DIYHomesellers.com Real Estate and Mortgage Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

A-Credit: A consumer with the best credit rating, deserving of the lowest prices that lenders offer. Most lenders require a FICO score above 750.
Acceleration Clause: A common provision of a mortgage or note providing the holder with the right to demand that the entire outstanding balance is immediately due and usually payable in the event of default.
Accrued Interest: Interest earned but not yet paid, adding to the amount owed (see Negative Amortization)
Adjustable Rate Mortgage Loans (ARM): Loans with interest rates that are adjusted periodically based on changes in a pre-selected index. As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. These mortgage loans must specify how their interest rate changes, usually in terms of a relation to a national index such as (but not always) Treasury bill rates. If interest rates rise, your monthly payments will rise. An interest rate cap limits the amount by which the interest rate can change; look for this feature when you consider an ARM loan.
Adjustment Date: The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
Adjustment Interval: The length of time between changes in the interest rate or monthly payment on an ARM loan.
Affordability
: A consumer's capacity to afford a house. Affordability is usually expressed in terms of the maximum price the consumer could pay for a house, and be approved for the mortgage required to pay that amount.
Agency: The legal requirement that one party in a relationship has a fiduciary obligation to the other.
Agreement of Sale: Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Alt-A: A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".
Alternative Documentation: A method of documenting a loan file that relies on information that the borrower is likely to be able to provide instead of waiting on verification sent to third parties for confirmation of statements made in the application.
Amortization: Repayment of a loan with periodic payments of both principal and interest calculated to payoff the loan at the end of a fixed period of time.
Amortization schedule: A table showing the mortgage payment, broken down by interest and amortization, the loan balance, tax and insurance payments if made by the lender, and the balance of the tax/insurance escrow account.
Amount Financed: This figure is used to calculate your APR. It represents your loan amount minus any prepaid finance charges and assumes you will keep the loan to maturity and make only the required monthly payments.
Annual Percentage Rate (APR): There are two interest rates applied to your loan: the Actual Interest Rate and the Annual Percentage Rate. The Actual Rate is the annual interest rate you pay on your loan (sometimes referred to as the "note rate"), and is the rate used to calculate your monthly payments. The amount of interest you pay, as determined by your Actual Rate, is only one of the costs associated with your loan; there may be others. The Annual Percentage Rate (APR) includes both your interest and any additional costs or prepaid finance charges you might pay such as prepaid interest, private mortgage insurance, closing fees, points, etc. Your APR represents the total cost of credit on a yearly basis after all charges are taken into consideration. It will usually be slightly higher than your Actual Rate because it includes these additional items and assumes you will keep the loan to maturity.
Application: An initial statement of personal and financial information required to apply for a loan.
Application Fee: Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.
Appraisal: An appraisal is a written analysis of the estimated value of your property. A qualified appraiser who has knowledge, experience and insight into the marketplace prepares the document. It demonstrates approximate fair market value based on recent sales in your neighborhood and is required to purchase or refinance your new home or property.
Appraisal Fee: A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date. This fee is paid to the outside appraisal company we engage to objectively determine the fair market value of your property. This fee varies based on the location and type of your 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.
APR: See Annual Percentage Rate.
Approval: Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.
ARM: See Adjustable Rate Mortgage Loans.
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 ownership, rights, or interests in property by one person, the assignor, to another, the assignee.
Assignment Recording Fee: In many instances, after closing the lender transfers your loan to a specialized loan "servicer" who handles the collection of your monthly payments. The Assignment Fee covers the cost of recording this transfer at the local recording office.
Assumable mortgage: A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan will save the buyer money if the rate on the existing loan is below the current market rate, and closing costs are avoided as well. A loan with a "due-on-sale" clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable.
Assumption: A method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property.
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.
Automated underwriting: A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, or whether the application will be forwarded to an underwriter. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.
Automated underwriting system: A particular computerized system for doing automated underwriting. Mortgage insurers and some large lenders have developed such systems, but the most widely used are Fannie Maes Desktop Underwriter and Freddie Macs Loan Prospector.

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B

Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Mortgage: Balloon mortgage loans are short-term fixed-rate loans with fixed monthly payments for a set number of years followed by one large final balloon payment for all of the remainder of the principal. Typically, the balloon payment may be due at the end of five, seven, or ten years. Borrowers with balloon loans may have the right to refinance the loan when the balloon payment is due, but the right to refinance is not guaranteed.
Balloon Payment: The final lump sum payment that is made at the maturity date of a balloon mortgage.
Bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
Bankruptcy: A proceeding in a federal court to relieve certain debts of a person or a business unable to pay its debts.
Before-Tax Income: Income before taxes are deducted.
Beneficiary: The person designated to receive the income from a trust, estate, or a deed of trust.
Bequest: A gift of personal property by will.
Binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Bi-Weekly Mortgage Payment: A mortgage that requires payments 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 that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
Blanket Mortgage: The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
Bona Fide: In good faith.
Bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
Borrower (Mortgagor): An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.
Breach: A violation of any legal obligation.
Bridge Loan: A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."
Broker: An individual who brings buyers and sellers together and assists in negotiating contracts for a client.
Broker Processing Fee: The fee charged to you to have your file packaged and handed over to a selected lender. There is no broker involved in your Rock Financial transaction; you deal with Rock Financial from start to finish.
Buy-Down Mortgage: A mortgage loan with a below-market rate for a period of time.
Buyer's Market: Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

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C

Call Option: A provision of a note that allows the lender to require repayment of the loan in full before the end of the loan term. The option may be exercised due to breach of the terms of the loan or at the discretion of the lender.
Caps (Interest): Consumer safeguards that limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.
Caps (Payment): Consumer safeguards that limit the amount monthly payments on an adjustable rate mortgage may change. Since they do not limit the amount of interest the lender is earning, these consumer safeguards may cause negative amortization.
Capital Improvement: Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
Cash Out: Any cash received when you get a new loan that is larger than the remaining balance of your current mortgage, based upon the equity you have already built up in the house. The cash out amount is calculated by subtracting the sum of the old loan and fees from the new mortgage loan. For example, if your existing loan is $150,000, you might refinance it with a loan of $170,000. After you pay off your current loan ($150,000) and any loan-origination costs for the new loan (for example $3,000 in points), you would be left with $17,000 cash out. NOTE: Cash-out loans may not be available for all types of property.
Cashier's Check (or Bank Check): A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.
Ceiling: The maximum allowable interest rate of an adjustable rate mortgage.
Certificate of Eligibility: Document issued by the Veterans Administration to qualified veterans and that verifies a veteran's eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).
Certificate of Reasonable Value (CRV): A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
Certificate of Title: Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.
Certificate of Veteran Status: FHA form filled out by the VA to establish a borrower's eligibility for an FHA Vet loan. Obtainable through local VA office by submitting form DD 214 (Separation Paper) with form26-8261a (request for certificate of veteran status).
Chain of Title: The chronological order of conveyance of a property from the original owner to the present owner.
Change Frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Clear Title: A title that is free of liens or legal questions as to ownership of the property.
Closing (or Settlement): The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).
Closing Cost Item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.
Closing Costs: Also known as settlement costs, these costs are for services that must be performed to process and close your loan application. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.
Closing Statement: Also referred to as the HUD1. The final statement of costs incurred to close on a loan or to purchase a home.
Cloud on Title: Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
CMA: See Comparative Market Analysis
CMT: The Constant Maturity Treasury (CMT) is published by the Federal Reserve Board based on the average yield of a variety of Treasury securities adjusted to a one-year maturity. The CMT is offered as an index for setting rates on adjustable rate mortgage programs.
COFI: See Cost of Funds Index.
Collateral: Assets (such as your home) pledged as security for a debt.
Collection: The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Co-Borrower: A party who signs the mortgage note along with the primary borrower, and who also shares title to the subject real estate.
Co-Maker: A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
Combined Loan To Value (CLTV): The mathematical relationship between the total of all loan amounts (first mortgage plus subordinate liens) and the value of the subject property.
Commission: Money paid to a real estate agent or broker for negotiating a real estate or loan transaction.
Commitment: A promise to lend and a statement by the lender of the terms and conditions under which a loan is made.
Commitment Letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."
Common Areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
Community Home Improvement Mortgage Loan: An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
Community Property: In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
Community Reinvestment Act (CRA): his act requires financial institutions to meet the credit needs of their community, including low and moderate-income sections of the local community. It also requires banks to make reports concerning their investment in the areas where they do business.
Comparables: An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
Comparative Market Analysis (CMA): An informal estimate of market value that a real estate agent or broker calculates based on sales of comparable properties. An appraisal or a comparative market analysis are the most accurate ways to determine what your home is worth.
Compound Interest: Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.
Condominium: A real estate project in which each unit owner holds title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. The condominium may be attached or detached. The homeowners association dues are included in the total monthly mortgage payment for qualifying purposes.
Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Conforming Loan: A mortgage loan that meets all requirements to be eligible for purchase by federal agencies such as Fannie Mae and Freddie Mac.
Construction Loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Consumer Reporting Agency: A company that regularly gathers, files and sells information to creditors to facilitate their decisions to extend credit.
Contingency: A condition that must be satisfied before a contract is legally binding.
Contract: An oral or written agreement to do or not to do a certain thing.
Contract of Sale: The agreement between the buyer and seller on the purchase price, terms and conditions of a sale.
Conventional Loan (Mortgage): Loans that are not made under any government housing program; they are not subject to the restrictions of government housing programs, such as loan size limits.
Conversion Clause: A provision in some ARMs that allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.
Conversion Option: Options to convert an adjustable rate mortgage or balloon loan to a fixed rate mortgage under specified conditions.
Convertible ARMs: A type of ARM loan with the option to convert to a fixed-rate loan during a given time period.
Conveyance: The document used to affect a transfer, such as a deed, or mortgage.
Cooperative (CO-OP): A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Corporate Relocation: Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
Cost of Funds Index (COFI): An index of the weighted-average interest rate paid by savings institutions for sources of funds.
Covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
Creditor: A person to whom debt is owed by another person who is the "debtor".
Credit Bureau: A credit bureau is a clearinghouse for credit history information. Credit grantors provide the bureau with factual information on how their credit customers pay their bills. The bureau regularly assembles this information, along with public record information obtained from courthouses around the country, into a "file" on each consumer.
Credit Rating: A rating given a person or company to establish credit-worthiness based upon present financial condition, experience and past credit history.
Credit Report: A report detailing the credit history of a prospective borrower that's used to help determine borrower creditworthiness.
Credit Repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
Credit Score: A statistical method of assessing your creditworthiness. Your credit card history; amount of outstanding debt; the type of credit you use; negative information such as bankruptcies or late payments; collection accounts and judgments; too little credit history and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine your credit score.

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D

Deal Structure: An Underwriters review of certain aspects of a loan application that do not meet standard guidelines.
Debt: An amount owed to another.
Debt to Income Ratio: Compares the amount of monthly income to the amount the borrower will owe each month in house payment (PITI) plus other debts. The other debts may include but not limited to car payment, credit cards, alimony, child support, and personal loans. This ratio is commonly used to see if the borrower has the capacity to repay the debt.
Deed: Legal document with which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.
Deed in Lieu: A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust: A legal document that conveys title to real property to a third party. The third party holds title until the owner of the property has repaid the debt in full.
Default: Failure to meet legal obligations in a contract, including failure to make payments on a loan.
Delinquency: Failure to make payments as agreed in the loan agreement.
Deposit: A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
Depreciation: A decline in the value of property; the opposite of appreciation.
Discount Points (or Points): Points are an up-front fee paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount. Points and interest rates are inherently connected: in general, the more points you pay, the lower your interest rate. However, the more points you pay, the more cash you need up front since points are paid in cash at closing.
Document Preparation Fee: Occasionally we use outside companies to prepare the loan closing documents. This fee covers the cost of this service.
Down Payment: The amount of your home's purchase price you need to supply up front in cash to get your loan. For conventional loans, you should strive for a down payment that's at least 20% of your home's value, since lenders generally do not require private mortgage insurance with a down payment of at least 20% of your home's purchase price. (Note, however, that FHA and VA loans have different policies regarding insurance.)
DTI: See Debt to Income Ratio
Due-on-Sale Clause: Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.
Duplex: Owner occupied property for more than one family

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E

Earnest Money: Deposit made by a buyer towards the down payment in evidence of good faith when the purchase agreement is signed.
Easement: A right of way giving persons other than the owner access to or over a property.
ECOA: See Equal Credit Opportunity Act.
Effective Age: An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective Gross Income: Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Encryption: This is a procedure used in order to prevent anyone but the intended recipient from reading the data. There are many types of data encryption, and they are basis of network security. Common types include (Data Encryption Standard) and public-key encryption.
Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
Endorser: A person who signs ownership interest over to another party. Contrast with co-maker.
Equifax: One of the three largest credit bureaus in the United States.
Equal Credit Opportunity Act (ECOA): Federal law requiring 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 current market value of a property and the total debt obligations against the property. On a new mortgage loan, the down payment represents the equity in the property.
Escrow: A transaction in which a third party acts as the agent for seller and buyer, or for borrower and lender, in handling legal documents and disbursement of funds.
Escrow Account: An account held by the lender to which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses escrow account funds on behalf of the borrower when they become due. Also known as Impound Account.
Escrow Agent: A person with fiduciary responsibility to the buyer and seller, or the borrower and lender, to ensure that the terms of the purchase/sale or loan are carried out.
Escrow Analysis: The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
Escrow Collections: Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
Escrow Disbursements: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Escrow Payment: The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Estimated Closing Fees: An estimate of the fees that must be paid on or before the closing date by the buyer and/or seller for services, taxes and items necessary to obtain mortgage. These fees will average between 2% and 5% of the loan amount and vary by lender, property location, and type of mortgage.
Eviction: The lawful expulsion of an occupant from real property.
Examination of Title: The report on the title of a property from the public records or an abstract of the title.
Experian: One of the three largest credit bureaus in the United States.
Express/Courier Fee: On refinance transactions, we typically use an overnight courier to expedite the payoff of your existing loan. This fee covers the cost of the courier.

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F

Fair, Isaac and Co. (FICO): The company that invented credit scoring software.
Fair 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 record.
Fair Housing Act: Prohibits the denial or variance of the terms of real estate related transactions based on race, color, religion, sex, national origin, disability, or familiar status of the credit applicant. Real estate related transactions include a mortgage, home improvement, or other loans secured by a dwelling.
Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae: This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.
Fannie Mae's Community Home Buyer's Program: An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home.
FDIC: See Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (FDIC): Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation's banking system.
Federal Home Loan Mortgage Corporation (FHLMC): Also known as Freddie Mac. A publicly owned corporation created by Congress to support the secondary mortgage market. It purchases and sells conventional residential mortgages as well as residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA).
Federal National Mortgage Association (FNMA): Also known as Fannie Mae. A privately owned corporation to support the secondary mortgage market. It adds liquidity to the mortgage market by investing in home loans through the country.
Federal Housing Administration (FHA): A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.
Fee Simple: Absolute ownership of real property.
Federal Reserve Board: The 7-member Board of Governors that oversees Federal Reserve Banks, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms. also called the Fed.
FHA: See Federal Housing Administration.
FHA Loans: Fixed- or adjustable rate loans insured by the U.S. Department of Housing and Urban Development. FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans. With FHA insurance, eligible buyers can purchase a home with a down payment of as little as 3% of the appraised value or the purchase price-whichever is lower. FHA borrowers typically are required to participate in a face-to-face meeting with their lender or a government approved mortgage counselor prior to closing on a new mortgage loan. The current FHA loan limits vary depending on home type and home location. To find the most recent limits for your home, consult the FHA Maximum Mortgage Limits web page.
FICO Score: The most common credit scoring model used by lenders, it is also known as a Fair, Isaac score. Your FICO can range from 200 to 900. According to this model, the higher your score, the less likely you are to default on your loan.
Filing Fees: The amount charged by public officials in your area for recording your mortgage and other documents.
Finance Charge: Your finance charge is the total of all the interest you would pay over the entire life of the loan, assuming you kept the loan to maturity, as well as all prepaid finance charges. If you pre-pay any principal during your loan, your monthly payments remain the same, but your total finance charge will be reduced.
Financial Statement: A summary of facts showing an individual's or company's financial condition. For individuals, it states their assets and liabilities as of a given date. For a company it should include a Profit and Loss Statement (P&L) for a certain period of time and balance sheet, stating assets and liabilities as of a given date.
First Mortgage: A mortgage that is in first lien position, taking priority over all other liens. In the case of a foreclosure, the first mortgage will be repaid before any other mortgages.
Fixed Rate: An interest rate that is fixed for the term of the loan.
Fixed Rate Mortgage Loans: Fixed rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.
Floating: The term used when a purchaser elects not to lock-in an interest rate at the time of application.
Flood Certification Fee: Federal law requires that you obtain flood hazard insurance if your property lies in a flood zone. As part of our evaluation of your property, we engage a flood determination company to tell us whether or not your house is located in a flood zone. The flood certification fee covers the cost. If your house is located in a flood zone, you will be required to purchase Flood Insurance.
Flood Insurance: Insurance that compensates for physical damage to a property by flood. Typically not covered under standard hazard insurance.
Flood Life of Loan Coverage: Flood zone determinations may change from time to time. The "Life of Loan Coverage" fee allows us to track any changes in your property's flood zone status over the life of your loan.
Forbearance: The act by the lender of refraining from taking legal action on a mortgage loan that is delinquent.
Foreclosure (or Repossession): Legal process by which a mortgaged property may be sold to pay off a mortgage loan that is in default.
For Sale by Owner (FSBO): A real estate term used to describe when a property is offered for sale directly by its owner and without the assistance of a licensed real estate brokerage, implying that no real estate commission is associated with the sale. In recent years, the term has been used more broadly to describe the process of marketing, buying, and selling of real property without the help of a real estate broker. Many sellers who choose to sell via FSBO do so to avoid paying a commission to a broker, typically 6% - 8% of the selling price of the property in many parts of the US.
Freddie Mac: This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.
FSBO: See For Sale by Owner
Fully Amortized ARM: An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

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G

Gift Letter: 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.
Good Faith Estimate (GFE): Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.
Government Recording Fee: We pay this fee to your local county recording office for recording our mortgage lien, and in the event of a purchase transaction, the deed that transfers title. Fees for recording vary by county and are set by state and local governments.
Grace Period: Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.
Gross Income: Total income before taxes or expenses are deducted.
Guideline Ratios: There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. Typically, this ratio should not exceed 28%. The second is called the back-end, or bottom ratio, and is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross monthly income. Typically, this ratio should not exceed 36%.

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H

Hazard Insurance: Protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.
Home Equity Line of Credit: A home equity line of credit is a credit line that is kept open and restored as you pay off what is owed. An equity line of credit also has a high credit limit similar to a credit card that you are allowed to draw upon as needed.
Homeowners Insurance: Just as you insure your automobile to protect against theft and damage, you insure your home. Homeowners insurance is required by all lenders to protect their investment, and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home.
Home Maintenance: Costs associated with maintaining a home. This may include, but not limited to, general repairs, replacement or repair of furnace, air conditioning, roof, plumbing and electrical systems.
Home Mortgage Disclosure Act (HMDA): Also known as Regulation C. The purpose of HMDA is to provide disclosure of mortgage lending application activity (home purchase or improvement) to regulators and the public. Information is collected on each application, and is recorded on a log that is compiled to produce a report on application activity by geographic designation (census tract).
Homeowners Association (HOA): A non-profit corporation or association that manages common areas and services of a Condominium or Planned Unit Development (PUD).
Homeowners Insurance: Insurance that covers damage to the insureds' residence and liability claims made against the insured subject to the policy terms, conditions, provisions, losses not insured provision and exclusions.
Housing and Urban Development: See HUD.
Housing Ratio: The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.
HUD: Housing and Urban Development, the U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.
HUD-1 Uniform Settlement Statement: A standard form that itemizes the closing costs associated with purchasing a home or refinancing a loan.

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I

Impound Account: Also known as an Escrow Account it is an account held by the lender to which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses impound account funds on behalf of the borrower when they become due.
Index: Most lenders generally tie adjustable rate mortgage loan (ARM) interest rate changes to an "index." An index is a widely published rate such as LIBOR, T-Bill, or 11th District Cost of Funds (COFI). Lenders use these indices to establish the interest rates charged on mortgage loans. For ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.
Initial Cap: Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage can change during the first adjustment period. See Caps.
Initial Interest Rate: The rate charged during the first interval of an ARM loan.
Insurance: The type of insurance(s) required for your loan. Private mortgage insurance may also be required in addition to what is indicated.
Interest: Charge paid for borrowing money.
Interest Income: The potential income from funds which would have been used for the down payment, closing costs, and any difference (increase) between monthly rental payment and monthly mortgage payment.
Interest Only Home Loan: An interest only mortgage is one that gives you the option of paying just the interest or the interest and as much principal as you want in any given month during an initial period of time. Interest only loans can be 30-year fixed-rate mortgages or adjustable rate mortgages. All of Rock Financial's interest only mortgages are interest only for the first ten years.
Interest Rate: The annual rate of interest on the loan, expressed as a percentage of 100.
Interest Rate Cap: Consumer safeguards that limit the amount the interest rate on an ARM loan can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.
Interest Rate Disclosure: A description of the conditions applicable to the processing of your loan as well as the terms of your interest rate agreement with Rock Financial.

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J

Joint Liability: Liability shared among two or more people, each of whom is liable for the full debt.
Joint Tenancy: A form of ownership of property giving each person equal interest in the property, including rights of survivorship.
Judgement: Decree of a court declaring that one individual is indebted to another and fixing the amount of such indebtedness.
Jumbo Loan: A mortgage larger than the limits set by Fannie Mae and Freddie Mac outlined as follows: Lower 48 States: 1 unit (i.e. a single family home): $417,000; 2 unit (i.e. a duplex) : $533,850; 3 unit: $645,300; 4 unit: $801,950; For Alaska and Hawaii: 1 unit (i.e. a single family home): $625,000; 2 unit (i.e. a duplex): $800,900; 3 unit: $967,950; 4 unit: $1,202,925
Junior Mortgage: A mortgage subordinate to the claim of a prior lien or mortgage. In the case of a foreclosure, a senior mortgage or lien will be paid first.

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K

No items in this category.

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L

Late Charge: Penalty paid by a borrower when a payment is made after the due date.
Lender: The bank, mortgage company, or mortgage broker offering the loan.
Lender Fees: Lender Fees are fees paid to the lender.
Lender Processing Fee: The lender processing fee covers the cost of analyzing your loan application and compiling and packaging the necessary supporting documentation to close your loan.
LIBOR (London Interbank Offered Rate): The interest rate charged among banks in the foreign market for short-term loans to one another-a common index for ARM loans.
Lien: A legal claim by one person on the property of another for security for payment of a debt.
Lifetime (or Overall) Cap: Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage loan (ARM) can change over the life of the loan. See Caps.
Loan Application: An initial statement of personal and financial information required to apply for a loan.
Loan Application Fee: Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.
Loan Origination Fee: Fee charged by a lender to cover administrative costs of processing a loan.
Loan Term: The period of time between the closing date and the date of your last payment is paid.
Loan-to-Value Ratio (LTV): The percentage of the loan amount to the appraised value (or the sales price, whichever is less) of the property.
Lock or Lock-In: A lender's guarantee of an interest rate for a set period of time-usually between loan application approval and loan closing. The lock-in protects you against rate increases during that time.

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M

Manufactured Home: A factory assembled residence built in units or sections that are transported to a permanent site and erected on a foundation.
Margin: The percentage difference between the index for a particular loan and the interest rate charged. This is a number predetermined by the lender.
Maximum Cash Out: The maximum amount of money you are allowed to get back from your mortgage transaction based on the loan information provided and the amount of equity you have in your home.
Maximum Monthly Payment: As part of your Power Buyer approval, you are given a maximum monthly payment for which you qualify based on the information you provided. This maximum payment is inclusive of the four major components of a typical mortgage payment: taxes, insurance, loan principal and interest.
Monthly Mortgage Payment: A monthly mortgage payment typically contains four parts called the PITI (principal, interest, taxes, and insurance). If you pay your taxes and insurance on your own, you pay only principal and interest to your lender.
Monthly Principal and Interest (P&I) Payment: Principal and interest is the dollar portion to repay the loan. All interest that occurs is calculated on the current balance owing. The principal reduces the remaining balance of a mortgage.
Mortgage: A legal document by which real property is pledged as security for the repayment of a loan.
Mortgage Banker: An individual or company that originates and/or services mortgage loans.
Mortgage Broker: An individual or company that arranges financing for borrowers.
Mortgage Disability Insurance: A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance (MI): Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's appraised value. (Note, however, that FHA and VA loans have different insurance guidelines.)
Mortgage Loan: A loan for which real estate serves as collateral to provide for repayment in case of default.
Mortgage Note: Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.
Mortgage Term: The length of time given to repay the loan.
Mortgagee: The lender in a mortgage loan transaction.
Mortgagee Clause: This is the clause that is typically used for hazard insurance and flood insurance.
Mortgagor: The borrower in a mortgage loan transaction.

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N

Negative Amortization: A loan payment schedule in which the outstanding principal balance of a loan goes up rather than down because the payments do not cover the full amount of interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan.
Net Income: The difference between effective gross income and expense including taxes and insurance. The term is qualified as net income before depreciation and debt.
Non Assumption Clause: A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.
Non Conforming Loan: Also known as a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines.
Non-Owner Occupied Property: Property purchased by a borrower not for a primary residence but as an investment with the intent of generating rental income, tax benefits, and profitable resale.
Note: Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.
Note Rate: The interest rate on the mortgage loan.
Notice of Default: Written notice to a borrower that a default has occurred and that legal action may be taken.

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O

Origination Fee: Fee charged by a lender to cover administrative costs of processing a loan.
Origination Process: Process in which a lender solicits business, gathers required information and commits to loan money, for the purchase of real estate.
Owner Financing: A property purchase transaction in which the property seller provides all or part of the financing.
Owner-Occupied Property: The borrower or a member of the immediate family lives in the property as a primary residence.

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P

Password: A password is a special code made up of letters and numbers that will allow you, and only you, to gain access to your personal account information. The best passwords combine letters (both upper and lower case) and numbers. It is best not to use your address, names of friends or family members, or other easily accessed or guessed words.
Payment Cap: Consumer safeguards that limit the amount monthly payments on an adjustable-rate mortgage may change. Since they do not limit the amount of interest the lender is earning, they may cause negative amortization.
Payment Schedule: The method for disclosing your payment schedule varies by loan type. For fixed-rate loans, the payment schedule indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for VA, FHA, one-time MIP and uninsured conventional loans should also indicate a fixed monthly payment. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates.
Per Diem Interest: Interest calculated per day. (Depending on the day of the month on which closing takes place, you will have to pay interest from the date of closing to the end of the month. Your first mortgage payment will probably be due the first day of the following month.)
Periodic Cap: Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage (ARM) can change in an adjustment interval. Caps.
PITI: Abbreviation for Principal, Interest, Taxes and Insurance, the components of a monthly mortgage payment.
Planned Unit Development (PUD): A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an owner's association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners' association must require automatic, non-severable membership for each individual unit owner, and provide for mandatory assessments.
Points (or Discount Points): Points are an up-front fee paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount. Points and interest rates are inherently connected: in general, the more points you pay, the lower the interest rate you get. However, the more points you pay, the more cash you need up front since points are paid in cash at closing.
Power of Attorney: Legal document that authorizes one person to act on behalf of another.
Pre-Approval: The process of determining how much money a prospective homebuyer or refinancer will be eligible to borrow prior to application for a loan. A pre-approval includes a preliminary screening of a borrower's credit history. Information submitted during pre-approval is subject to verification at application.
Pre-Qualification: A process designed to assist a customer in determining a maximum sales price, loan amount and PITI payment they are qualified for. A pre-qualification is not considered a loan approval. A customer would provide basic information (income, debts, assets) to be used to determine the maximum sales price, etc.
Prepaid Expenses: Taxes, insurance and assessments paid in advance of their due dates. These expenses are included at closing.
Prepaid Interest: Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.
Prepayment: Full or partial repayment of the principal before the contractual due date.
Prepayment Penalty: A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information.
Pre-qualification: The process of determining how much money a prospective homebuyer will be eligible to borrow prior to application for a loan. Information submitted during pre-qualification is subject to verification at application.
Principal: The amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI): Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's purchase price. (Note, however, that FHA and VA loans have different insurance guidelines.)
Processing: Gathering the loan application and all required supporting documents (including the property appraisal, credit report, credit history, and income and expenses) so that a lender can consider the borrower for a loan.
Property Taxes: The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal.
Promissory Note: 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.
Purchase Agreement: Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Purchase Price: The total amount paid for a home.

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Q

Qualifying Income Ratios
: Income analysis used by lenders in deciding whether to offer the borrower a loan. One type of analysis compares only the amount of the proposed monthly mortgage payment to the monthly income. Another compares the amount of the total monthly payments (for example car, credit card and proposed mortgage payments) to the monthly income.

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R

Rate Cap: A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
Rate Lock-In: A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.
Rate Index: An index used to adjust the interest rate of an adjustable mortgage loan.
Real Estate Appreciation Rate: Percentage increase in the value of real estate, expressed at an annual rate.
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires, among other things, lenders to give borrowers advance notice of closing costs.
Real Financing Cost: The real financing cost is a consumer-oriented rate that takes into account specific costs, fees, potential rate changes and the projected amount of time you will have the loan. The fees and costs are distributed over the time you plan to be in the house, allowing you to do an apples-to-apples comparison of a variety of loan types. The real financing cost is not the APR. The APR assumes that you keep your loan for the entire term (e.g. 30 years for a 30-year fixed loan) and includes only some of your loan fees. The total financing cost takes into account all of your closing costs associated with your loan and also how long you plan to be in your house.
Real Property: Land and any improvements permanently affixed to it, such as buildings.
Realtor: A person licensed to negotiate and transact the sale of real estate on behalf of the property owner. A real estate broker or associate must hold active membership in a real estate board affiliated with the National Association of Realtors.
Rebate: Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower.
Recording: The act of entering documents concerning title to a property into the public records.
Recording Fee: Money paid to a government agent for entering the sale of a property into the public records.
Refinancing: The process of paying off one loan with the proceeds from a new loan secured by the same property.
Regulation Z: Federal Reserve regulation issued under the Truth-in-Lending Act, which among other things, requires that a credit purchaser be advised in writing of all costs connected with the credit portion of the loan.
Rent Free: If you are living with a relative or friend without paying money, this is considered "rent free."
Renters Insurance: Insurance against perils which are commonly covered in policies described as a "Renters Policy".
Repayment: The payment of a mortgage loan over a period of time established when the loan is originated.
Requested Cash Out: The amount of money you requested to get back from your mortgage transaction. Remember, your closing costs and escrows will be subtracted from this amount.
Rescind: To avoid or cancel in such a way as to treat the contract or other object of the rescission as if it never existed.
Residential Mortgage Credit Report (RMCR): A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.
RESPA
: See Real Estate Settlement Procedures Act
Right to Rescission: Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.

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S

Sales Agreement (Contract): Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
Savings Rate: The interest rate a person expects to earn on a savings account or investment account.
Second Mortgage: An additional mortgage placed on a property that has rights that are subordinate to the first mortgage. A second mortgage is a lien in which you are given a lump sum amount that you pay off in installments over a specified period of time. Home improvement and debt consolidation loans are considered second mortgages.
Secondary Market: An informal market where existing mortgages are bought and sold. It is the traditional aftermarket for mortgage loans that brings together lenders that sell mortgages with lenders, investors and agencies that buy mortgages.
Security: This refers to the address of the property being pledged as security for your loan.
Seller Carry Back (Contribution): An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Selling Costs: The costs incurred in selling a home. This could include Realtor expenses and other miscellaneous expenses such as painting or minor repairs to prepare the home for sale.
Servicing: All the management and operational procedures that the mortgage company handles for the life of the loan, up through foreclosure if necessary, including: collecting the mortgage payments, ensuring that the taxes and insurance charges are paid promptly, and sending an annual report on the mortgage and escrow accounts.
Servicing Released: A stipulation in the agreement for the sale of mortgages in which the Lender is not responsible for servicing the loan.
Servicing Retained: A loan sale in which the original lender's servicing department continues to service the loan after the sale to a secondary institution or investor.
Settlement (or Closing): The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).
Settlement Costs: Also known as closing costs, these costs are for services that must be performed to process and close your loan application. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.
Settlement Cost (HUD guide): HUD - published booklet that provides an overview of the lending process, and that is given to consumers after completing a loan application.
Settlement Statement: Also referred to as a HUD-1 Settlement Statement. The complete breakdown of costs involved in the real estate transaction for both the seller and buyer.
Simple Interest: The interest calculated on a principal sum, not compounded on earned interest.
Single Family: It is a residence that houses one family.
Single-Family Attached Home: A single-family dwelling that is attached to other single-family dwellings.
Single-Family Detached Home: A freestanding dwelling for a single family
Site Condominium: A detached single-family dwelling characterized as a site condominium by the way it is platted by the builder, however it is still considered a condominium.
Structural Improvements: A "Structural Improvement" is any permanent improvement made to your property that is not strictly for decorating purposes. Examples include: additions, new flooring, kitchen or bathroom upgrades, new windows and central air. Swimming pools are considered structural improvements only if they are in ground and your property is in a year round warm weather climate.
Subject Property: The home that you intend to obtain the mortgage on is called the subject property.
Survey: A mortgage survey is a bird's eye sketch of your property that shows the boundary lines of your lot, and details any encroachments between you and your neighbors.
Survey Fee: The survey fee covers the cost of the survey.
Sweat Equity: Value added to a property in the form of labor or services by the owner rather than by cash.

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T

Tax Impound: Money paid to and held by a lender for annual tax payments.
Tax Lien: Claim against a property for unpaid taxes.
Tax Rates: Tax levied by the federal government and some states based on a person's income. Federal income tax rates vary depending on a person's adjusted gross income.
Tax Sale: Public sale of property by a government authority as a result of non-payment of taxes.
Tax Savings: The amount saved on taxes by itemizing deductions on income tax returns.
Tax Service Fee: In some cases, we engage a third party to monitor and/or handle the payment of your property tax bills. The Tax Service Fee covers the cost of this service.
Tenants in Common: An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
Term: The period of time which covers the life of the loan. For example, a 30 year fixed loan has a term of 30 years.
Third Party Fees: Fees paid to a third party for services requested by the lender on your behalf.
Title: Document that gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property. Individuals who will have legal ownership in the property are considered "on title" and will sign the mortgage and other documentation.
Title Company: A company that insures title to property.
Title Company Closing Fee: This fee is paid to the title insurance company that conducts your closing and handles the transfer of funds among the parties.
Title Insurance: Title insurance protects a lender against any title dispute that may arise over a particular property. It is required to close on your home. You may also purchase owner's title insurance which protects you as the homeowners.
Title Insurance Premium: In order to determine that the property is properly owned and not subject to any unacceptable liens, we require a search of the local real estate records, and a title insurance policy insuring the lender that there are no defects in title. The Title Insurance Premium covers the cost of the search and the insurance. The cost of title insurance varies both by state and by county.
Title Search: Examination of local real estate records to ensure that the seller is the legal owner of a property and that there are no liens or other claims against the property.
Total Debt Ratio: Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.
Total Payments: This is the total amount you will have paid over the life of the loan for principal, interest and prepaid finance charges, assuming you keep the loan to maturity and made only the required monthly payments.
Trade Lines: Trade lines are your different credit accounts listed on your credit report.
Trans Union: One of the three largest credit bureaus in the United States.
Transfer Tax: Tax paid when title passes from one owner to another.
Treasury Bills: Interest bearing U.S. Government obligations sold at a weekly sale. The change in interest rates paid on these obligations is frequently used as the Rate Index for Adjustable Mortgage Loans.
Truth-in-Lending Act: Federal law requiring written disclosure of the terms of a mortgage (including the APR and other charges) by a lender to a borrower after application. Also requires the right of rescission period.

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U

Underwriting: In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.
Underwriting Fee: The underwriting fee covers the cost of evaluating your entire loan package, including your credit report and appraisal, to determine whether we can approve your loan request.
Username: A unique sequence of characters including letters and numbers which is generated by Rock Financial and used as identification when logging on to My Rock Financial. It is required to give you exclusive access to the status of your loan and your loan documents online.
Usury: Interest charged in excess of the legal rate established by law.

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V

VA Loans: Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. They are designed to make housing affordable for eligible U.S. veterans. VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans with 100% entitlement. Eligible veterans may be able to purchase a home with no cash reserve, no application fee, and lower closing costs than other financing options. The maximum VA loan amount is currently $203,000.
Variable Rate Mortgage: See Adjustable Rate Mortgage.
Variable Rate: Interest rate that changes periodically in relation to an index.
Verification of Deposit (VOD): Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.
Verification of Employment (VOE): Document signed by the borrower's employer verifying the borrower's position and salary.
Verification of Mortgage (VOM): Form used in mortgage lending to verify the existing mortgage balance, monthly payments and late payments, if any.
Verification of Rent (VOR): Form used in mortgage lending to verify monthly rents paid and late payments, if any.

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W

Waiver: Voluntary relinquishment or surrender of some right or privilege.
Walk-through: A final inspection of a home to check for problems that may need to be corrected before closing.
Wire Transfer Fee: On occasion, we will transmit funds via the inter-bank wire transfer system to you, your prior lender, and/or the title insurance company conducting your closing. This fee covers the cost of such transfer.

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