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MORTGAGE TUTORIAL

Here's a glossary of real estate and home financing terms, words and phrases to help you better understand and converse with a real estate agent or a loan officer. This is not an all-encompassing list and there may be definitions that may vary from state to state or among various financial institutions.

203(b):		A Federal Housing Authority program which provides mortgage insurance that protects lenders from default. Can be used to finance the purchase of new or existing one-to-four family housing; generally characterized by low down payments, flexible qualifying guidelines, limited fees, and limits on maximum loan amount.
203(k):		A Federal Housing Authority mortgage insurance program which enables homebuyers to finance both the purchase of a home and its rehab cost via a single mortgage loan.

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Abstract of title:		A brief history of the transfers of ownership of a piece of land, including all claims that could be made against it.
Adjustable-rate mortgage (ARM):		A mortgage with an interest rate that fluctuates (adjusts) up or down, based on the movements of a predetermined index, which may cause the monthly payment to adjust up or down accordingly.
Agent/sales associate:		Real estate agents that help people buy and sell houses.
Amenity:		Any feature of a property that a person may consider to be beneficial but not necessary. Amenities may be natural (like location, view, water access) or man-made (walk-in closet, swimming pool, etc.).
Amortization:		The paying off of a debt, such as a mortgage, in periodic installments over a period of time (the term of the loan).
Amortization schedule:		A timetable for payment of a mortgage loan. The amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Amortization term:		The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Amortize:		To repay a mortgage with regular payments that cover both principal and interest.
Annual percentage rate (APR):		The actual cost of credit to the borrower, including interest and certain other charges, expressed as a yearly rate and calculated over the life of the loan. The APR is a term used in the federal Truth in Lending Act and is used in disclosures required by that law.
Application:		A form completed by a potential borrower in which the person submits to a lender or broker important financial information about him or herself necessary to the underwriting process.
Appraisal:		A professional analysis used to estimate the value of the property. This generally includes examples of similar properties.
Appraiser:		A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appraisal Fee:		A fee generally paid by the buyer to determine the estimated value of the property.
Appreciation:		An increase in the value of a property due to changing market conditions and/or home improvements.
Assessed value:		The valuation placed on property by a public tax assessor for purposes of taxation.
Assessment:		The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Assessment rolls:		The public record of taxable property.
Assessor:		A government official who is responsible for determining the value of a property for the purpose of taxation.
Association fees:		The fee condominiums and planned unit developments assess individual owners monthly for maintaining common areas and service for the development.
Assumable loan:		An existing mortgage that can be taken over (assumed) by the buyer when a home is sold -- usually on the same terms given to the original buyer. The seller remains liable unless released by the lender from the obligation. If the mortgage contains a due-on-sale clause, the loan may not be assumed without the lender's consent.
Assumption:		Taking over responsibility for payments on a mortgage and meeting any of the other requirements. Typically, a buyer assumes a mortgage from the seller.
Balloon mortgage:		A mortgage loan with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mortgage loan may contain an option to "reset" the interest rate to the current market rate and to extend the due date if certain conditions are met.
Billing cycle:		The period or number of days shown on a billing statement in which interest is billed.
Bi-weekly mortgage:		A mortgage with payments due every two weeks, totaling 26 payments per year.
Bond program:		A state sponsored method of assisting borrowers and first-time buyers in the purchase of a home at a reduced interest rate.
Bridge loan:		A short-term loan secured by the borrower's current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new house before the current home is sold. Also known as a "swing loan."
Building code:		A regulation that, based on agreed upon safety standards within a specific area, determines the design, construction, and materials used in building. A type of municipal, city or county ordinance.
Buy down:		A method of lowering the interest rates on a mortgage, either temporarily or for the entire term of the loan. Often points are paid up front to make up the difference between the rate actually charged on the mortgage and the rate at which the buyer pays. Practically anyone -- sellers, buyers, home builders, relatives, etc. -- can buy down rates.
Buyer pool:		The entire market of prospective homebuyers in a specific area or looking for a type of home.
Cap:		To safeguard against excessively high payment increases, adjustable rate mortgage programs may include a cap on the amount by which either the interest rate or payment may rise at any single adjustment, over the life of the loan, or both. Look at the cap as "the worst case scenario" to determine if the ARM loan suits your financial capabilities.
Capital expenditure:		The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital improvement:		Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
Cash reserves:		A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
Certificate of eligibility:		A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage loan.
Certificate of reasonable value (CRV):		A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA-guaranteed mortgage loan.
Certificate of title:		A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.
Clear or marketable title:		A title that doesn't have any liens or claims against it, which would keep title from being transferred, putting the buyer in a position to sue for property rights or be obligated for claims.
Closed-end loan:		A credit arrangement in which the borrower and lender agree on the total amount loaned and the number and due dates of each payment; all proceeds are advanced at time of closing.
Closing:		Also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.
Closing costs:		Costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing, fees charge by the settlement agent and title company, and fees charged by the mortgage lender and mortgage broker. These costs (e.g., origination fee, discount points, title insurance fees, survey fees, and attorney's fees) generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.
Collateral:		An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
Collection:		The procedure followed to bring a delinquent mortgage loan current and to file the required notices to begin foreclosure, if necessary.
Combined loan-to-value (CLTV):		The relationship of the outstanding balances of a first and second mortgage to the appraised value of the security used to determine the maximum lending amount on real estate.
Commitment:		A lender's offer to grant a mortgage loan outlining the terms, the amount of the loan, the interest rate and other conditions. It can serve as a communication of the lender's decision on the borrower's application.
Comparables or "comps":		An abbreviation for "comparable properties;" used for comparative purposes in the appraisal process. Comparables are properties similar to the property under consideration; they are reasonably the same size, in the same location, with similar amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
Condominium:		A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.
Conforming loan:		A loan which meets all requirements to be eligible for sale to Fannie Mae or Freddie Mac.
Construction loan:		A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses.
Contingency:		A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
Contract of purchase:		A document that lists the price, conditions and terms under which the buyer is willing to purchase the property. Also known as an offer to purchase, purchase offer, earnest money agreement or deposit receipt.
Contract of sale (sales contract):		An offer of purchase that has been signed by both buyer and seller. A firm contract that outlines all details of the property transaction. Also known as an offer to purchase/acceptance of sale/sales contract.
Conventional mortgage:		A mortgage loan which is not insured or guaranteed by a government agency such as FHA or VA.
Cooperative (Co-op):		Residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.
Corporate relocation:		Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
Credit history:		History of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit pre-approval:		A process in which an individual can apply for a credit pre-approval decision before he or she actually finds a home and enters into a sales agreement.
Credit report:		Information provided by a credit bureau that allows a lender or other businesses examine your use of credit. It provides information on money that you've borrowed from credit institutions and your payment history.
Credit score:		A numerical value that ranks a borrower's credit risk at a given point in time based on a statistical evaluation of information in the individual's credit history.
Current debt:		The amount of money owed all out standing loans, including mortgage loans, car loans, and credit card debt.
Debt-to-income ratio:		The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, car payments and other installment debts, and payments on revolving or open-end accounts, such as credit cards.
Deed:		The legal document transferring ownership or title to a property.
Delinquent:		Failure to make a payment when it is due. The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which payment is 30 or more days past due.
Deposit receipt:		An official document that can act as both the receipt for a buyer's deposit and the purchase agreement. Some states use a deposit receipt to outline a buyer's offer on a home, including the description of the property and how it will be financed, and how the deposit money is handled in the event the deal breaks down. If the seller accepts the offer and signs the document, the deposit receipt becomes the legal purchase agreement for the deal. The deposit receipt is also called a sales contract.
Discount points:		A fee paid by the borrower at closing to reduce the interest rate on a mortgage loan. One point is equal to one percent of the loan amount.
Down payment:		A portion of the sales price of a home, usually between three to 20 percent, not borrowed and paid up-front in cash. Some loans are offered with a zero down payment.
Due-on-sale clause:		A provision in a mortgage that allows the lender to demand repayment in full of the outstanding balance if the property securing the mortgage is sold.
Earnest money:		Money deposited by potential buyers to show their seriousness about buying a home. It generally becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.
Earnest money agreement:		A document that lists the price, conditions and terms under which the buyer is willing to purchase the property. Also known as an offer to purchase, purchase offer, contract of purchase or deposit receipt.
Easement:		A right-of-way giving persons other than the owner access to or over a property.
Economic indicator:		A variety of indicators, such as the Consumer Price Index (CPI) or the Gross Domestic Product (GDP), that predict where the interest rates may be heading in the coming months.
Encroachment:		The intrusion onto another's property without right or permission.
Equal Housing Opportunity symbol:		Represents the commitment to doing business in accordance with the Fair Housing Act. This act makes it unlawful to discriminate in any aspect of the sale, financing, or rental of residential real estate on the basis of race, color, religion, sex, handicap, familial status or national origin. (See Fair Housing Act)
Equity:		The amount of ownership that one has in a home. Ownership value is built up by paying down the principal on your mortgage or through the increase in value (appreciation) of your home in the market place.
Escrow account:		An account that a mortgage servicer establishes on behalf of a borrower to pay property taxes, homeowners insurance, mortgage insurance, flood insurance or other charges when they are due, although there may be other types of escrow accounts. Sometimes referred to as an "impound" or "reserve" account.
Escrow analysis:		The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance and other bills when due.
Exclusive agency listing:		A listing contract in which the agent has the sole right to sell your home for you, though you are not bound to pay the commission if you produce the buyer. (See Listing agreements)
Exclusive right-to-sell contract:		A listing contract in which you give the real estate broker the sole right to sell; the person receives a commission, regardless of who produces the buyer.
Fair Housing Act:		A law that prohibits discrimination in all facets of the homebuying process on the basis of race, color, national origin, religion, sex, familial status, or disability. (See Equal Housing Opportunity symbol).
Fair market value:		The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully and with complete knowledge of the situation.
Federal Home Loan Mortgage Corp. (Freddie Mac):		A government-sponsored entity that purchases mortgage loans from lenders and resells them as securities.
Federal Housing Administration(FHA):		An agency within the Department of Housing and Urban Development that insures mortgages and loans made by private lenders.
Federal National Mortgage Association(Fannie Mae):		A government-sponsored entity that purchases mortgage loans from lenders and resells them as securities. Fannie Mae is the nation's largest mortgage investor.
FHA loan:		A loan insured by the Federal Housing Administration.
Finance charge:		The cost of interest and other charges involved in borrowing money.
First mortgage:		A mortgage that is the primary lien against a property. The first mortgage usually has priority over most other liens against the property.
Fixed-rate mortgage:		A mortgage with an interest rate that does not change during the entire term of the loan.
Floating rate:		Deciding not to lock in the interest rate at the time of application, and instead to float with the market until a later date at which time you will ask the lender to lock in the interest rate.
Flood insurance:		Insurance that protects homeowners against losses from a flood; if a home is located in a federally designated flood hazard zone, the lender generally will require flood insurance on the loan.
Foreclosure:		A legal action that ends all ownership rights in a home when the owner fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
General warranty deed:		The type of deed considered to provide the most protection to an owner, since the seller guarantees that he or she is the true owner of the property and that no claim will be brought against the property.
Gift letter:		A letter that a family member writes verifying that he or she has given you a certain amount of money as a gift and that you don't have to repay it. You can use this money towards a portion of your down payment with some mortgage loans.
Government National Mortgage Association (Ginnie Mae):		A government-owned corporation within the U.S. Department of Housing and Urban Development that guarantees securities backed by mortgages that are insured or guaranteed by other government agencies.
Good faith estimate:		A form required by the Real Estate Settlement Procedures Act (RESPA) that discloses an estimate of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the mortgage transaction.
Home inspection:		An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.
Home market analysis:		Presents an opportunity to review and evaluate the facts before you decide the price you will ask for your home. It also helps you look at your home from a buyer's perspective. This process will establish a realistic listing price and may increase the percentage of qualified buyers who look at your property.
Hazard insurance:		Insurance coverage that provides compensation for physical damage to a property from fire, wind, vandalism, or other covered hazards or natural disasters.
Home equity line of credit (HELOC):		A type of revolving loan that enables a homeowner to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in the property.
Homeowners insurance:		An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence, inappropriate action that results in someone's injury or property damage.
Home warranty:		Insurance that offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowners insurance; overage extends over a specific time period and does not cover the home's structure.
Housing counseling agency:		Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing and homebuying.
Housing Market Index (HMI):		HMI is based on a monthly survey of home builders that the National Association of Home Builders (NAHB) has been conducting for more than 16 years. Each month, the survey asks builders to rate present sales of single-family detached homes and sales expectations over the next six months as "good," "fair," or "poor." Traffic of prospective buyers is rated as "high to very high," "average," or "low to very low." The HMI is a weighted average of the three seasonally adjusted components. On a scale of 0 to 100, with zero being the worst and 100 the best.
HUD:		The U.S. Department of Housing and Urban Development (HUD), established in 1965, works to create decent home and suitable living environments for all Americans by addressing housing needs, improving and developing American communities and enforcing fair housing laws.
HUD-1 Settlement Statement:		A final listing of the closing costs of the mortgage transaction. It provides the sales price and down payment, as well as the total settlement costs required from the buyer and seller.
HVAC:		Short for Heating, Ventilation and Air Conditioning; a home's heating and cooling system.
Income-to-debt ratios:		A qualifying ratio used in underwriting a residential mortgage loan, which computes the percentage of monthly income required to meet the monthly housing expense.
Index:		A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, as stated in the note.
Inflation:		An increase in prices.
Installment:		The regular periodic payment that a borrower agrees to make to a lender.
Insurance:		Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
Interest:		The cost you pay to borrow money. It is the payment you make to a lender for the money it has loaned to you. Interest is usually expressed as a percentage of the amount borrowed.
Interest adjustment:		Required on all sellers' payoffs due to interest being paid one month in arrears for mortgage loans. It is always best to figure on 30 days of interest. To figure out one month's interest, multiply the unpaid principal balance and interest rate, and then divide by 12. The new lender may also charge the buyer a "per diem" (per day) interest adjustment from the date of loan disbursement to 30 days before the first payment comes due.
Interest rate:		The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Interest rate ceiling:		For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest rate floor:		For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Investment property:		A property that generally is not occupied by the owner.
Investor:		Any person or institution that invests in mortgages or mortgage-backed securities.
Jumbo loan:		A loan with a dollar amount that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. Also known as a non-conforming loan.
Lease:		A written agreement between the property owner and a tenant that stipulates the conditions, including the amount of rent, under which the tenant may possess the real estate for a specified period of time.
Lease purchase:		Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
Liabilities:		Your debts and other financial obligations.
LIBOR (London Inter Bank Offer Rate) Index:		An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the average interest rate at which international banks lend to or borrower funds from the London Interbank Market.
Lien:		A claim or charge on property for payment of a debt. Usually liens must be settled before the buyer can take the title.
Line of credit:		See: Home equity line of credit (HELOC).
Liquid asset:		A cash asset or an asset that is easily converted into cash.
Listing agreements:		There are three types of listing agreements (see also Listing Contract): 1. With an exclusive right-to-sell agreement, the seller pays a fee regardless of who produces the buyer. This fee covers many important services that the sales associate performs above and beyond finding a qualified buyer. 2. If the seller finds a buyer, he or she is not obligated to pay the fee in exclusive-agency listing. If the sales associate finds a buyer, then the fee is paid to the real estate company. 3. An open listing is one in which you sign with several real estate firms and give each authority to sell your home. It is typically less effective than exclusive listing because the sales associate lacks the incentive to make an all-out effort to sell your home.
Listing contract:		A contract with the broker or firm you hire to represent you in the sale of your home, according to the terms of the sale that you specify. In exchange for producing a ready, willing and able buyer for you, the sales associate is paid a commission. Also known as a listing agreement.
Loan:		Money borrowed that is usually repaid with interest.
Loan application fee:		A lender's fee that you must pay when applying for a mortgage.
Loan fraud:		Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Loan origination fee:		A fee, usually one to four points, charged by the lender for processing your mortgage.
Loan-to-value ratio (LTV):		The ratio of mortgage amount to appraised value or sales price of real property. Used by lenders to determine maximum loan amounts set by secondary market investors and/or government insuring agencies.
Loan servicing:		A mortgage banking function which includes the receipt of payments, customer service, escrow administration, investor accounting, collections and foreclosures.
Lock-in:		Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time and certain conditions are satisfied.
Locking your rate:		A procedure where a lender agrees to lock-in a specific interest rate (initial interest rate in the case of an adjustable-rate mortgage) on a mortgage loan request for a specified period of time.
Margin:		An amount the lender adds to an index to determine the interest rate on an adjustable-rate mortgage.
Maturity:		The date on which the principal balance of a loan, bond or other financial instrument becomes due and payable.
Modification:		A change to the terms of a mortgage.
Mortgage:		A loan using your home as collateral. In some states, the term "mortgage" also is used to describe the document you sign to grant the lender a lien on your home.
Mortgage banker:		The lender providing funds for a mortgage.
Mortgage broker:		An individual or firm that brings borrowers and lenders together for the purpose of loan origination. A mortgage broker typically takes loan applications and may process loans. A mortgage broker also may close the loan.
Mortgage insurance:		Insurance that protects lenders against losses caused by a borrower's default on a mortgage loan; mortgage insurance is typically required if the borrower's down payment is less than 20 percent of the home's purchase price. See: private mortgage insurance (PMI).
Mortgage insurance premium (MIP):		A monthly payment - usually part of the mortgage payment - paid by a borrower for mortgage insurance.
Mortgage life insurance:		Term life insurance paid by the borrower in which the amount of coverage decreases as the mortgage balance declines. In the event the borrower dies while the policy is in force, the mortgage debt is automatically satisfied by the insurance proceeds.
Mortgagee:		The institution or individual to whom a mortgage is given; the lender.
Mortgagor:		The owner of real estate who pledges property as security for the repayment of a debt; the borrower.
Multiple Listing Service (MLS):		A networking system, frequently on computer, in which a number of real estate firms share information about their clients' houses that are for sale.
National Association of Home Builders:		The National Association of Home Builders (NAHB) is a federation of more than 800 state and local builders associations throughout the United States. The mission of this Washington, D.C.-based trade association is to enhance the climate for housing and the building industry, and to promote policies that will keep housing a national priority. Chief among NAHB's goals is providing and expanding opportunities for all consumers to have safe, decent and affordable housing. About one-third of NAHB members are home builders and/or remodelers. The remainder of the membership consists of associates working in closely related fields -- such as mortgage finance and building products and services -- within the housing industry.
National Association of REALTORS®:		Founded in 1908, the National Association of REALTORS® (NAR) is composed of residential and commercial realtors, who are brokers, salespeople, property managers, appraisers, counselors and others engaged in all aspects of the real estate industry. Members belong to one or more of some 1,700 local associations/boards and 54 state and territory associations of realtors. They can join one of many institutes, societies and councils. NAR offers members the opportunity to be active in appraisal and international real estate specialty sections. Realtors pledge to a strict code of ethics and standards of practice.
Negative amortization:		An increase in the outstanding mortgage balance that occurs when the amount of interest due is greater than the borrower's monthly payment, and the difference is added to the mortgage principal.
Net worth:		The total value of a person's assets, including cash, minus all liabilities.
Non-conforming loan:		A loan that is not eligible to be purchased by Fannie Mae or Freddie Mac. May also be referred to as a jumbo loan.
Non-liquid asset:		An asset that cannot easily be converted into cash.
Note:		A written promise to pay a specified amount under the agreed upon conditions.
Note rate:		The interest rate stated on the note.
Offer to purchase:		A document that lists the price, conditions and terms under which the buyer is willing to purchase the property. Also known as purchase offer, earnest money agreement, contract of purchase or deposit receipt.
Offer to purchase of sale (sales contract):		An offer of purchase that has been signed by both buyer and seller. It is a contract that outlines all details of the property transaction. Also known as acceptance/contract of sale/sales contract.
Open house:		When the seller's real estate agent opens the seller's house to the public. You don't need a real estate agent to attend an open house.
Open listing:		A listing contract in which you hire more than one firm or person to sell your home, and only the one who produces the buyer is entitled to the commission. Also known as a listing agreement.
Origination:		The process of preparing, submitting and evaluating a loan application; generally includes a credit check, verification of employment and a property appraisal.
Origination fee:		A fee for originating a loan; it is usually calculated in the form of origination points and is paid at closing.
Pest inspection:		May be required on new loans to determine if there is an infestation of termites or other pests in the home.
Piggyback:		Borrowers often use a "piggyback" second mortgage in conjunction with a first mortgage so that they do not have to provide a 20 percent down payment in order to avoid PMI.
PITI:		Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowners and mortgage, if applicable) goes into an escrow account to cover the fees when they are due. If no escrow account is established, the borrower must pay taxes and insurance directly.
Point:		One percent of the amount of the mortgage loan.
Power of attorney:		A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Pre-approval:		A process by which a lender provides a prospective borrower with an indication of how much money he or she will be eligible to borrower when applying for a mortgage loan. This process typically includes a review of the applicant's credit history and may involve the review and verification of income and assets to close and be subject to the borrower satisfying certain conditions.
Premium:		An amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Prepaid interest:		Money paid by the borrower to the lender for interest that accrues between the closing date and the end of the month.
Prepayment Penalty:		A fee that is charged to the borrower if the loan is paid off earlier than the specified term of the loan. Depending on your loan, you may or may not incur a prepayment penalty.
Pre-qualification letter:		A letter from a mortgage lender that states that you're pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.
Pre-qualify:		A buyer can pre-qualify for a loan based on non-verified income and credit information provided by the buyer. The pre-qualification, which is usually done over the phone, is the opinion of the loan originator and does not represent a formal loan approval.
Prime Rate:		The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.
Principal:		The amount of money borrowed or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow the money.
Private mortgage insurance (PMI):		Insurance that protects a mortgage lender against loss in the event of default by a borrower. Generally required for borrowers with down payments of less than 20 percent of a purchase price.
Property tax:		The tax assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Services may include police and fire department, garbage pick up and snow removal.
PUD (Planned Unit Development):		A real estate project in which each unit owner has title to a residential lot and a nonexclusive easement on the common areas of the project.
Purchase contract:		A document that lists the price, conditions and terms under which the buyer is willing to purchase a property. (See: purchase offer)
Purchase offer:		A document that lists the price, conditions and terms under which the buyer is willing to purchase the property. Also known as offer to purchase, earnest money agreement, contract of purchase or deposit receipt.
Qualifying ratios:		Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
Quitclaim deed:		A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
Radon:		A radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.
Rate adjustment period:		How often the interest rate on an adjustable rate mortgage will change.
Rate cap:		The limit on the amount an interest rate on an adjustable-rate mortgage (ARM) can increase or decrease during an adjustment period.
Rate guarantee:		The interest rate lock feature that lenders offer to borrowers.
Real estate agent:		An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
REALTOR®:		An active member of a local board of realtors. Local boards are affiliated with the National Association of REALTORS®.
Real estate broker:		A person who has a real estate broker's license, who may not only make real estate transactions for others in exchange for a fee (or other consideration), but also may operate a real estate business and employ sales associates and other brokers.
Real estate brokerage fee:		The amount paid to the real estate firm by the buyer or seller for services rendered.
Real Estate Settlement Procedures Act (RESPA):		A federal law that requires lenders to provide home mortgage borrowers with information about transaction-related costs prior to settlement, as well as information during the life of the loan regarding servicing and escrow accounts. RESPA also prohibits kickbacks and unearned fees in the mortgage loan business.
Reconveyance:		The transferring of a title back to its previous owner.
Recorder:		The public official who keeps records of transactions that affect real property in the area. (Also known as registrar of deeds or county clerk)
Recording:		The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage or an extension of mortgage, thereby making it a part of the public record.
Recording fees:		A fee charged by a county recorder's office for the filing of documents or details of a legal document to make them a matter of public record. Usually requires the witnessing and notarizing of the documents to be recorded.
Refinance:		The repayment of a debt from the proceeds of a new loan using the same property as security.
Rehabilitation mortgage:		A mortgage that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.
Revolving Debt:		Credit that is extended by a creditor under a plan in which (1) the creditor contemplates repeated transactions; (2) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (3) the amount of credit that may be extended to the consumer during the term of the plan is generally made available to the extent that any outstanding balance is repaid.
Rural Housing Service (RHS):		An agency within the Department of Agriculture, which operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.
Second mortgage:		A mortgage that is in a second position behind (or subordinate to) the original first mortgage.
Secured loan:		A loan that is backed by property such as a house, car, jewelry, etc. If the borrower defaults on the loan, the lender has the right to take the property.
Security:		The property that will be pledged as collateral for a loan.
Secondary mortgage market:		The market where lenders and investors buy and sell existing mortgages or mortgage-backed securities, thereby providing funds for additional mortgage lending.
Servicing:		A mortgage banking function following loan closing which includes the receipt of payments, customer service, escrow administration, investor accounting, collections and foreclosures.
Settlement:		Another name for closing.
Single-family residence:		A structure intended to house one family.
Special forbearance:		A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
Step-rate mortgage:		A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
Subdivision:		A housing development that is created by dividing a tract of land into individual lots for sale or lease.
Subordinate:		To place in a rank of lesser importance or to make one claim secondary to another.
Subordination agreement:		An agreement by which an encumbrance is made subject to a junior encumbrance; a lender with a loan in second position agrees to stay in second position on the property, even when the loan in first position has been rewritten or refinanced.
Survey:		A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.
Sweat equity:		Using labor to build or improve a property as part of the down payment.
Tax Service:		Required by the lender to assure that all tax billings are paid on the right tax parcel. FHA and VA do not allow the borrower to pay the tax service fee.
Term:		The period of time during which a loan is repaid.
Title:		The right to, and the ownership of, real property, which is transferred by a deed; evidence of ownership in real estate.
Title insurance:		Insurance, usually paid through a single premium at closing, that insures the lender and homeowner (if the homeowner purchases coverage) against loss because of a claim against the title that was not found in the title search.
Title search:		The process of checking all the records relating to the title to ensure that it doesn't have any liens or claims against it that would keep it from being transferred.
Transfer fee:		Fees a buyer or seller pays a municipality to defray the cost of recording a transfer of ownership.
Truth-in-Lending Act:		A federal law that requires disclosures of the terms and cost of consumer credit . TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit.
Two-step mortgage:		A two-step mortgage is a convertible ARM mortgage that offers a fixed-rate for a set time and adjusts only once-usually at five or seven years. After that the interest rate is adjusted to market conditions at the time.
Underwriting:		The analysis of the risk involved in making a mortgage loan that determines whether the risk is acceptable to the lender. Underwriting involves the evaluation of the property as outlined in the appraisal report, the borrower's ability to repay the loan and the application of credit and other criteria, some of which may be specified by an investor.
Unsecured loan:		A loan that is not secured by any form of collateral.
Uniform Residential Loan Application:		A standard mortgage application your lender will ask you to complete. The form requests your income, assets, liabilities and a description of the property you plan to buy, among other things.
VA Loan:		A loan guaranteed by the Department of Veterans Affairs, formerly known as the Veterans Administration, a federal agency that guarantees loans made to veterans.
Warranties:		Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.
Zoning:		The creation of districts by local governments in which specific types of property uses are authorized (e.g., commercial, industrial, residential, high density, mixed use, etc.).

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