Glossary of Terms

Understanding that many mortgage terms are unfamiliar to the general population, we have compiled a helpful glossary for clarification. If you require any additional information or help with mortgage definitions not covered here, please contact us for assistance.

Common loan application form, also known as a Universal Residential Loan Application.

A written or verbal statement from the seller of a home accepting a purchase offer made by a buyer.

Land measurement equal to 43,560 square feet.  A common metric used to measure the size of land in a property purchase.

Mortgage type whose rates fluctuate based on market indexes. Rates may increase or decrease throughout the loan cycle. Monthly payments cannot exceed the preset loan cap.

The process of repaying a loan debt, via monthly payments, according to an amortization schedule or calculator.

The cost of a mortgage loan expressed in yearly percentage rate. Factors in interest rate, fees, insurance expenses, and other expected costs.  The Truth in Lending Act requires all mortgage lenders to disclose their annual percent rate to the borrower.

Increase in the monetary value of a home or property, often achieved through renovations or market improvements.

Used to calculate annual real estate and property taxes, the assessed value is determined by government assessors.

A mortgage type allowing transfer from seller to buyer with the interest rate remaining intact.

Fees paid to the attorney conducting the closing of an application.

The person(s) requesting a loan, who is/are responsible for all fees and payments throughout the life of said loan.

A sum of money contributed by a lender or seller to lower a loan’s initial interest rate, as to incentivize a prospective buyer.

A real estate agent working on behalf of a homebuyer.

The maximum amount a borrower is expected to pay monthly on a loan.

Any profit which is earned through the sale of assets, such as homes or properties.

Sum of money paid against profits secured through the sale of assets such as homes and properties.

When a homeowner refinances their existing mortgage, a second mortgage is taken out to allow a borrower to borrow cash against home equity.

The formal sale of a property and/or home in which the seller and buyer sign documents relating to the exchange and payment of all associated fees.

An attorney or mortgage company official who oversees the closing process and verifies that all paperwork has been properly completed.

Transaction-related fees due from the buyer and seller at closing, including but not limited to origination, documentation, and title search costs. Also called third-party fees.

Any additional borrower(s) whose name(s) appear on loan documents and whose income and credit history are used to qualify for the loan. Under this arrangement, all parties involved have an obligation to repay the loan. For mortgages, the names of applicable co-borrowers also appear on the property's title.

The sale prices of similar homes in an area, used when calculating a particular home’s appraised value.

Any conventional loan which adheres to guidelines set forth by a government-sponsored enterprise (GSE) such as Fannie Mae or Freddie Mac.

A specialized short-term loan granted for the construction of a new home, which is eventually replaced by a long-term standard home loan program.

Common clauses in real estate agreements which provide the buyer or seller conditions in which they can terminate the agreement if a condition is not met. 

Any mortgage (typically fixed rate over 30 years) which is not backed by a government sponsored agency (such as a VA or FHA loan). 

Money given to a borrow from a lender based upon their credit history. 

The actual date when all mortgage and property documents are to be finalized and signed. 

A total amount of money a borrower owes to creditors such as credit card companies, student loan companies, car loans, etc. 

A public document that establishes official ownership of a property. 

Also called a recon or reconveyance deed, this document is awarded from a lender to a borrower once full payback of a mortgage loan has been completed. It then becomes part of the public record, as with a standard deed.

A document which may be held by a third party, used in place of a mortgage in certain states. 

When a borrower is unable to continue making regular loan payments successfully.

The monetary loss of a home or property’s value, sometimes caused by negative economic conditions or direct property damage.

Money paid up front in order to reduce interest rate and monthly payment amounts. In terms of interest, each point is equal to one percent.

A sum presented by a prospective homebuyer to a home seller as part of a purchase offer.  Often used as a symbol of good faith to display serious interest in a transaction.

Measurable value of a property or home, minus the amount that is owed on a loan or loans secured by the property.

A separate account, often maintained by a lender, from which non-loan expenses are paid (such as property taxes and insurance). Also called impound account.

The price which a house or property will get based on the current housing market.

Government-sponsored enterprise (GSE) which, alongside Freddie Mac, sets loan limits and guidelines annually to make certain that a majority of Americans can finance homes. Commonly called a secondary mortgage market, this corporation lends to mortgage companies, who in turn lend to borrowers.

The Federal Housing Administration, a U.S. government agency that insures types of loans made by banks and private lenders.

A type of loan offered by an FHA-approved lender, designed to aid first time home buyers who are otherwise unable to gain approval for a conventional home loan, due to down payment or credit score limitations.

A borrower who has never taken out a home loan mortgage in the past, and may qualify for various assistance programs. 

Any conventional mortgage with an interest rate that remains set over the entire life of the loan, resulting in consistent monthly payment amounts.

If a property falls within a flood plain, many lenders will require standalone flood insurance which must be purchased before a home loan application is approved.

When a borrower does not meet the payment terms of their loan, the lender will take repossession of the property or home.

A major government-sponsored enterprise similar to Fannie Mae, responsible for helping maintain stability in the mortgage market.

Itemized list of expected loan costs and fees, provided to borrowers within three days of submitting a loan application. Replaced by similar document known as a loan estimate as of October 3, 2015.

Often required before a home loan can be approved, to ensure that the home is in the condition the seller says it’s in, a detailed examination of a home is performed by a licensed inspector.

Home buyers have a right to place a clause in their offer letters that they have certain rights depending on what is found within a home inspection.  These rights include the ability to request certain repairs, a reduction in price to cover repairs, or the right to cancel the offer. 

Historical data detailing the prices of residential homes in various regions.

A group which establishes certain conditions of ownership, such as participating in shared dues for community landscaping, or maintenance of common areas in a neighborhood such as a pool or park.

Also referred to as hazard insurance, many lenders require borrowers to carry this type of insurance.  This type of insurance coverages will protect the borrower and lender as it relates to property damage. 

A specific type of loan offered to Department of Housing and Urban Development (HUD) homebuyers, geared toward improving properties and creating opportunities for those unable to qualify for funds to fix up a home that they want to purchase.  These funds are then assumed into a mortgage.

The base interest amount for an adjustable rate mortgage. Also known as an introductory interest rate.

The percentage of a loan amount which is charged to the borrower, usually expressed as an annual percentage.

Property purchased with the aim of earning profit through renting or reselling, rather than for primary residential purposes. 

Any form of property ownership shared equally between two parties, as with a married couple.

Property ownership which is shared by two or more persons.

A loan wherein the amount exceeds conventional loan limits.

Costs incurred by lenders during the loan and application process. Also called processing fees.

Also called a mortgage lender, this is the actual bank or financial institution which awards loan money to a borrower.

A legal and formal representation of money owed for any major asset, including property.

Sum of money extended to a borrower from a creditor for a specific period of time and with a predetermined interest rate.

The time period in which a loan must be repaid. As an example, a 30-year loan reaches maturity 30 years from when it is first granted.

Legal documentation establishing a property or home as security for a loan.

Commonly referred to a mortgage broker, a third-party entity acting between a lender and homebuyer who handles paperwork and seeks out ideal pricing for the borrower to facilitate the loan process. Brokers do not provide loans directly.

Tools which help buyers determine affordable mortgages based on various personal financial details.

Insurance requested by lenders for protection in the event of a default. This type of insurance is generally required when one’s down payment does not meet a specific dollar percentage as determined by the lender.  Also, referred to as Private Mortgage Insurance in some instances. 

A 1.5% required fee which is added into all FHA loans, to be paid at closing.

The company which actually lends, or originates a mortgage.

A sales incentive which eliminates all upfront closing costs. This type of mortgage typically comes with a higher interest rate, often resulting in higher overall costs across the life of the loan.

A form sent to buyers who fail to provide all necessary information or documentation on a loan application.

A formal proposal to purchase a home for a specified dollar amount, provided from buyer to seller.

A small percentage charged by a lender for processing a home loan and typically included in closing costs.

The maximum monthly payment amount expected from a borrower as part of an adjustable rate mortgage.

A legal document granting one person the right to act on behalf of another.

Known also as prepaid fees, these can include attorney fees as well as those associated with origination and underwriting. Often paid out-of-pocket at closing.

A process allowing homebuyers to determine how much he or she would likely be approved of for a home loan, allowing greater flexibility while house hunting.

A conforming loan (according to limits set forth by Freddie Mac or Fannie Mae), usually granted to borrowers whose credit is in good standing.

Amount of money borrowed as part of a home loan.

The amount owed on a mortgage by a borrower.  Also referred to as the remaining balance. 

Usually paid as part of closing costs, and charged by the lender, these are any fees associated with the loan creation.

A home or property’s physical street address.

A process of determining fair market value as performed by a licensed professional. Factors include a home’s condition as well as the value of comparable properties in the region. 

Local taxes charged annually based on the value of a property. Also known as real estate tax.

A legal document releasing one party from responsibility in a property title while granting it to another. Also spelled as “quit claim deeds,” these are commonplace when there is shared interest in a property among married couples or families.

Sometimes called rate commitment option (RCO), this is a short-term agreement between a borrower and lender in which an interest rate is locked in while the borrower negotiates the purchase of their property.  

Mutual funds or securities which invest into properties or real estate.

A 1974 act requiring all previously-hidden fees and costs to be fully disclosed to buyers and sellers.

The process of renegotiating a mortgage to obtain a lower interest rate and reduced monthly payments. Borrowers can refinance with either their original mortgage lender or an entirely different company.  

The time left in the life of a loan before it reaches maturity (is fully paid off).

The lifespan and expected intervals for repayment of a loan.

Designed for homeowners over the age of 62, this type of mortgage provides access to home equity via cash payments for use on home repairs or other expenses. 

Formal, written agreement between a buyer and seller which details crucial information such as street address, property condition, closing date, inspection details, purchase price, etc.

This type of mortgage allows borrowers to borrow against their home equity to obtain cash for major expenses.

Any real estate agent working on behalf of a seller.

A lender allowing a borrower to sell a home for less than the loan’s principal balance in order to facilitate a quick transaction and avoid potential foreclosure.

A market in which investors purchase homes in hopes of completing quick re-sales, hoping for profits in the event of a rising property value.

Any high-risk loan coupled with non-conforming limits and higher interest rates. These types of loans often allow homebuyers with poor credit histories to qualify for mortgages.

Lenders often require borrowers to purchase a property survey as part of the application process.  This is a formal process in which property lines and other factors that might impact a property’s value are established. 

An ownership situation in which two or more persons share ownership in various percentages.

The official document specifying property ownership in the real estate industry.

An organization which generally takes responsibility for property title-related tasks, such as search and insurance needs.

Insurance which is taken out on a property title during the home buying process in order to protect the lender and borrower, should a title dispute occur.

Research performed on a title to determine if any outstanding liens exist against the property in question. Usually handled by a title company.

A required document from lenders to borrowers disclosing interest rate, principal, and the total cost of a loan when it reaches maturity.

A service or company which evaluates a borrower’s credit and income as it relates to how risky of a borrower they might be in the course of approving a loan.

Home loans, frequently offered at discounted rates, which are specifically designated for veterans of the military and their spouses.

A document indicating that no existing disputes or liens exist against a property and that the property deed holder is authorized to sell it to another.

Still have questions?  Let one of our mortgage professionals guide you with ease through the homebuying proccess.