The right of the mortgagee (lender) to demand the
immediate repayment of the mortgage loan balance upon
the default of the mortgagor (borrower), or by using the
right vested in the Due-on-Sale Clause.
Fixed Rate Mortgage
A mortgage where the interest rate remains the same
through the life of the loan.
The agreement between buyer and seller where the buyer
takes over the payments on an existing mortgage from the
seller. Assuming a loan can usually save the buyer money
since this is an existing mortgage debt, unlike a new
mortgage where closing cost and new, probably higher,
market-rate interest charges will apply.
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.
A second trust that is collateralized by the borrower's
present home allowing the proceeds to be used to close
on a new house before the present home is sold. Also
known as "swing loan."
When the lender and/or the home builder subsidized 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.
A mortgage option which allows the borrower to pay only
the interest portion of their payment for some period of
The ratio of a burrower's monthly payment obligation on
long-term debts divided by their gross monthly income.
A written document which shows evidence of a lien on a
property by a lender as security that the loan will be
An abbreviation for total payment meaning principal,
interest, taxes, and insurance.
The cancellation or annulment of a mortgage transaction
by the borrower. Borrowers on a refinance loan receive a
Right to Recission lasting 3 business days.
When a mortgage is written with a monthly payment that
is less than required to satisfy the note rate, the
unpaid interest is deferred by adding it to the loan
A letter drafted by a C.P.A., or Certified Public
Accountant, which can be used as employment and income
verification, typically for self-employed borrowers.
Usually these letters state that the C.P.A. has been
doing taxes for a borrower, and that they have been
employed for 'X' amount of years for 'Y' company, etc...
An opinion of a property's fair market value, based on
an appraiser's knowledge, experience, and analysis of
A document in which the borrower promises to pay a
stated amount on a specific date. The note normally
states the name of the lender, the terms of payment and
any interest rate.
An estimate of the value of property, made by a
qualified professional called an "appraiser".
This is the repayment of a loan through a schedule of
periodic and timely payments.
A professional estimate of value. This is based on most
recent sold comparable properties. It is necessary for
the Mortgage Lender to determine the amount of money it
will loan. This is performed by a qualified professional
Annual percentage rate (A. P. R.)
Is the interest rate reflecting the cost of a mortgage
as a yearly rate? This measurement of rates is likely to
be a little higher than the stated mortgage note rate or
advertised rate on the mortgage. It takes into account
points and other mortgage related origination costs. You
can find the A.P.R. on the mortgage disclosure document.
Cost associated with applying and closing for a
mortgage, these are the fees on the Good Faith Estimate
A written authorization from the borrower in favor of
the lender to gather the necessary information about
A loan with many different possible disqualifying
characteristics. These may include larger loan amounts,
property type (such as number of units or zoning), or
credit problems, etc..
Consumer safeguards put in place to limit the amount the
interest rate on an adjustable rate mortgage may change
per adjustment period. It is in effect for the life on
Fully Indexed Rate (FIR)
Especially important in ARM's, once the loan has reached
the end of the fixed rate period it switches to an
adjustable loan. Your interest rate will be calculated
either annually or semi-annually by adding the index
your loan is tied to (MTA, LIBOR, etc.) and your margin.
The margin is specific to each specific loan. For
A 6.00% short-term fixed ARM is ending it's fixed
period. The loan is tied to the LIBOR index and has a
margin of 5.50. If the LIBOR index is at 3.22, your
Fully Indexed Rate will be 8.72% at the end of the fixed
Due On Sale Clause
a clause in a mortgage contract providing that if the
borrower sells or transfers any interest in the
property, the lender has the right to accelerate payment
and demand the entire unpaid principal balance.
The meeting between all parties to the loan or their
agents, where the property and mortgage funds change
A geographic region whose boundaries are defined by the
census bureau based on the number of people who live
within the area. Used when determining neighborhood
characteristics on appraisals.
Consumer safeguards limiting the amount monthly payments
on an adjustable rate mortgage may change during the
life on the mortgage.
Adjustable Rate Mortgage (ARM)
A mortgage that is tied to an index that will adjust
based on changes in the economy. ARMs commonly come in
2, 3, 5, and 7 year terms. The number of years your ARM
is will be the number of years it will be fixed for.
These loans are still amortized for the full 30 years.
The difference between what is owed on the property, and
what the property could be sold for.
A mortgage which covers two pieces of real estate under
Interest accumulated on a loan since the last interest
payment was made. The interest portion of a mortgage
payment is used for the accrued interest in the prior
month. For example your February 1st payment will pay
for interest accrued in January.
The number of percentage points a lender adds to the
index rate to calculate the ARM interest rate at each
The value of real property as determined by a township,
city, or county assessor. This figure is used for
proprty tax purposes.
Any mortgage that has amortized payments due for a
specified term but has a lump sum payment due at an
earlier stated term. For example a mortgage with
payments based on a 30 year term but the loan is due in
20 years. This would mean that the remaining balance on
the loan would be due in the 20th year.
A discount point is a percentage of the total loan
amount that is paid for a lower interest rate. Example 1
point would be 1% of the loan amount or $1000 dollars on
a $100,000 loan.
Cloud on Title
A claim on the title of a property that, if true, will
prevent a buyer from getting a clear title.
43,560 Feet = 4,840 square yards.
One who applies for and receives a loan in the form of a
mortgage with the intention of repaying the loan in
Biweekly Payment Mortgage
A plan to reduce the debt every two weeks (instead of
the standard monthly payment schedule). The 26 (or
possibly 27) biweekly payments are each equal to
one-half of the monthly payment required if the loan
were a standard 30-year fixed-rate mortgage. The result
for the borrower is a substantial savings in interest.
Closing Costs -
Closing cost are the expenses incurred in association
with the mortgage application. These include the lender
fees, title charges, recording fees, and any prepaid
The process of evaluating a loan application to
determine the risk involved for the lender. Underwriting
involves an analysis of the borrower's creditworthiness,
their capacity to repay the loan, and the quality of the
A written agreement between the lender and borrower for
a specified period of time in which the lender will hold
a specific interest rate, origination and/or discount
A letter or affidavit that indicates that part of a
borrower's down payment is supplied by relatives or
friends in the form of a gift and that the gift does not
have to be repaid
Loan to Value
The percentage ratio that is determined by dividing the
loan amount by the value of the property. This
percentage is a large factor in determining interest
The common terminology used when speaking of Loan to
An agent is a person authorized to represent his/her
principle in business dealings with other parties.
a mortgage underwritten within the risk assessment
guidelines promulgated by Fannie Mae and Freddie Mac,
thereby eligible to be sold to the two secondary market
Good Faith Estimate (GFE)
An estimate of settlement charges paid by the borrower
at closing. The Real Estate Settlement Procedures Act (RESPA)
requires a Good Faith Estimate of settlement charges be
provided to the borrower.
The right to take and hold or sell the property of a
debtor as security or payment for a debt or duty
This is usually divided into two portions: Owner's
Insurance and Lender's Insurance. Owner's Insurance
covers the purchase price (or refinance value) of the
home while the Lender's Insurance covers the loan
amount. While the Owner's Insurance is optionable
Lender's Insurance is not an option.
The date that the interest rate changes on an
adjustable-rate 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.
The period elapsing between adjustment dates for an
adjustable-rate mortgage (ARM).
Deed of Trust
A recorded security instrument that is used instead of a
mortgage in the states of Alaska, Arizona, California,
Colorado, Georgia, Idaho, Illinois, Mississippi,
Missouri, Montana, North Carolina, Texas, Virginia and
West Virginia. A DOT differs from a mortgage in that
there is a third party, known as the trustee who holds
the title to the property in trust for the lender,
otherwise known as the beneficiary. By having the
property in trust, the process of foreclosure is
somewhat more expedient should the borrower, or trustor,
default on the loan.