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Glossary of Mortgage Terms

dictionaryProvided by Steve Brunett, 410-884-8276Bank Of America


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Adjustable-rate mortgage (ARM): A home loan with an interest rate that changes, over the life of the loan, based on an index.

Amortization: The gradual repayment of a mortgage by installments.

Amortization schedule: A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.

Annual Percentage Rate (APR): The total yearly cost of a loan stated as a percentage; includes the base interest rate plus certain fees associated with financing, such as application fee or loan origination fee (points). Only fees that are considered prepaid finance charges are used to calculate the APR.

Application: A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information.

Appraisal: An estimate of the value of property, made by a qualified professional called an “appraiser.”

Appraisal process: The procedure a professional appraiser uses to estimate the value of a property. It consists of the following series of steps:
- Preliminary survey and appraisal plan.
- Data collection and analysis.
- Application of the three approaches (cost approach, market value approach and income approach).
- Documentation of problem(s).
- Reconciliation of value indications into a final estimate of defined value.
- The Appraisal Report.

Appraised value: An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.

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 house due to changes in market conditions or other causes.

Assessed value: The valuation placed upon property by a public tax assessor for purposes of taxation.

Assessor: County official who determines the assessed value of property for tax purposes.

Assignment: (1) The act of transferring ownership of something from one person to another. (2) The instrument or paper by which one person transfers ownership of a right or an object to another.

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

Assumption: The transfer of the seller’s existing mortgage to the buyer.

Assumption fee: Lender’s charge for changing over and processing new records for a buyer who is assuming an existing loan.

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Balloon mortgage: Usually a short-term fixed-rate loan that 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 payment that is made at the maturity date of a balloon mortgage.

Bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can alter or eliminate debts by transferring his or her assets to a trustee.

Basis point: One basis point equals 0.01%. For example, to go from a 6.25% interest rate to a 6.15% rate is a reduction in 10 basis points. This term is commonly used to express changes in interest rates.

Bill of lading: A legal contract between you and the mover specifying the details of your move: what, where and when.

Bill of sale: The instrument by which title to personal property is transferred or conveyed.

Binder: A preliminary agreement, secured by the payment of earnest money, in which a buyer agrees to purchase real estate.

Binding agreement: A binding agreement requires the mover to honor its original quote based on your list of items to be moved.

Biweekly payment mortgage: 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.

Buydown: A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

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Cap: A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or monthly payments may increase or decrease.

Capital gain: The profit you make when you sell an asset, such as your home. Keep in mind that the real estate broker commission and any outstanding mortgage you owe are subtracted from your house sale price and what’s left is your capital gain. You can avoid paying taxes on your capital gain if you immediately invest the profit in another home.

Cash reserve: A requirement of some lenders that buyers have cash remaining after closing. Traditionally, lenders have required borrowers to have reserves equal to two mortgage payments.

Cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Certificate of sale: Certificate issued to the purchaser at an execution sale. It evidences ownership, and is exchanged for a deed if there is no redemption from the sale.

Certificate of title: Certified statement regarding ownership of land, based on examination of the record title.

Clear title: A title that is free of liens and legal questions regarding the ownership of the property.

Closing: The time and place at which all documents for your loan are signed, dated and notarized. Also called a settlement.

Closing costs: Expenses (over and above the prices of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country.

CLTV: Combined loan-to-value. The relationship between the amount of all mortgage loans on the property and the appraised value of the property expressed as a percentage.

Collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Combination loan-to-value ratio: The ratio between the unpaid principal amount of your first mortgage, plus your home equity loan - or your credit limit in the case of a line of credit - and the appraised value of your home. Expressed as a percentage.

Commitment letter: A formal offer by a lender stating the terms in which they agree to lend money to a homebuyer.

Common areas: In a condominium or PUD, any land or improvements owned jointly by all the owners in the project.

Community property: Property acquired jointly by a husband and wife during their marriage. Each spouse has equal rights, including the right of survivorship.

Comparative market analysis (CMA): A listing of home values in a local area, which a real estate agent can provide you.

Condominium (Condo): A type of property in which the homeowner holds title to an individual dwelling unit plus an interest in common areas of the multi-unit project.

Conforming loans: A loan that does not exceed Fannie Mae’s/Freddie Mac’s legislated mortgage amount limits. Currently the maximum loan amount for one-unit is $275,000.

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.

Co-tenancy: Ownership of property by two or more persons.

Contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract of sale: An agreement entered into for the sale and purchase of property. Title of record remains in the name of the vendor pending payoff in full by the payee.

Conventional mortgage: Any mortgage that is not insured or guaranteed by the federal government.
Convertible ARM: An adjustable rate mortgage that can be converted to a fixed rate mortgage under specified conditions.

Convey: To transfer title to property from one person to another.

Conveyance: Written instrument transferring title to real property.

Cooperative (Co-op): A form of common property ownership in which the residents of an apartment building do not own their own units, but own shares in the corporation that owns the property.

Correspondent Lenders: Provides mortgage products to Banks, Thrifts, Credit Unions, and Mortgage Bankers nationwide. Clients originate, underwrite and close mortgage loans before selling them. Typically Correspondent clients offer more than mortgages. They can offer other financial products and services to their customers.

Cost of Funds Index (COFI): Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.

Credit report: A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

Creditworthiness: The likely ability of a borrower to repay debt.

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Debt-to-income 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 gross monthly income.

Declaration of Trust: A written instrument by a person (settlor-trustor), acknowledging that he or she holds title to property (as trustee) for the benefit of another or others (beneficiary).

Deed: The legal document conveying title to a property.

Deed of trust: The legal document used in some states instead of a mortgage that pledges property to the lender as security for payment of a debt.

Default: Failure to make mortgage payments on a timely basis or to comply with other conditions of a mortgage.

Delinquency: The state of a loan payment being overdue.

Deposit: Cash paid to the seller when a formal sales contract is signed.

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

Down payment: The part of the purchase price, which the buyer pays and does not finance with a mortgage.

Down payment Assistance Programs (DAP): A financing option for low- and moderate-income households to assist with the down payment and closing costs of a first mortgage. Funds for the second mortgage are provided by cities and counties, or state housing agencies, foundations, or nonprofit corporations. Payment on the second mortgage is often deferred, may carry no or low interest rates, and may be forgiven over a period of years.

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

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Earnest money: A deposit given to the seller to show that a prospective buyer is serious about buying the house.

Easement: A right-of-way giving persons other than the owner access to a property.

Equal Credit Opportunity Act (ECOA): A federal law that prohibits lenders from denying mortgages on the basis of the borrower’s race, color, religion, national origin, age, sex, marital status, receipt of income from public assistance programs, or exercising of rights under the Consumer Protection Act.

Equity: The difference between the market value of a property and the homeowner’s outstanding mortgage balance.

Equity loan: A loan based on the borrower’s equity in his or her home.

Escrow: The holding of documents and money by a neutral third party prior to closing; also, an account held by the lender into which a homeowner pays money for taxes and insurance. Sometimes called an impound account.

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Fair Credit Reporting Act: A consumer protection law that sets up a procedure for correcting mistakes on one’s credit record.

Federal Home Loan Mortgage Corporation (FHLMC): Also called “Freddie Mac.” A quasi-governmental agency that purchases conventional mortgage from insurance depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards 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 mortgage that is insured by the Federal Housing Administration.

Financing concession: Fees paid by the seller to facilitate a transaction. Frequently, these costs are simply added on to the sales price and result in a price higher than true market value.

First mortgage: The mortgage that has first claim in the event of default.

Fixed-Rate Mortgage(FRM): A mortgage in which the interest rate does not change during the entire term of the loan.

Flood insurance: Insurance required for properties in federally designated flood areas.

Foreclosure: The process by which a mortgaged property may be sold when a mortgage is in default.

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Good Faith Estimate: An itemized list of certain estimated closing costs associated with a mortgage loan, such as appraisal and title search, that the lender is required by law to provide to the borrower within three business days of receiving the application.

Government National Mortgage Association (GNMA): Also known as “Ginnie Mae.” Provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Graduated payment mortgage (GPM): A mortgage that starts with low monthly payments that increase at a predetermined rate.

Grant: A transfer of real estate between individuals by deed. A transfer of real estate from a sovereign by patent or royal decree.

Gross monthly income: The amount of income you earn each month before taxes and other pre-tax deductions (insurance, 401(k) contribution) are taken out.

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Hazard insurance: Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism, or other hazards.

Home equity line of credit: A line of credit which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property.

Home equity loan: Also known as a second mortgage. Like a mortgage, it is secured by the borrower’s home.

Home inspection: A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

Home Mortgage Disclosure Act (HMDA): A federal law implemented by Regulation C which requires creditors to report information on race or national origin and gender for all loans and lines of credit to be used for home improvement, refinance of home improvement, purchase or refinance of purchase.

Homeowner’s Association: An organization of homeowners living in a particular development, whose major purpose is to maintain and provide community services for the enjoyment of the residents.

Homeowner’s insurance: An insurance policy that combines liability coverage and hazard insurance.

Homeowner’s warranty: A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Housing and Urban Development (HUD): The U.S. Department of Housing and Urban Development, established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency. It is responsible for the implementation and administration of government housing and urban development programs.

HUD median income: Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

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Impound account: Also called an escrow account or a Tax and Insurance Reserve (TIR). Account required by the lender when they pay the property taxes, mortgage insurance, hazard insurance and flood insurance when required.

Index: A published external measure of interest rates paid on certain investments. Among the most common are the rates on one- three- or five-year Treasury securities and monthly averages of Jumbo ($100,000+) Certificates. Also known as base rate.

Initial interest rate: The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as “start rate” or “teaser rate.”

Installment: The regular periodic payment that a borrower agrees to make to a lender.

Installment loan: Borrowed money that is repaid in equal periodic payments, known as installments.

Insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Interest: The fee charged for borrowing money.

Interest rate: The cost of borrowing money, usually expressed as a percentage of the loan, paid over a specific period of time. The interest rate does not include fees charged for the loan. See annual percentage rate.

Interest rate cap: A provision of an ARM limiting how much interest rates may increase per adjustment period. See also Lifetime cap.

Interest rate ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

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Joint tenancy: A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.

Jumbo loan: A loan that exceeds Fannie Mae’s/Freddie Mac’s legislated mortgage amount limits. Also called a nonconforming loan. Currently up to $2 million.

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

Lease: A contract for possession of property in consideration of payment of rent.

Lease-purchase mortgage loan: An alternative financing option that allows low- and moderate-income homebuyers to lease a home from a nonprofit organization with an option to buy. Each month’s rent payment consists of PITI payments on the first mortgage, plus an extra amount that is earmarked for a savings account in which money for a down payment accumulates.

LIBOR: London Interbank Offered Rate. An index widely used by lenders to determine short-term interest rates for their loan products. The British Bankers’ Association (BBA) compiles the LIBOR, which is the interest rate banks pay to borrow funds from other banks in the London interbank market.

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

Lifetime payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Lifetime rate cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan.

Line of credit: An agreement between a bank and a client whereby the bank agrees over a future period, to lend the client funds up to an agreed maximum amount.

Loan servicing: The collection of mortgage payments from borrowers. If your mortgage payment includes escrows for taxes and insurance, these are paid annually by the servicing agent.

Loan-to-value (LTV) ratio: The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

Lock-in: A written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time (also referred to as “rate-lock”). Usually, the lock-in also specifies the number of points to be paid at closing.

Low-income: Defined as 80% of the median income for the area.

Low-income census tract (LICT): Census tract areas determined by HUD in which the median income for the area is 80% or less.

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Manufactured home: A home that is built in a factory, transported to its site and secured on a foundation.

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

Market value: Market value is the most probable price which a property should bring in a competitive and open market, under the conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. In a mortgage or a home equity loan, the market value is usually determined by an appraisal. Also known as fair market value.

Maturity: The end of the loan repayment period; a specific date in the future when full payment for a loan or other credit contract becomes due.

Modular housing: A home built at least partially in a factory and then assembled on a site. Homes are usually built to local building codes and are underwritten the same as site-built homes.

Monthly assessment: Also known as unit charge. A monthly fee paid to the homeowners’ association of a condominium or PUD to cover the cost of maintaining common areas, insurance and other expenses associated with managing the project.

Monthly fixed installment: That portion of the total monthly payment that is applied toward principle and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.

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

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

Mortgage broker: An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or commission for their services.

Mortgage insurance premium (MIP): The fee paid by a borrower to the FHA or a private insurer for mortgage insurance.

Mortgage note: A 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.

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

No cash-out refinance: A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower’s use (as long as the amount does not exceed one percent of the principal amount of the new mortgage).

Nonbinding agreement: Used by movers, a nonbinding estimate means the final price is determined on the day of the move, only after every item is weighed and transportation costs.

Non-conforming loans: See Jumbo loans.

Non-conforming use: Property use which doesn’t conform to current zoning requirements. Special underwriting treatment may be necessary where inability to continue the use could lead to a loss in value.

Note rate: The interest rate stated on a mortgage note.

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One-year adjustable: Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.

Origination fee: A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount (often 1%), or points.

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

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Payment cap: A provision of some ARMs limiting how much a borrower’s payments may increase regardless of how much the interest rate increases; may result in negative amortization.

Periodic rate: Rate of interest that a creditor charges on the balance on open-end or revolving accounts for a period of time, or billing cycle.

Periodic rate cap: The maximum amount the interest rate can change over a short period of time or interim.

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

Planned Unit Development (PUD): A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.

Points: A one-time charge by the lender to increase the yield of the loan; a point is one percent of the amount of the mortgage. The amount the interest decreases ranges from 10-35 basis points for each point you purchase. Also known as discount points.

Pre-approval: When an individual’s credit has been reviewed preliminarily by a mortgage lender and the lender has conditionally committed to provide a specific loan amount to the borrower.

Prepayment: The payment of a debt before it becomes due.

Prepayment penalty: A fee charged to a borrower who pays off a loan before it is due.

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

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

Private Mortgage Insurance (PMI): In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan’s structure.

Promissory note: A legal promise to repay the loan.

PUD (Planned Unit Development): A real estate project in which each unit owner has title to a residential lot and building, an undivided interest in common areas, and non-exclusive easements on the common areas of the project. The owner may have exclusive easements over some parts of the common areas (i.e. a parking space).

Purchase agreement: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. Also known as a sales agreement or sales contract.

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Real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of the owner or buyer.

Real estate broker: An individual employed on a fee or commission basis as agent to bring parties together and assist in negotiating contracts between them for the purpose of purchasing or selling a home.

Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give borrowers advance notice of estimated closing costs. Lenders are required to disclose whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

Realtor®: A copyrighted trade name that can be legally used only by those persons belonging to the National Association of Realtors.

Reconveyance: The conveyance to the landowner of the title held by a trustee under a deed of trust. May be full or partial.

Refinancing: The process of paying off one loan with the proceeds from a new loan secured by the same property.

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 collateral for and repayment of the loan.

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Second home: Single-family property that the borrower occupies in addition to his or her primary residence. It is suitable for year-round occupancy. It cannot be income-producing.

Second loan mortgage (aka 80/10/10): A 10% down payment purchase money loan program, where there are two separate mortgage loans. The first mortgage is for 80% of the sale price, the second mortgage is for 10% of the sale price. This loan avoids mortgage insurance (which is not deductible, while in most cases mortgage interest is), and builds equity quicker than a standard 30-year fixed-rate loan.

Second mortgage: A mortgage that has rights secondary to the first mortgage.

Secondary mortgage market: The buying and selling of existing mortgages.

Seller carryback: An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Servicing: All the steps and operations a lender performs 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 sheet: The computation of costs payable at closing which determines the seller’s net proceeds and the buyer’s net payment.

Shared Appreciation Mortgage (SAM): A mortgage in which a borrower receives a below-market interest rate in return for which the 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 mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.

Subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate financing: Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Survey: A measured drawing showing the legal boundaries of a property.

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Tax lien: The lien which is imposed upon real estate by operation of law which secures the payment of real estate taxes.

Tenancy in common: A type of joint ownership in a property without right of survivorship.

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. See mortgage broker.

Title: A legal document establishing the right of ownership.

Title company: A company that specializes in insuring title to property.

Title insurance: Insurance to protect the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.

Title search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Townhouse: A building type wherein units are not built over other units. Units are attached side to side, not top to bottom. They may be condominiums or PUDs, depending on their legal definitions.

Transfer tax: State or local tax payable when title passes from one owner to another.

Truth-in-Lending statement: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges using a standard format. This makes it easier for the borrower to compare the lending terms of different financial institutions.

Two-step mortgage: An adjustable-rate mortgage (ARM) that has one interest for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

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Underwriting: The process of evaluating a loan application to determine the risk involved for the lender.

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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.

Variable rate loan: A loan whose rate can change over the life of the loan. The rate may be tied to an index, and changes in the index can cause the rate to increase or decrease. Changes in the rate will cause the payments to also increase or decrease accordingly.

Variable rate: An interest rate that changes periodically, usually based on movements of an interest rate index.



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