A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate changes over time based on an index and a margin. Rate changes are made at prescribed times and within prescribed limits (caps) as defined in the mortgage contract.
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.
The gradual repayment of a mortgage by installments.
Annual Percentage Rate (A.P.R.)
The interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated rate on the mortgage because it takes into account points and other credit costs.
An opinion of the market value of a property, made by a qualified "appraiser".
An increase in value due to changes in market conditions or other causes.
The transfer of the seller's existing mortgage to the buyer.
A provision of an ARM limiting the interest rate or mortgage payment's increase.
Sufficient cash remaining after closing to make the first two mortgage payments.
The occasion where a sale is finalized; the buyer signs the mortgage, and closing costs are paid. Also called "settlement."
A promise by a lender to make a loan on specific terms to a borrower.
A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.
A condition that must be met before a contract is legally binding.
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.
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.
The legal document conveying title to a property.
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.
Failure to make payments on time. This can lead to foreclosure.
Paid to the seller when a formal sales contract is signed.
A decline in the value of a property; the opposite of "appreciation."
Money paid to make up the difference between the purchase price and the mortgage amount.
Given by buyer to seller as part of the purchase price to bind the transaction.
Equal Credit Opportunity Act (ECOA)
Federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
The value an owner has in real estate over and above the loans against the property.
A loan based on the borrower's equity in his or her home.
Refers to a neutral third party who carries out the instruction of both the buyer and seller to handle all the paperwork of settlement or closing. Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
A policy that combines liability coverage and hazard insurance.
A type of insurance that covers repairs to specified parts of a house for a specific period of time.
Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income.
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments, which is then used to adjust the interest rate.
The fee charged by the lender for borrowing money.
A construction loam made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
A legal claim against a property that must be paid when the property is sold.
The relationship between the amount of the mortgage loan and the appraised value of the property, expressed as a percentage.
A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closes with that buyer within a set period of time. The lock-in also usually specifies the number of points to be paid at closing as well.
The set percentage added to the index rate to determine the interest rate of an ARM.
A legal document that pledges a property to the lender as security for payment.
Mortgage Insurance (Private Mortgage Insurance - PMI)
Money paid to insure the mortgage when the down payment is less than 20 percent. Insurance provided by a non governmental insurer that protects lenders against a loss if a borrower defaults.
The borrower / homeowner.
A provision of some ARMs limiting how much a borrower's payments may increase regardless of how much the interest rate increases.
Principal, Interest, Taxes and Insurance. Also called monthly housing expense.
Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
A privilege in a mortgage permitting the borrower to make payments in advance of their due date.
Money charged for an early repayment of debt.
The amount of debt, not counting interest, left on a loan.
A document that gives evidence of an individual's ownership of property.
A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller.
An examination of municipal records to determine the legal ownership of property. This is usually performed by a title company.
State or local tax payable when title passes from one owner to another.
A federal law that requires lenders to full disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
A mortgage in which the borrower receives a below-market interest rate for a specified number of years, and then receives a new interest rate adjusted (within certain limits) to market conditions at that time.