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Mortgage and
finance terminology can sometimes be confusing. Here are a few common
terms and their meanings.
A B C D E F G H I J K L M N O P Q R S T U V W
A & D Loan
Acquisition and Development Loans are used in purchasing and developing
raw land with the intent of future development.
Abstract of Title
A written history of ownership showing verification or non-verification
of title.
Acceleration Clause
Requires the balance of a loan to become due immediately. Occurs
when regular payments are not made.
Acquisition Cost
The price to obtain property, including purchase price and all nonrecurring
closing costs, including discount points, FHA application fee, service charge,
credit report, FHA appraisal, escrow, document preparation, title insurance,
termite inspection, reconveyance and recording fees for FHA-insured loans.
Ad Valorem
A Latin phrase used to describe a tax charged in relation to the
value of the property taxed meaning "according to value".
Adjustable Rate Mortgage (ARM)
A loan with an adjusted interest rated determined by a pre-selected index.
Adjustment Period
The period between adjustments of an ARM interest rate.
Back Up
All-inclusive Trust Deed
Overriding trust deed; A financing tool where a lender assumes payments on
an existing mortgage or trust deed and takes from the borrower a trust deed
with a face value in an amount equal to the amount due on the old instrument
and the additional amount of money borrowed.
Amortization
A financial obligation paid in installments; An amortized loan includes
both principal and interest, usually due monthly, resulting in complete payment
of the amount borrowed, with interest, by the end of the loan term.
Annual Percentage Rate (APR)
The cost of credit including interest, loan fees and discount points
stated as an annual percentage.
Appraisal
A licensed appraiser𠏋 estimate of a property𠏋 monetary value
on the open market; Justifies the contract purchase price.
Arrearages
The total delinquent principal, interest, taxes and insurance owed.
Balloon Payment
An installment payment on a loan that is usually a larger payment and
due on a specified date.
Back Up
Bond
Real Estate Bond. An obligation issued on security of a mortgage or
trust deed.
Cap
A limit on interest rate fluctuation on an adjustable rate.
Certificate of Reasonable Value
Property appraisal necessary for a VA-guaranteed loan.
Certificate of Redemption
Certificate issued by the county tax collector verifying payment of all
past due obligations.
Chattel Mortgage
Using personal property to guarantee a promissory note.
Closing
The ending of a real estate transaction resulting in title and fund conveyance.
Back Up
Closing Costs
Expenses resulting from the closing of a real estate mortgage loan.
Closing Statement
Also known as a HUD-1 statement. Provides a listing of all funds payable
at closing.
Cloud on Title
Encumbrance which affects the title marketability.
Compound Interest
Interest payable on the principal loan amount and accrued interest.
Conventional Loan
A secured loan that is not insured by FHA and VA loans.
Back Up
Cost Approach
An Appraisal method to determine market value calculated by adding value
less depreciation to the replacement value.
Deed
A legal document conveying title to real property.
Debt to Income Ratio
Ratio comparing total monthly obligations, including home loan payments,
to total monthly gross income.
Discount Points
Fee charged by the lender to decrease the interest rate on a loan.
Back Up
Due on Sale Clause
Mortgage provision stating that the entire note balance is due if the
borrower sells the property.
Easement
The right and use to a specific piece of land owned by someone else.
Encroachment
A property improvement that unlawfully intrudes on another𠏋
property.
Equity
Calculated by subtracting the balance owed on a home from the market
value.
Back Up
Escrow
The holdings of documents or funds by a neutral third party on the behalf
of the borrower pending the closing of a loan or payment of real estate taxes,
insurance and any such agreements of a contract.
Escrow Impounds
Money paid at loan settlement and with monthly loan payments for the
purpose of paying future real estate taxes and homeowners insurance.
Escrow Waiver
The borrower𠏋 request to not pay taxes and insurance through
impounds. Equity positions play a role in the decision.
Fair Credit Reporting Act
Law protecting consumers that establishes procedures to correct errors
on credit reports and gives consumers specific rights in dealing with credit
reporting agencies.
Back Up
Fannie Mae (FNMA)
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