Mortgage Glossary

A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.

The gradual repayment of a mortgage by installments, calculated to pay off the obligation at the end of a fixed period of time.

A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.

The total cost of a mortgage stated as a yearly rate; includes such items as the base interest rate, loan origination fee (points), commitment fees, prepaid interest, and other credit costs that may be paid by the borrower.

A professional opinion or estimate of the market value of a property.

A financial statement that shows assets, liabilities, and net worth as of a specific date. Professional opinion or estimate of the market value of a property

A mortgage that has level monthly payments that will amortize over a stated term and provides for a lump sum payment due at the end of an earlier specified term.

The final lump sum payment that is made at the maturity date of a balloon mortgage.

A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee

The consumer price index is an indicator of the general level of prices. Components include energy, food and beverages, housing, apparel, transportation, medical care, and entertainment. When the consumer price index goes up, it is a sign of an inflationary environment. Consumers have to pay more for the same amount of goods and services. Bond Market Moves Down In Price.

A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

The legal document conveying title to a property.

A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”

The document used in some states instead of a mortgage; title is conveyed to a trustee.

Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

A deposit made by the potential homebuyer to show that he or she is serious about buying the house.

A right of way giving persons other than the owner access to or over a property.

An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

A congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.

Exactly the opposite of Fed tightening. The Federal Reserve feels that the economy is not growing at the desired level and eases credit conditions by lowering interest rates to help stimulate the economy. Bond Market Moves Up In Price.

This term refers to efforts by the Federal Reserve to curb excessive growth in the money supply. This can be accomplished by their raising the discount rate and/or increasing the federal funds rate. Bond Market Moves Down In Price.

A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.

The person to whom an interest in real property is conveyed.

The person conveying an interest in real property.

The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

A mortgage loan, which is usually in a subordinate position, that allows the borrower 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 a property.

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 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 that are associated with the mortgage.

The industrial production index measures the monthly level of the physical output of the manufacturing, mining, and gas and electric utility industries. When industrial production is down, it indicates a slowing of economic growth and, therefore, the Federal Reserve is inclined to allow interest rates to drop to stimulate the economy. Bond Market Moves Up In Price.

An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.

An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as “start rate” or “teaser.”

A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor’s real property as collateral for the judgment’s creditor.

A lien on the property of a debtor resulting from the decree of a court.

A loan that exceeds Fannie Mae’s legislated mortgage amount limits. Also called a nonconforming loan.

A property description, recognized by law,that is sufficient to locate and identify the property without oral testimony.

A person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party

A homeowners’ association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a “second-level” association that handles matters affecting the entire development, while the “first-level” associations handle matters affecting their particular portions of the project.

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners’ association dues, leasehold payments, and subordinate financing payments.

The value of all of a person’s assets, including cash, minus all liabilities.

The non-farm payroll figure is a component of total civilian employment and measures the number of people employed in all activities except agriculture.

The total amount of principal owed on a mortgage before any payments are made.

A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.

A property purchase transaction in which the property seller provides all or part of the financing.

A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.

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.

A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.

The monthly producer price index measures the level of prices for all goods produced and imported for sale in the primary marketplace. Increase in the PPI tend to lead other measures of inflation. Bond Market Moves Down In Price.

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.

A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.

A loan that is backed by collateral.

The property that will be pledged as collateral for a loan.

A drawing or map showing the precise legal boundaries of a property and the location of improvements, easements, rights of way, encroachments, and other physical features.

A type of joint ownership of property that provides rights of survivorship and is available only to a husband and wife.

A type of joint ownership in a property without rights of survivorship.

A legal document evidencing a person’s right to or ownership of a property.

A company that specializes in examining and insuring titles to real estate.

Insurance to protect the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of property.

An examination of the public records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

State or local tax payable when title passes from one owner to another.

A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.

The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower’s creditworthiness and the quality of the property itself.

A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.

An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.

A loan that is guaranteed by the U.S. Department of Veteran Affairs. Also referred to as a “government” mortgage.