Mortgage Terminology
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This is a mortgage where the interest rate is adjusted periodically based on a pre-selected index.
Amortization
The loan payment broken down by periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
Annual Percentage
Rate (APR)
APR is a measurement of the full cost of a mortgage including interest and mortgage fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of mortgages.
Appraisal
An estimate of the property
value. This is done by a licensed professional called an
"appraiser”. TOP of Page 
This is a mortgage that is amortized for a longer period of time than the term. At the end of the term (I. e. 5 years), the remaining outstanding balance on the mortgage is due. This final payment is known as a balloon payment.
Blanket Mortgage
A mortgage covering at least two
pieces of real estate for the same mortgage.
Borrower
Person who applies for and receives a mortgage with the intention of repaying the mortgage in full.
Broker
A professional in the business of assisting in the funding or negotiating of mortgages for a client but who does not loan the money themselves. Brokers usually charge a fee or receive commission for their services.
Buy-down
When the lender subsidizes the
mortgage by lowering the interest rate during the first few years of the
loan. While payments are initially low, they will increase when the
subsidy expires.TOP of Page
The amount of cash derived over a certain period of time from an income-producing property, such as a rental. The cash flow should be large enough to pay the expenses of the property (mortgage payment, insurance, utilities, etc.).
The meeting or settlement between
the buyer, seller and lender or their real estate agents where the
property and funds change hands. Closing costs usually include an
origination fee, discount points, appraisal fee, title search and
insurance, plat drawing, taxes, mortgage document recording fees required
by the county and other costs assessed at the closing. The cost of
closing a mortgage average between three to six percent of the mortgage
amount. TOP of Page
Construction Loans
A short term interim mortgage to pay for the construction of a home. These mortgages are usually designed to provide periodic disbursements to the builder as he progresses.
Contract For
Deed
A contract between a buyer and seller of real estate property to convey title only after certain conditions have been met.
Conventional
Mortgage
A mortgage not insured by FHA or guaranteed by the VA.
Credit Bureau
Report
A report documenting the credit
history and current status of a borrower’s standing with
creditors. TOP of Page
This ratio, expressed as a percentage, results when a borrower’s monthly payments on long-term debts are divided by their gross monthly income.
Default
Failure to meet legal obligations or monthly payments in a contract or mortgage.
Delinquency
Failure to make mortgage payments on time or as scheduled. This can lead to foreclosure of the mortgaged property.
Down
Payment
Money paid to make up the
difference between the purchase price and the mortgage amount of the loan.
TOP of Page
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
Equity
The difference between the fair market value and current indebtedness, also referred to as the owner’s interest. The value the owner has in real estate over and above the obligation against the property.
Escrow
An account held by the lender
into which the home buyer pays money for tax or insurance payments.
Earnest deposits are also held pending mortgage loan closing.
TOP of Page
The mortgage interest rate will remain the same on these types of mortgages throughout the term of the mortgage.
Foreclosure
A legal process by which the
lender or the seller forces a sale of a mortgaged property because the
borrower has not met the terms of the note.
TOP of Page
A promise by one party to pay a
debt if the original party fails to pay according to the contract or note.
TOP of Page
Insurance in which the insurance
company protects the insured from specified losses, such as windstorm or
fire. TOP of Page
Portion of a borrower’s monthly payment held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, etc. that becomes due.
Interest
Caps
Consumer safeguards which limit the amount of interest rate on an adjustable rate mortgage which may change per year over the life of the loan.
A larger mortgage loan (more than
$240,000. 00 as of January 1, 1999) than the limits set by FNMA and the
FHLMC. Because jumbo loans cannot be funded by these two agencies,
they usually are set at a slightly higher rate of
interest. TOP of Page
A legal claim on real estate for a debt or obligation. This can by paid in monthly payments until satisfied.
Loan-To-Value
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Lock
Lender’s guarantee that the
mortgage rate quoted will be good for a specific number of days.
TOP of Page
The highest price that a buyer would pay and the lowest price a seller would accept on a property.
Mortgage
Insurance
Money paid to insure the mortgage loan when the down payment is less than 20% or the mortgage amount is over 80% of the appraised value.
Mortgagee
The
lender TOP of Page
Fee charged by a lender or
mortgage broker to prepare the loan package & documents and review
credit. This fee is a percentage of the mortgage loan amount.
TOP of Page
This is prepaid interest at closing by the lender. Each point represents one percent of the mortgage loan amount. This is also referred to as Loan Discount points.
Prepayment
Penalty
Amount charged for an early prepayment of the mortgage loan.
Principal
The current amount of the
mortgage loan, not considering
interest. TOP of Page
The cancellation period of a mortgage loan when refinancing. This law gives the homeowner three days to cancel the loan if the transaction uses equity in the home as security.
Recording
Fees
Amounts paid to the lender for recording a mortgage with the county authorities, making it part of the public record.
Refinance
Obtaining a new mortgage loan on real estate that a borrower already owns.
RESPA (Real Estate
Settlement Procedures Act)
A federal law that allows
consumers to review information of estimated settlement costs at the
application period and before the mortgage loan closing.
TOP of Page
Document prepared by the mortgagee when a mortgage loan balance is paid in full.
Second
Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first mortgage.
Simple
Interest
Interest which is computed only
on the principle balance.TOP of Page
Document the shows evidence of ownership of property.
Title Insurance
Policy issued by a title company that insures a home buyer and/or mortgagee against errors in the title search.
Truth-In-Lending
Statement
A disclosure required by federal
law that shows the Annual Percentage Rate to buyers after they apply for
the mortgage loan. TOP of Page