisers. FHA loans and VA loans are excluded from compliance(...)

Escrow or impound account is a special account that mortgage lenders use to hold borrower's monthly payments toward property taxes and insurance. Instead of paying for the property tax and insurance payments in one lump sum, borrowers can pay for them as part of their monthly mortgage(...)

Impound Account also known as an Escrow account is a special account that mortgage lenders use to hold borrower's monthly payments toward property taxes and insurance. Instead of paying for the property tax and insurance payments in one lump sum, borrowers can pay for them as part of their(...)

Income refers to money received, especially on a regular basis, for work or through investments.

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. When a person declares bankruptcy, their assets are turned over to a trustee and the assets used to pay off outstanding debt. A bankruptcy will stay on a person's credit(...)

Index in the context of an Adjustable Rate Mortgage is a base interest rate used to compute adjustable-rate mortgage interest for some time period. This index or reference rate can be the prime rate, LIBOR, or the rate on U.S. Treasury bills, among others.

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. When a person declares bankruptcy, their assets are turned over to a trustee and the assets used to pay off outstanding debt. A bankruptcy will stay on a person's credit(...)

Home Insurance also known as hazard insurance is coverage that protects a real estate owner against damage caused by fires, severe storms, hail/sleet, or other natural events. As long as the specific weather event is covered within the policy, the property owner will receive compensation to(...)

Interest is the money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.

Interest-only Loan is one that gives the borrower the option of paying just the interest or paying the interest and as much principal as the borrower wants in any given month during an initial period. Interest-only home loans can have a fixed or an adjustable rate.

Interest Rate is the cost a lender charges the borrower to borrow money. A basic mortgage payment is made up of principal and interest. The amount of interest that borrower owes depends on the interest rate and the loan amount – the lower the interest rate, the less one owe in interest.

Interest Rate Ceiling is the highest interest rate that a borrower can receive under an adjustable rate mortgage.

Investment Property is real estate property purchased with the intention of earning a return on the investment either through rental income, the future resale of the property, or both.

Interest-only Loan is one that gives the borrower the option of paying just the interest or paying the interest and as much principal as the borrower wants in any given month during an initial period. Interest-only home loans can have a fixed or an adjustable rate.

Year-end Statement (also known as IRS Form 1098 Mortgage Interest Statement) is a status update on a mortgage, showing how much mortgage interest, mortgage points and property taxes have been paid by the borrower that year and also includes how much the borrower has left on their mortgage. See(...)

IRS Tax Transcripts, also known as 4506-T transcripts summarizes an individual's tax return information and includes Adjusted Gross Income (AGI). They are available for the most current tax year after the IRS has processed the return. Lenders can also get them for the past three years. The(...)

Judgement is a court order that is the decision in a lawsuit. If a judgment is entered against a borrower, a debt collector will have stronger tools, like garnishment, to collect the debt.

Jumbo mortgages are mortgages larger than the conforming loan limits set every year by the government-sponsored enterprises Fannie Mae and Freddie Mac. Any loan that meets certain criteria, including falling below the limit, is considered a conforming loan eligible for purchase, while loans(...)

Kickback in the context of real estate transaction refers to an illegal payment intended as a compensation for referral for real estate settlement services. The kickback can be in the form of money, a gift, credit, or anything of value. § 1024.14 of the The Code of Federal Regulations Part(...)

Late Fees is a penalty that borrowers pay when a payment is made after the grace period.

Late Payment is an amount of money a borrower sends to a lender or servicer that arrives after the date that the payment was due or after a grace period for the payment has passed.

Loan Estimate is a three-page standardized document that borrowers receive after applying for a mortgage. The Loan Estimate informs borrowers important details and estimated costs associated with their loan. Loan estimate includes information regarding the estimated monthly payment, interest(...)

Lender also known as a mortgagee, is a bank or mortgage originating institution that offers home loans or other types of credit.

Liabilities are something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued(...)

Liability Insurance provides the insured party with protection against claims resulting from injuries and damage to people or property.

LIBOR is acronym for London Interbank Offered Rate. It is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

Lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

Lien Holder is a lender or entity that legally has an interest in the property until the borrower pays off the mortgage in full. The lender — which can be a bank, non-bank financial institution or private party — holds a lien, or legal claim, on the property because they lent the money to(...)

Line of Credit (LOC) is a type of revolving credit, with preset borrowing limit that can be used at any time till the line of credit is active. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line(...)

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. When a person declares bankruptcy, their assets are turned over to a trustee and the assets used to pay off outstanding debt. A bankruptcy will stay on a person's credit(...)

Loan Amount is the amount the borrower promises to repay, as set forth in the loan contract. The loan amount may exceed the original amount requested by the borrower if the borrower elects to include points and other upfront costs in the loan.

Loan Commitment is an agreement by a lender to lend a to an individual a specified sum of money.

Loan Estimate is a three-page standardized document that borrowers receive after applying for a mortgage. The Loan Estimate informs borrowers important details and estimated costs associated with their loan. Loan estimate includes information regarding the estimated monthly payment, interest(...)

Loan Modification is a change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or any combination of these.

Loan Officer is a representative of a lender who assists borrowers in the loan application process.

Loan Origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds (or declining the application). For mortgages, there is a specific mortgage(...)

Loan-to-Value ratio (LTV) is the ratio of loan amount and the home's value and is generally expressed as a percentage.

Line of Credit (LOC) is a type of revolving credit, with preset borrowing limit that can be used at any time till the line of credit is active. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line(...)

Lock Commitment Letter is a letter from a lender verifying that the price and other terms of a loan have been locked.

Lock Expiration is the event when rate lock on a loan expires.

Lock Period also called mortgage lock-in period is the period of time that a lender will guarantee a specific interest rate. Rate lock-ins protect the borrower against rate increases during that period of time. A rate lock period typically lasts 15 to 60 days. To keep the mortgage rate the(...)

Lock Period also called mortgage lock-in period is the period of time that a lender will guarantee a specific interest rate. Rate lock-ins protect the borrower against rate increases during that period of time. A rate lock period typically lasts 15 to 60 days. To keep the mortgage rate the(...)

In Lender-Paid Mortgage Insurance (often abbreviated LPMI), the borrower either pays a fee up front when they get the mortgage or accept a higher interest rate and the lender will pay for the borrower's mortgage insurance.

Loan-to-Value ratio (LTV) is the ratio of loan amount and the home's value and is generally expressed as a percentage.

Manufactured Housing, also known as a mobile home, is a dwelling that is built to the Manufactured Home Construction and Safety Standards. Manufactured homes are typically built in a factory and transported in one or two pieces on a permanent steel chassis using the home's own wheels.

Margin for adjustable rate mortgages is the difference between the index and the interest rate charged for a particular loan. The margin is a fixed percentage point that is predetermined by the lender and added to the index to compute the interest rate. A lender's margin remains fixed for the(...)

Maturity Date is the point when the mortgage, including both the principal balance and interest, is paid for in its entirety.

Maximum Loan Amount describes the total amount that an applicant is authorized to borrow. Maximum loan amounts are used for standard loans, credit cards, line-of-credit accounts and mortgages.

Maximum LTV is the largest allowable ratio of a loan's size in relation to the dollar value of the property (Loan-to-Value) for a specific loan product offered by the lender.

Manufactured Housing, also known as a mobile home, is a dwelling that is built to the Manufactured Home Construction and Safety Standards. Manufactured homes are typically built in a factory and transported in one or two pieces on a permanent steel chassis using the home's own wheels.

Mortgage is a legal agreement by which a creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Year-end Statement (also known as IRS Form 1098 Mortgage Interest Statement) is a status update on a mortgage, showing how much mortgage interest, mortgage points and property taxes have been paid by the borrower that year and also includes how much the borrower has left on their mortgage. See(...)

Mortgagee, also known as Mortgage Lender, is a financial institution that offers mortgages.

Lock Period also called mortgage lock-in period is the period of time that a lender will guarantee a specific interest rate. Rate lock-ins protect the borrower against rate increases during that period of time. A rate lock period typically lasts 15 to 60 days. To keep the mortgage rate the(...)

Note is a legal document that obligates the borrower to repay a loan at a specified interest rate during a specified period of time. The agreement is secured by a mortgage, a deed of trust or another security instrument.

Mortgage broker is an individual or firm that acts as an intermediary between a borrower and a mortgage lender.

Mortgage Insurance is a type of insurance policy that protects the lender in case the borrower default on the loan. There are different types of mortgage insurance policies. Private mortgage insurance (PMI) is one type of policy. Borrower pays PMI when they get a conventional loan, usually(...)

Mortgage Lender also known as a mortgagee, is a financial institution that offers mortgages.

Mortgage Points also known as points, are an upfront fee paid to the lender at the time that you get your mortgage. One point equals 1% of the total loan amount. In general, the more points borrowers pay, the lower the interest rate is. However, the more points paid, the more cash is need(...)

Mortgage shopping refers to the process of shopping around for a home loan or mortgage will help you get the best financing deal. Mortgage brokers like Stem Lending can help borrowers compare all the costs involved in obtaining a mortgage across lenders and help customize options that work(...)

Mortgage Type refers to the kinds of mortgage products offered by a mortgage broker like Stem Lending. Here are the common types of mortgages: Fixed-Rate Mortgage. Mortgages designed to be paid off in 8 to 30 years at a fixed interest rate. Can have long term (20-30-years), medium term(...)

Mortgagee, also known as Mortgage Lender, is a financial institution that offers mortgages.

Mortgagee Clause is a property insurance provision granting special protection for a mortgagee (lender) named in the policy that, in effect, sets up a separate contract between the insurer and the mortgagee.

Mortgagor, also known as a borrower, is an individual who applies for and receives funds in the form of a loan. The borrower is obligated to repay the loan in full under the terms of the loan.

Multi-family Residence, also known as Multi-Dwelling Unit or MDU is a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex. A common form of multi-family Residence is an apartment(...)

Multi-family Home is a single building that’s set up to accommodate more than one family living separately. That can range from a duplex, which has two dwellings within a single building, to homes or apartment buildings. One to four unit homes can typically be financed via a Fannie Mae/Freddie(...)

Multi-family Residence, also known as Multi-Dwelling Unit or MDU is a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex. A common form of multi-family Residence is an apartment(...)

Negative Amortization happens when the outstanding principal balance of a loan goes up rather than down because the monthly payments don’t cover the full amount of the interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan.

Negative Amortization Loan also known as deferred interest loan is a loan that lets borrowers pay less than the entire interest owed for that month. The unpaid interest is then added to the loan amount to be paid off later, increasing the overall loan amount.

Net Tangible Benefit refers to the benefit that borrower experiences with a proposed loan. The Federal Housing Administration defines a net tangible benefit as the mortgage payment dropping by at least 5%. The reduction must factor in principal, interest, and mortgage insurance.

No closing cost loan is typically a refinance where the loan amount and lender credits are adjusted to absorb the net