Acceleration Clause: 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.

 

Acceptance: The date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.

 

Adjustable Rate Mortgage: A mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.

 

Amortization Schedule: A timetable for payment of a mortgage by installments, calculated to pay off the obligation at the end of a fixed period of time.

 

Amortized Loan: A loan, which is paid in equal installments during its term.

 

A.P.R. (Annual Percentage Rate): A term used in the Truth in Lending Act. It represents the relationship of the total finance charge (interest, discount points, origination fees, loan broker, commission, etc.) to the amount of the loan.

 

Appraisal: An estimate of real estate value, usually issued to standards of FHA, VA, and FHMA. Recent comparable sales in the neighborhood are the most important factor in determining value.

Appreciation: An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

 

Assessed Value: The valuation placed upon property by a public tax assessor that is used to compute property taxes.

 

Assumable Mortgage: Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.

 

Bill of Sale: Document used to transfer title (ownership) of PERSONAL Property.

Cap: a provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease.

 

Cash Reserve: A requirement of some Lenders that buyers have sufficient cash remaining after closing equivalent to two months mortgage payments.

 

Clear Title: A title that is free of liens or legal questions as to ownership of property.

Closing: A meeting at which a sale of a property is finalized by delivery of a deed from the seller to the buyer and the buyer signing the mortgage documents and paying closing costs.

 

Closing Statement (HUD1): A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.

 

Cloud on Title: Any condition that affects the clear title to real property.

 

Comparable Sales: Sales that have similar characteristics as the subject property and are used for analysis in the appraisal process.

 

Condominium: A form of property ownership in which the homeowner holds title to an individual dwelling unit, an undivided in common areas of a multi-unit project, and sometimes the exclusive use of a certain limited common areas.

 

Contingency: A condition that must be met before a contract is legally binding.

 

Contract: An agreement to do or not to do a certain thing.

 

Consideration: Anything of value to induce another to enter into a contract, i.e., money, services, a promise.

 

Conventional Mortgage: Any mortgage that is not insured or guaranteed by the federal government.

 

Convertible Arm: An Adjustable-rate mortgage that can be converted to a fix-rate mortgage under certain specified conditions.

 

Cooperative: A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

 

Covenant: A clause in a mortgage that obligates or restricts the borrower and which, if violated can result in foreclosure.

 

Credit Report: A report of an individual’s credit history prepared by a credit bureau or consumer reporting agency and used by a lender in determining a loan applicant’s credit-worthiness.

 

Credit Score: A score based statistical method used to predict the relative likelihood that you will repay a credit obligation, such as a mortgage loan. The most well-known credit score in the mortgage industry has been developed by Fair, Isaacs and Company and is also referred to as FICO score.

 

Deed: Written instrument, which when properly executed and delivered, conveys title to real property.

 

Deed of trust: The document used in some states (Colorado) instead of a mortgage which gives the lender a security interest in the property. Title is conveyed to a trustee by the borrower (who owns equitable title). When the debt is paid in full, title is conveyed to the borrower.

default: The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage.

 

Delinquency: A loan in which a payment is overdue but not yet in default.

 

Depreciation: A decline in the value of a property; the opposite of appreciation.

 

Discount Points: A loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment. One point = 1% of the loan amount.

 

Down Payment: The amount that a buyer must pay in cash at closing that is not financed with a mortgage.

 

Due-on-Sale Clause: A provision in a mortgage allowing the lender to demand repayment in full if the borrower sells the property securing the mortgage.

 

Earnest Money: A deposit paid by the buyer to show that they are serious about purchasing the home.

 

Easement: The right to use the land of another.

 

Encumbrance: Anything that burdens (limits) the fee title to property, such as a lien, easement, or restriction of any kind.

 

Equity: The value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.

 

Escrow Payment: That portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due.

 

Fannie Mae: Nickname for Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.

 

Federal Credit Reporting Act: 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 report.

 

Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money to plan or construct housing.

 

FHA Insured Mortgage: A mortgage under which the Federal Housing Administration insures loans made, according to its regulations

 

Fixed Rate Mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

 

Flood insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

 

Forbearance: The lender’s postponement of foreclosure to give the borrower time to catch up on overdue payments.

 

Foreclosure: Procedure whereby property is pledged as security for a debt is sold to pay the debt in the event of default.

 

Freddie Mac: Nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.

 

Graduated Payment Mortgage: Any loan where the borrower pays a portion of the interest due each month during the first few years of the loan. The payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life.

 

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

 

Homeowners Insurance: An insurance policy that combines personal liability coverage and hazard coverage for a dwelling and its contents.

 

Homeowners Warranty: A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by a builder or seller as a condition of sale.

 

Interest: The fee charged for borrowing money.

 

Investor: The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.

 

Joint Tenancy: Is a way for two or more persons to hold title to a property in equal undivided shares. When one owner dies, his or her share of the property is not passed on according to their will, but automatically become property of surviving joint tenant(s). The last surviving owner takes full ownership of the property and can dispose of it as he or she wishes.

 

Late Charge: The penalty a borrower must pay when a payment is made after the due date.

 

Lease Purchase Agreement: Buyer makes a deposit for future purchases of a property with the right to lease the property for the interim.

 

Lien: A legal claim against a property that must be paid off when the property is sold.

 

Loan to Value Ratio (LTV): The ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.

 

Lock-in: A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

 

Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.

 

Mortgage Banker: A company that originates mortgages exclusively for the resale in the secondary market.

 

Mortgage Broker: An individual or company that for a fee acts as an intermediary between borrowers and lenders.

 

Mortgage Insurance Premium (MIP): The amount paid by a mortgagor for mortgage insurance. This insurance protects the investor from possible loss in the event of a borrower’s default on a loan.

 

Mortgage Margin: The set percentage the lender adds to the index value to determine the interest rate of an ARM.

 

Mortgagee: The lender in a mortgage agreement.

 

Mortgagor: The borrower of money or the giver of the mortgage document.

 

Negative Amortization: A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire amount of principal and interest due. The amount of the shortfall is added to the unpaid principal balance which results in negative amortization.

 

Note: A written promise to pay a certain amount of money.

 

Notice of Default: A formal written notice to a borrower that a default has occurred and legal action may be taken.

 

Origination Fee: The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

 

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

 

PITI: Stands for principal, interest, taxes, and insurance. The components of a monthly payment.

 

Planned Unit Developments (PUDs): A planned unit development is a project or subdivision that consists of a common property that is owned and maintained by an owner’s association for the benefit and use of the individual PUD unit owners.

 

Points: A one-time charge by the lender to increase the yield of the loan; a point is one percent of the amount of the mortgage.

 

Prepayment Penalty: A fee that may be charged to a borrower who pays off a loan before it is due.

prequalification: The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.

 

Principal: The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of the mortgage.

 

Private Mortgage Insurance (PMI): See Mortgage Insurance Premium.

 

Promissory Note: A written contract containing a promise to pay a definite amount of money at a definite future time.

 

Purchase and Sales Agreement: A written contract signed by the buyer and seller stating the terms and conditions under which the property is sold.

 

Radon: An invisible, odorless gas found in some homes that in sufficient concentrations may cause health problems. It is encourage to test for radon in Colorado.

 

Real Estate Settlement Procedure Act: A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

 

Realtor: A member of local and state real estate boards, which are affiliated with the National Association of Realtors (NAR).

 

Rent With Option: A contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.

 

Second Mortgage/Second Deed of Trust/Junior Mortgage or Junior Lien: An additional loan imposed on a property with a first mortgage. Generally, a higher interest rate and shorter term than a “first” mortgage.

 

Secondary Mortgage Market: The buying and selling of existing mortgages.

 

Severalty Ownership: Ownership by one person only. Sole ownership.

 

Survey: The process by which a parcel of land is measured and its area ascertained.

 

Tenancy In Common: Ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.)

 

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

 

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

 

Title Insurance: An insurance policy which protects the insured (purchaser or lender against loss arising from defects in the title).

 

Truth-in-Lending Act: A Federal Law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including APR and other charges.