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11th District Cost of Funds

A monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts. The 11th district covers Arizona, California and Nevada. The index is published on the last day of the month and reflects the cost of funds for the prior month.

Acceleration Clause

A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Acceptance

An offeree's consent to enter into a contract and be bound by the terms of the offer.

Acquisition cost -
Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.

Additional Principal Payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjustable-Rate Mortgage (ARM)

A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index. Also called a variable rate mortgage.

Adjusted Basis

The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjusted Book Basis -
The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.

Adjustment Date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Interval -
For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Adjustment Period

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Administrator

A person appointed by a probate court to administer the estate of a person who died intestate.

Affidavits

As part of the closing process, you're likely to sign numerous affidavits. You may be required, for example, to sign an affidavit of occupancy. It states that you will use the property as a principal residence. Or, you and the seller may have to sign an affidavit stating all of the improvements to the property required in the sales contract were completed before closing.

Your lender can provide additional information regarding any of these documents you will sign.

Affordability Analysis

A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

Amenity

A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization

The gradual repayment of a mortgage loan by installments by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

Amortization Schedule

A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortization Term

The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amortize

To repay a mortgage with regular payments that cover both principal and interest.

Annual Mortgagor Statement

A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR)

The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

Annuity

An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application

A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.

Also see "Loan Application" entry

Application Fee

The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

Appraisal

A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser

A person qualified by education, training, and experience to estimate the value of real property and personal property.

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 on property by a public tax assessor for purposes of taxation.

Assessment

The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessment Rolls

The public record of taxable property.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment

The transfer of a mortgage from one person to another.

Assumable Mortgage

A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

A provision in an assumable mortgage allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon the sale or transfer of the property.

Assumption

The transfer of the seller's existing mortgage to the buyer.

See also "Assumable Mortgage" entry

Assumption Clause

A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee

The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Attorney-in-fact

One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Automated Underwriting

After you complete your loan application with a lender, it is sent to "underwriting" for review. In short, underwriting is the process used to analyze how you have managed credit obligations in the past, whether you have the ability to repay the mortgage loan you are applying for (i.e., your income and assets), and whether the price you are willing to pay for the home is supported by the price of the property.

Balloon (Payment) Mortgage

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Balloon Payment
The final lump sum that is paid at the end of the balloon mortgage.

Bankruptcy
A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for "A" paper loans until after two years after declaration and a re-establishment of credit.

Best Faith Estimate
An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing.

Bill of Sale
A written document that transfers a title to personal property.

Biweekly Mortgage
Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.

Blanket Mortgage
A mortgage secured by the pledging of more than one property or collateral.

Book Value
Acquisition costs less any accrued depreciation.

Bridge Loan
An equity loan secured to solve short-term financing problem.

Broker

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.

Buydown
Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In order to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. After the discount period, the payment is calculated as the note rate.

Buydown

When the lender and/or the home builder subsidizes 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.

Callable Debt
A debt security in where the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date.

Caps (Interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (Payment)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Carryback Loan
A loan in which a seller agrees to finance a buyer in order to complete a property sale.

Certificate of Eligibility
A veteran's evidence of entitlement for a VA-guaranteed loan.

Certificate of Reasonable Value (CRV)
An appraisal that has been performed on a property that is being paid for a VA loan. After the property has been appraised, the Veterans Administration issues a CRV.

Clear Title
A title that is free of liens or any legal question as to the ownership of the property.

Closing

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.

Closing Costs

Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the mortgage amount.

Cloud
An outstanding claim or encumbrance, that, if valid, would affect or impair the owner's property title.

Collateral
Property, real or personal, pledged as a security to back up a promise. In a home loan, the property is considered collateral that can be revoked if loan is not repaid according to the terms of the mortgage or deed of trust.

Commitment

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Conforming Loan -
A mortgage loan for up to $322,700 in the continental United States (Alaska and Hawaii limits are higher).

Construction Loan

A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

Conventional Loan

A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FmHA).

Conversion
The right of a borrower to convert an adjustable or balloon loan into a fixed loan. The Conversion Option column on Monstermoving.com balloon tables indicates the right of a borrower to convert this balloon loan. The possible options are as follows...

Credit Loan
A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral.

Credit Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (Conventional loans). See Housing Expenses-to-Income Ratio.

Credit Rating
Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

Credit-Related Expenses
The sum of foreclosed property expenses plus the provision for losses.

Credit-Related Losses
The sum of foreclosed property expenses plus charge-offs.

Credit Report
A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

Debt-to-Income Ratio (DTI)
The ratio of aggregate monthly debt to aggregate monthly income.

Deed
A legal document which affects the transfer of ownership of real estate from the seller to the buyer.

Deed of Trust

In many states, this document is used in place of a mortgage to secure the payment of a note.

Default

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest

See Negative Amortization.

Delinquency

Failure to make payments on time. This can lead to foreclosure.

Department of Veterans Affairs (VA)

An independent agency of the federal government which guarantees long-term, low- or no-down payment mortgages to eligible veterans.

Discount Points

Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100,000 mortgage would cost $2,000).

Down Payment

Money paid to make up the difference between the purchase price and mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on Conventional loans, and no money down up to 5 percent on FHA and VA loans.

Due-On-Sale Clause

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Earnest Money

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Eminent Domain
The government right to take private property for public use depended on the payment of its fair market value.

Encumbrance
Any lien against a property or any restriction it its use, such as an easement; a right or interest in a property held by one who is not the legal owner.

Equal Credit Opportunity Act (ECOA)

Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

The difference between the fair market value and current indebtedness, also referred to as the owner's interest.

Escalator Clause
A clause in a loan providing for increases in payments or interest based on pre-determined schedules or on a specific economic index, such as the consumer price index.

Escrow

Refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or "closing." Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments.

Escrow Account (impound account)
An account that a borrower can hold with a lender once a purchase transaction is closed. This requires borrowers to pay more than the principal and interest each month. The overage is put into escrow, which the lender uses to pay items like property taxes and homeowner's insurance when they are due. This eliminates the actual number of payments that a homeowner has to worry about, but not the amount that has to actually be paid.

Escrow Analysis
An analysis performed by a lender each year to escrow accountholders to ensure that the correct amount of money is being collected to cover anticipated payments.

Escrow Fee
These costs cover the preparation and transmission of all home purchased-related documents and funds. Escrow fees range from several hundred to over a thousand dollars, based on the purchase price of your home. Not all states require funds to be put into escrow accounts for closing.

Easement
Giving other persons, other than the owner, access to a property.

Fair Credit Reporting Act-
A law that protects consumer that regulates the reporting of consumer credit by agencies and establishes procedures for correcting errors on an individual record.

Fannie Mae (FNMA)
The Federal National Mortgage Association is a congressionally chartered, shareholder-owned company. This organization is the nation's largest supplier of home mortgage funds.

See Federal National Mortgage Association.

Farmers Home Administration (FmHA)

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation (FHLMC)

Also called Freddie Mac, is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA)

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standard for underwriting mortgages.

Federal National Mortgage Association (FNMA)

Also known as Fannie Mae. A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FHA Loan

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA Mortgage Insurance

Requires a small fee (up to 3 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed-rate FHA loan, this fee would amount t o either $2,250 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, the more years the fee must be paid.

Firm Commitment
A lender's agreement to provide a loan to a specific borrower on a specific property.

First Mortgage
A mortgage that has priority over other mortgages.

Fixed-Rate Mortgage

A mortgage on which the interest rate is set for the term of the loan.

Float
Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.

Forbearance
The postponement for a limited time of a portion or all the payments on a loan when a borrower is delinquent.

Foreclosure

A legal procedure in which property securing debt is sold by the lender to pay a defaulting borrower's debt .

401(k)/403(b)-
An investment plan sponsored by employers that allows individuals to set aside tax-deferred income for retirement or emergency purposes. A 401(k) applies to private corporations, while a 403(b) applies to non-profit organizations.

401(k)/403(b) loan
A loan that can be taken against the amount accumulated in the 401(k)/403(b) plans, if so allowed by the plan administrator. Loans against these plans are an acceptable source of down payment for most types of other loans.

Freddie Mac

See Federal Home Loan Mortgage Corporation.

Ginnie Mae

See Government National Mortgage Association.

Good Faith Estimate
An estimate of charges which a borrower is likely to incur in connection with a loan closing.

Government Loan
A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran's Administration), or RHS (Rural Housing Authority).

Government National Mortgage Association (GNMA)

Also known as Ginnie Mae, provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Grace Period
A time allowed, usually 15 days, for making late payments without a penalty.

Graduated Payment Mortgage (GPM)

A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Gross Monthly Income

The total amount the borrower earns per month, before any expenses are deducted.

Guarantee

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hard-Money Mortgage
Cash loan to a borrower

Hazard Insurance

A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Home Equity Conversion Mortgage (HECM)
Also known as the reverse annuity mortgage. This mortgage provides that instead of making payments to a lender, the lender makes payments to the individual. Older homeowners are able to convert home equity into cash this way, in the form of monthly payments. Borrowers don't qualify on the basis of income, but on the value of his or her home. Such a loan does not have to be repaid until the borrower no longer occupies the property.

Home Equity Line of Credit (HELOC)
A mortgage loan in second position that allows a borrower to obtain cash drawn against home equity, up to a certain amount.

Housing Expenses-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).

HUD
Department of Housing and Urban Development; regulates Fannie Mae and Ginnie Mae.

Hybrid Financing
The joining together of two forms of finance, such as combining a convertible loan with a participation loan, under which the lender has the right at loan maturity to convert the debt to a 50 percent ownership in the property.

Impound

That portion of a borrower's monthly payments held by the lender or to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Only
A term loan arrangement calling for payments of interest only, not to include any amount for principal.

Interest Rate
The percentage of an amount of money that's paid for its use over a specified time period.

Interest Rate Swap
A transaction between two parties, in which each agrees to exchange payments tied to different interest rates or indices for a specified period of time.

Intermediate-Term Mortgage
A mortgage loan with a stated maturity at the time of purchase that it is equal to or less than 20 years.

Investor

Money source for a lender.

Judicial Foreclosure
A court procedure used by lenders to secure clear title to a property under a defaulted real estate loan.

Jumbo Loan

A loan which is larger (more than $203,150) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Last Updated
The Last Update column on a quotes results table tells you when the information was last provided by the lender to our site. We always place new listings at the top of each table so that you, the borrower, may have immediate access to the most timely information. Times provided are all Eastern Standard Time.

Leasehold Estate
An estate for a fixed length of time, established when a landlord gives up possession of real estate to a tenant, giving the tenant an equitable interest in the property, as defined by lease terms.

Lender
The bank, mortgage company, or mortgage broker offering the loan. Many institutions only "originate" loans and then resell the obligation to third parties.

Leverage
Using someone else's money for the purchase of property.

Liability Insurance
Insurance that protects property owners against claims that alleges negligence or inappropriate action that resulted in bodily injury or property damage to another party.

LIBOR
The London Interbank Offered Rate Index (LIBOR) is an average of the interest rates that major international banks charge each other to borrow U.S. dollars in the London money market. Like the U.S. treasury the CD indexes, LIBOR tends to move and adjust quite rapidly to changes in interest rates.

Lien

A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

Life of Loan Cap
The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial loan rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25+6.0).

Loan
The principal, or amount of total borrowed money, that is repaid with interest.

Loan Amount
The amount of money that you intend on borrowing from a financial institution for the purchase of your home. Subtracting the down payment from the purchase price of the home will provide you with the loan amount.

Loan Officer
An intermediary between lending institutions and borrowers, loan officers solicit loans, represent creditors to borrowers, and represent borrowers to creditors.

Loan Origination
What the process of obtaining new loans is called.

Loan Servicing
A service performed by a lender to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.

Loan-To-Value Ratio

The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

Lock (noun)
The period, expressed in days, during which a lender will guarantee a rate. Some lenders will lock rates at the time of application while others will allow the borrower to lock the rate after the application is taken. Request information from your lender regarding lock procedures.

Lock (verb)
The act of committing to a mortgage rate. This action, taken by a borrower some time between the application and the closing dates, is sometimes accompanied by a payment by the borrower to the lender.

Lock-in Clause
Clause in a loan agreement that states that the borrower cannot repay a loan prior to a specified date.

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Market Value

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Maturity
The "Due Date" of a loan.

Merged Credit Report
A credit report that reports data from two or more major credit repositories.

Minimum Credit
This field on the table refers to the minimum credit rating a borrower must have in order to qualify for the listed loan.

Monthly Housing Expense
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

Mortgage Banker
A financial intermediary that originates or funds loans, collects payments, inspects the property, and forecloses if necessary. The main difference between a mortgage banker and a loan officer is a banker funds their own loans and sell them on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae.

Mortgage Broker
A mortgage company that originates loans, joining the borrower and lender for a real estate loan, earning a placement fee.

Mortgage Constant
The factor used for rapid computation of the annual payment needed to amortize a loan.

Mortgage Insurance

Money paid to insure the mortgage when the down payment is less than 20 percent. See Private Mortgage Insurance or FHA Mortgage Insurance.

Mortgagee

The lender in a mortgage agreement..

Mortgagor

The borrower or homeowner in a mortgage agreement.

Multi-dwelling Units
Properties that provide separate housing units for more than one family, although only a single mortgage is secured.

Negative Amortization

Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

Net Effective Income

The borrower's gross income minus federal income tax.

No Cash-out Refinance
A refinance transaction that is not intended to put cash in the hand of the borrower, but instead calculates a new balance to cover the balance due on a current loan and any costs with obtaining a new mortgage.

No-Cost Loan
A no-cost loan can either be: 1) a loan that has no "lender costs" associated with it or, 2) a loan that also covers purchases or refinancing costs, which may be incurred in buying a home, obtaining and/or refinancing a loan, but are not directly charged by the lender. The interest rate on this type of loan is higher.

Non-Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

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 face value of the loan.

Owner Financing
A property purchase that is partly or wholly financed by the seller.

Owner's Title Policy
A policy protecting the buyer for the amount of the purchase price in the event of a future title dispute.

Package Mortgage
A mortgage that /includes equipment and appliances located on the premises in addition to the real property itself.

Partial Entitlement
Under VA loans, the amount of guarantee still available to an eligible veteran who has used his previous entitlement.

Partial Payment
A payment that is not sufficient enough to cover the month payment. During times of economic hardship, a borrower can make this request of the loan servicing collection department.

Participation Financing
A loan in which more than one mortgagee or more than one mortgagor harbors an interest. It can also be a loan in which the mortgagee receives partial ownership of the property being financed.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM) or a graduated payment mortgage (GPM). The payment change date occurs the month immediately after the interest rate adjustment date.

Periodic Payment Cap
The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate mortgage (ARM) where the interest rate and principal fluctuate independently of one another.

Periodic Rate Cap
The limit on the amount that payments can increase or decrease during any one adjustment period in an ARM (adjustable rate mortgage), regardless of how high or low the index fluctuates.

PITI

Principal, interest, taxes, and insurance. Also called monthly housing expense.

PITI Reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI (principal, interest, taxes, and insurance) must equal the amount that the borrower would have to pay for PITI for a determined number of months.

Planned Unit Development (PUD)
A type of ownership where individuals actually own the building or unit they reside in, but shared areas are owned jointly with the other members of the development or established association.

Pledge Account Mortgage (PAM)
Combines GPM (graduated payment mortgage) with a subsidizing savings account to provide the borrower with a low payment plan, the lender with amortizing payments and the seller with cash.

Points

See Discount Points

Power of Attorney

A legal document authorizing one person to act on behalf of another.

Pre-Approval
A term used to mean that a borrower has completed a loan application and provided debt, income, and savings information that has been reviewed and pre-approved by an underwriter.

Pre-Foreclosure Sale
A procedure in which the borrower is allowed to sell his or her property for an amount less that what is owed on it to avoid foreclosure, fully satisfying the borrower's debt.

Prepaids

Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment Penalty

Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Pre-Qualification
After a loan officer has made inquiries about a borrower's debt, income, and savings, he or she can write a written statement (pre-qualification) about the borrower's chances for qualifying for a home loan.

Principal

The amount of debt, not counting interest, left on a loan.

Prime Rate
Interest charged by financial institutions to top-rate borrowers.

Principal
The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)

In the event that you do not have a 20 percent down payments, lenders will allow a smaller down payment-as low as 5 percent in some cases. With the smaller down payments loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on your loan's structure. On a $75,000 house with a 10 percent down payments, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.

Promissory Note
A written promise to repay a specified amount over a specified period of time.

Prorations
The allocation of charges and credits to the appropriate parties at a real estate sale and/or loan closing at a real-estate sale and/or loan closing.

Purchase Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase-Money Mortgage
Mortgage given by a borrower to the seller as part of the purchase price of the property.

Purchase-Money Transaction
The acquisition of property through the payment of money or its equivalent.

Qualifying Ratio
The ratio of the borrower's fixed monthly expenses to his gross monthly income. Ratios are expressed as two numbers like 28/36 where 28 would be the Front-End Ratio and 36 would be the Back-End Ratio.

The Front-End Ratio is the percentage of a borrower's gross monthly income (before income taxes) that would cover the cost of PITI (Mortgage Principal Payment + Mortgage Interest Payment + Property Taxes + Homeowners Insurance). In the case of a 28% Front-End Ratio a borrower could qualify if the proposed monthly PITI payments were 28% or less than the borrower's gross monthly income.

The Back-End Ratio is the percentage of a borrower's gross monthly income that would cover the cost of PITI plus any other monthly debt payments like car or personal loans and credit card debt.

Please note that qualifying ratios are only a rough guideline in determining a potential borrower's credit-worthiness. Many factors such as excellent or poor credit history, amount of down payment, and size of loan will influence the decision to approve or disapprove a particular loan. Monstermoving.com urges all borrowers to discuss their particular situation with a qualified lender regardless of the outcome of any self-qualification exercise.

Quitclaim Deed
A deed that transfers, without warranty, whatever interest or title a grantor may have at the time the conveyance is made.

Rate Lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Realtor

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Recast
To redesign an existing loan balance into a new loan for the same period or longer, to reduce payments and help a distressed borrower.

Recision

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Reconciliation
Determining the final estimate of value by weighing the results of the various approaches in an appraisal.

Recording Fees

Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Renegotiable Rate Mortgage (RRM)

A loan in which the interest rate is adjusted periodically. See Adjustable Rate Mortgage.

Real Estate Settlement Procedures Act (RESPA)

RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish information after application only.

Reconveyance Clause
The clause in a trust deed that gives the title back to the borrower when the loan is paid in full.

Recording
The formal filing of documents affecting a property's title.

Refinancing
The process of paying off one loan with the proceeds from a new loan, using the same property as security.

Regulation Z
A truth-in-lending provision that requires lenders to reveal the actual costs of borrowing.

Repayment Plan
An agreement between a lender and a delinquent borrower regarding mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making scheduled payments.

Residual Qualifying
Under a VA loan, using specified housing expenses to qualify for a loan payment.

Reverse Annuity Mortgage (RAM)

A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security.

Revolving Debt
A credit arrangement that allows a customer to borrow against a pre-approved line of credit used to purchase goods and services. The borrower is responsible for the actual amount borrowed plus any interest due.

Right-of-First Refusal
A provision that states that a property to be first offered to a specific person before it can be offered for sale or lease to other parties.

Rollover Loan
A loan that /includes a call date earlier than its normal amortization period.

Rule of 78
Calculates proportionate amount of interest due on a loan being paid in full before its maturity.

Sale-Buyback
A financing arrangement in which an investor buys property from a developer and immediately sells it back under a long-term sales agreement, wherein the investor retains legal title.

Sale-Leaseback
A financing arrangement whereby an investor purchases real estate owned and used by a business corporation, then leases the property back to the business.

Second Mortgage
A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market
A market where mortgage originators may sell them, freeing up funds for continued lending and distributes mortgage funds nationally from money-rich to money poor areas.

Secured Loan
A loan that is backed by collateral.

Seller Carry-Back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Senior Loan
A real estate loan in first priority position.

Servicer
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Servicing

All the steps and operations a lender perform to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

Settlement

See Closing.

Settlement Costs

See Closing Costs.

Shared Appreciation Mortgage (SAM)

A mortgage in which a borrower receives a below-market interest rate in return for which a lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgages where the borrower shares the monthly principal and interest payments with another party in exchange for a part of the appreciation.

Stop Date
Date on a term loan when the balloon payment is due.

Subordinate Financing
Any mortgage or other lien that has a priority lower than that of the first mortgage, or senior loan. See second mortgage.

Survey

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any building.

Sweat Equity
Increase in property value due to improvement by owners.

Takeout Mortgage
A permanent mortgage, obtained by pre-arrangement between a builder and a financial institution, to repay the interim mortgagee at the completion of construction.

Tax Lien
A claim against real estate for the amount of its unpaid taxes.

Term Mortgage

See Balloon Payment Mortgage.

Third-Party Origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Title

A document that gives evidence of an individual's ownership of property.

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

Title Insurance

A policy, usually issued by a Title Insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller.

Title Search

An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Back-End Ratio.

Transfer of Ownership
The means by which the ownership of a property changes hands. Examples of such include the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchases, and any exchange of possession of the property under a land sales contract or any other land trust device.

Transfer Tax-
State or local tax payable when the title passes from one owner to another.

Truth-in-Lending

A federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for the loan.

Two-Step Mortgage

A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10 years), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan, due within 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier" mortgage.

Underwriting

The decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

VA Loan

A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee

A premium of up to 2 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 30-year fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

Variable Rate Mortgage (VRM)

See Adjustable Rate Mortgage.

Verification of Deposit (VOD)

A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment

A document signed by the borrower's employer verifying his/her position and salary.

Vested
Means that one has a right to use a portion of a fund, such as an individual's retirement fund.

Wraparound

Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Zero Percent Financing
A loan with no interest in the contract. The IRS imputes 10 percent for both borrower and lender.