Mortgage Glossary

Uniform Residential Loan Application.

Acquisition and development loan- a loan for the purchase of raw land for the purpose of development.

A written history of the ownership of a parcel of land.

Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

A declaration by a notary, certifying, by way of personal knowledge or written identification, the identity of the signer.

Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage. (ARM)

On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

A sworn statement in writing.

An organization of title companies specializing in Real Property Law which has standardized forms and coverage on a national basis. This is standardized coverage.

Amortization refers to the principal portion of the loan payment and is the loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. A fully amortized loan will be completely paid off at the end of the loan term.

An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan.

An estimate of the value of real property, made by a qualified professional called an "appraiser." An appraisal will be needed to determine the value of your property.

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. This must be approved by the lender and be allowed by the note, which was originally signed by the seller.

This refers to the debt-to-income ratio calculated using principal, interest, taxes, insurance and consumer credit obligations divided by gross monthly income. It is expressed as a percentage.

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

The entity funding the loan. This is the entity to which the loan is owed.

A reorganization or discharge of debts. Could also be referred to as Chapter 7, 11 or 13.

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.

When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

The highest rate that an adjustable rate mortgage may reach. It can be expressed as the actual rate or as the amount of change allowed above the start rate. For example, a 7.99 % start rate with a 6% rate change cap would have a maximum interest rate cap of 13.99%.

Any funds disbursed directly to the borrower.

A certificate issued by local city government to a builder, stating that the building is in proper condition to be occupied.

A true copy, attested to be true by the officer holding the original. It should have a stamp and signature stating that it is a true copy.

Loan is ready to be closed with no additional conditions.

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.

Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the total mortgage amount. Or any costs being charged to facilitate granting of the credit request.

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Property owned in common by a husband and wife, which was not acquired as separate property. A classification of property peculiar to certain states. In community property states, assets may be owned in part by a spouse even if their name does not appear on the title.

A property with the same basic characteristics as the property you are attempting to find the value of (usually a real estate appraisal.) It should have been sold recently and be as similar as possible.

A property owned as a group, with rights to occupy specific units of the structure. An overseeing board, often referred to as a Homeowners Association, governs the property.

A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

Credit owed by the individual, not secured by real estate.

A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FMHA).

A provision in some ARMS, (Adjustable Rate Mortgage) that allows you to change the ARM to a fixed-rate loan at some point during the loan term.

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).

History of buyers past credit performance.

The score given to an individual to determine the credit worthiness. These scores come from TRW, Equifax and Trans Union.

The customer's monthly obligations divided by their monthly gross income. See also Back End.

Legal document which conveys the title to a property.

A document used which pledges real property to secure a debt. In some cases a deed of trust can replace a mortgage.

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

See Negative Amortization

Failure to make payments on time. This can lead to foreclosure.

An independent agency of the federal government which guarantees long-term, low- or no-down payment mortgages to eligible veterans.

A letter written by the borrower giving an explanation for any derogatory credit.

This is short for derogatory and refers to negative credit items.

Following a completed bankruptcy proceeding, discharged debts are no longer owed or collectable. Lenders will require copies of the discharge papers on any prior bankruptcy filings.

Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100,000 mortgage would cost $2,000).

If a bankruptcy is dropped without being completed, a Bankruptcy Dismissal document will be needed to proceed with the loan. Either the court or the debtor can prompt the dismissal.

Money paid to make up the difference between the purchase price and mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on Conventional loans, and no money down up to 5 percent on FHA and VA loans.