Glossary of Terms

A

Ajustable-Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically according to a pre-selected index and margin.

Alternative Financing: A home financing program that accommodates borrowers with special qualifying factors, including lack of down payment and poor credit histories.

Amortization: The gradual reduction of a debt over a period of time in which a regular payment will pay off a loans principal and interest. Example: a 30 year loan amortizes over 30 years.

Annual Percentage Rate (APR): A yearly percentage rate that expresses the total finance charge on a loan over its entire term. The APR figure includes the interest rate; certain fees associated with the cost of getting the mortgage, discount points, mortgage insurance, and therefore is a more complete measure of a loan’s cost than the interest rate alone. The loan’s interest rate, not the APR, is used to calculate the monthly principal and interest payment for the loan.

Annual Cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate or monthly payment can increase or decrease from one adjustment period to another.

Annuity: An amount paid yearly or at other regular intervals, often at a guaranteed minimum amount. Also, a type of insurance policy in which the policy holder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company.

Application (or 1003): The initial statement by a borrower(s) regarding their current personal and financial information, the purpose of the loan and the property that will be secured with the loan. The information is then verified and used to approve the borrower(s). Lender’s often call this for a 10 03 (1003) which is the form number of FNMA’s standard application form.

Application Fee: The fee that a mortgage lender, broker or bank charges to apply for a mortgage to help cover the initial processing costs.

Appraisal: A professional analysis, done by an appraiser, whose opinion is used to estimate the value of the property. This document will include examples of at least 3 similar properties that have sold in your home’s area.

Appraiser: A professional who conducts an analysis of the property, including examples of sales of similar properties in order to develop an estimate of the value of the property. The analysis report is called an “appraisal”.

Appreciation: An increase in the market value of a home due to changing market conditions and/or home improvements. Opposite of depreciation.

Arbitration: A process where disputes are settled by referring them to a fair and neutral third party (arbitrator). The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.

Asbestos: A toxic material that was once used in housing insulation and fireproofing. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. If you’re buying an older home, it may still have asbestos material in it, so please ask a professional for the proper care and handling of this material.

Assessed Value: The value placed on real property, by the taxing authority, for the purpose of determining real estate taxes owed on that property. (assessed value x millage rate = annual real estate taxes)

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

Asset: Anything of monetary value that is owned by a person or company. Assets include real property, personal property, stocks, mutual funds, etc.

Assignment of Mortgage: A document evidencing the transfer of ownership of a mortgage from one person or institution to another.

Assumable Mortgage: A mortgage loan that can be taken over or assumed by the new buyer when real property (a home) is sold. This is called a “Simple Assumption” and the person on the original note remains liable for timely mortgage payments to the Lender. A “Formal Assumption” of a mortgage is a transaction in which the buyer of real property takes over the seller’s existing mortgage and the person on the original note is released of liability by the lender for future payments, because the new borrower has been approved by the Lender. If the mortgage contains a due-on-sale clause, the loan may not be assumed without the Lender’s consent.

Assumption: A homebuyer’s agreement to take on the primary responsibility for paying an existing mortgage from a home seller, (see assumable mortgage).

Assumption Fee: A fee the lender charges a buyer who will assume the seller’s existing mortgage.

Automated Underwriting: A computerized method of reviewing home mortgage applications for loan approval, that streamlines the processing of loan applications and provides a recommendation to the lender to approve the loan or refer it for manual underwriting.

B

Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Mortgage: A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mortgage may contain an option to “reset” the interest rate to the current market rate and to extend the due date if certain conditions are met.

Balloon Payment: A final lump sum payment that is due, often at the maturity date of a balloon mortgage, (see balloon mortgage).

Bankruptcy: A federal court proceeding in which a debtor is legally declared unable to pay their debts. Bankruptcy can severely impact your credit and your ability to borrow money. Individuals can file two types of Bankruptcy, chapter 7 and chapter 13. With chapter 7, no future payments are expected, all claimed debts are written off by the lender as a bad debt. With chapter 13, monthly payments are established based on the debtor’s ability to pay, usually paid over a 3 to 5 year time period. A credit report will report both types of bankruptcy negatively.

Before-tax Income: Income before taxes are deducted. Also known as “gross income.”

Bi-Weekly Payment Mortgage: A mortgage with payments due every two weeks, instead of once a month. This payment plans makes it so you pay 13 payments in a year versus the normal 12. Therefore, you will amortize your loan faster with this payment type, but you will also have to qualify for the larger required monthly payment.

Bi-Monthly Payment Mortgage: A mortgage with payments due on the 1st and 15th day of each month, instead of once a month. You will amortize your loan faster with this payment type, but you will also have to qualify for the larger required monthly payment.

Bona fide: In good faith, without fraud.

Borrower (Mortgagor): A person who applies for and receives a loan or mortgage and is obligated to repay the debt under the terms of the loan agreement.

Bridge Loan: A short-term loan secured by the borrower’s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new house before the current home is sold. Also known as a “swing loan.”

Broker: An individual or firm that acts as an agent between providers and users of products or services, such as a mortgage broker or real estate broker. See also “Mortgage Broker” and “Real Estate Professional/Broker.”

Building Code: Local regulations that set forth the standards and requirements for the construction, maintenance and occupancy of buildings and homes. The codes are designed to provide for the safety, health and welfare of the public.

Buy-down: An arrangement whereby the buyer, seller or another third party provides an interest subsidy to reduce the borrower’s monthly payments typically in the early years of the loan. Often referred to as a “temporary buy-down”.

Buy-down Account: An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buy-down plan is in effect. These funds are held by the lender.

Buyer’s Broker/Agent/Realtor: Most real estate brokers and agents work only for the sellers. A buyer’s broker/agent serves the interest of the buyer only, by contract, and has no relationship with the seller.

C

Cap: For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate or mortgage payments may increase or decrease over a certain time period. See also “Lifetime Payment Cap,” “Lifetime Rate Cap,” “Periodic Payment Cap,” “Annual Cap,” and “Periodic Rate Cap.”

Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability (job history and security), your assets and savings, and the amount of your income each month that is left over after you’ve paid for your housing costs, debts and other obligations.

Capital Gains: Used for tax purposes. The positive difference between what you make on house when you sell it versus what you paid for it. For example, if you purchase a property for $100,000 and sell it later for $150,000, your capital gain is $50,000.

Cash-out Refinance: A refinance transaction in which the borrower receives additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens.

Certificate of Deposit: A document issued by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Eligibility: A document issued by the U.S. Department of Veterans Affairs (VA) certifying a veteran’s eligibility for a VA-guaranteed mortgage loan. VA form number DD214.

Chain of Title: The history of all of the documents that have transferred title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Orders: A change in the original construction plans ordered by the property owner or general contractor.

Clear Title: Proof of Ownership that is free and clear of liens, defects, or other legal encumbrances to the real property.

Closing: The process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See also “Settlement.”

Closing Agent: Usually an attorney or escrow/title agency representative who oversees the various closing activities, including the preparation and recording of closing documents and the disbursement of funds. (Also referred to as an escrow agent or settlement agent.)

Closing Costs: The upfront fees charged in connection with a mortgage loan transaction. Monies paid by a buyer (and/or seller or other third party, if applicable) to effect the closing of a mortgage loan, generally including, but not limited to a loan origination fee, discount points, appraisal, credit report, title insurance, title company closing fee, survey, attorney’s fee, and prepaid items, such as escrow deposits for taxes and insurance.

Closing Date: The date on which the sale of a property is to be finalized and a loan transaction completed. Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent, and the lender.

Closing Statement: See “HUD-1 Settlement Statement.”

CMA Comparable Market Analysis: A written analysis of houses having similar characteristics currently being offered for sale as well as comparable houses sold in the past six months. This enables you to determine if you are paying market value for a home, and to identify whether market prices are rising or falling. It is also used by sellers to determine what their home should sell for.

Co-borrower: Any borrower other than the first borrower whose name also appears on the application and mortgage note, the co-borrower typically owns the property jointly with the first borrower and shares liability for the note. Each borrower is 100% responsible to make the payment if the other does not.

Collection: The process of collecting a final payment or balance owed for a debt to a creditor by a third party which then receives a “commission” to collect the payment from the borrower for the creditor.

Collateral: An asset that is pledged as security for a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan agreement. In the case of a mortgage, the collateral would be the house and real property.

Commission: The fee charged for services performed, usually based on a percentage of the sales price of the items sold (such as the fee a real estate agent earns on the sale of a house).

Commitment Letter: A formal offer from your lender that states the terms under which they agree to lend money to the borrower. Also includes the amount of the mortgage, the interest rate, and length of the loan term.

Common Areas: Those portions of a building, land, or improvements and amenities owned 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.

Comps/Comparables: An abbreviation for “comparable properties,” which are used as a comparison in determining the current value of a property that is being appraised.

Concession: Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.

Condominium: A unit in a multi-unit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own solely the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes and insurance on the common areas and reserves for improvements.

Construction Loan: A loan for financing the cost of construction or improvements to a property; the lender disburses payments to the builder at periodic intervals during construction. This is typically a first lien loan and considered temporary financing.

Contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often include a home inspection contingency; the sales contract is not binding unless and until the purchaser has the home inspected and approves of their findings.

Conventional Mortgage/Loan: A mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as FHA, VA or Rural Housing. This type of loan will have Private Mortgage Insurance (PMI) if you are putting down less than a 20% down payment.

Conversion Option: A provision of some adjustable-rate mortgage (ARM) loans that allows the borrower to change the ARM to a fixed-rate mortgage at specified times after loan origination.

Convertible ARM: An adjustable-rate mortgage (ARM) that allows the borrower to convert the loan to a fixed-rate mortgage under specified conditions.

Cooperative (Co-op) Project: A project in which a corporation holds title to a residential property and sells shares to individual buyers, who then receive a proprietary lease as their title. These are similar to condo’s.

Cost of Funds Index (COFI): An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) loans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.

Counter-offer: An offer made in response to a previous offer. For example, after the buyer presents their first offer, the seller may make a counter-offer with a slightly higher sale price.

Credit: The ability of a person to borrow money, or buy goods by paying over time. Credit is extended based on a lender’s opinion of the person’s financial situation and reliability, among other factors. Your timely monthly payments on a debt, will reflect a satisfactory payment history and as such will be reported on your credit rating.

Credit Bureau: A company that gathers information on consumers who use credit. These companies sell that information to lenders and other businesses in the form of a credit report.

Credit History: Information in the files of a credit bureau primarily comprised of a list of individual consumer debts and a record of whether or not these debts were paid back on time or “as agreed.” Your credit history is called a credit report when provided by a credit bureau to a lender or other business.

Credit Life Insurance: A type of insurance that pays off a specific amount of debt or a specified credit account if the borrower dies while the policy is in force.

Credit Report: Information provided by a credit bureau that allows a lender or other business to examine your use and availability of credit. It provides information on money that you’ve borrowed from creditors and your monthly re-payment history.

Credit Score: A numerical value that ranks a borrower’s credit risk at a given point in time based on a statistical evaluation of information in the individual’s credit history that has been proven to be predictive of loan performance. 850 is the highest score possible.

Creditor: A person who extends credit to whom you owe money.

Creditworthy: Your ability to qualify for credit and show others how you repay debts.

D

Debt: Money owed from one person or institution to another person or institution.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, installment debts –such as car and loan payments, and payments on revolving or open-ended accounts, such as credit cards. Each loan program will have different guidelines for what this maximum percentage can be.

Deed: The legal document transferring ownership or title to a property.

Deed Holder: The “true owner” of a property because there is no lien against it.

Deed-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to satisfy the mortgage debt and avoid foreclosure. Also called a “voluntary conveyance.”

Deed of Trust: A legal document in which the borrower transfers the title to a third party (trustee) to hold as security for the lender. When the loan is paid in full, the trustee transfers title back to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.

Default: Failure to fulfill or pay on time, a legal obligation as agreed to, in a contract.

Delinquency: Failure to make a payment when it is due. The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which payment is 30 days or more past due.

Depreciation: A decline in the value of a house due to changing market conditions or lack of upkeep on a home. Opposite of appreciation.

Discount Point: A fee paid by the borrower at closing to reduce the interest rate. A point equals one percent of the loan amount.

Down Payment: Money paid to make up the difference between the purchase price and the mortgage amount. Some loans are offered with as little as zero down payment.

Due-on-Sale Clause: A provision in a mortgage that allows the lender to demand repayment in full of the outstanding balance if the property securing the mortgage is sold.

E

Earnest Money Deposit: The deposit to show that you’re committed (earnest or sincere) to buying the home. The deposit usually will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not fulfilled. It will be credited towards the cash you need at closing.

Easement: A right to the use of, or access to, land owned by another.

Employer-Assisted Housing: A program in which companies assist their employees in purchasing homes by providing assistance with the down payment, closing costs, or monthly payments.

Encroachment: The intrusion onto another’s property without right or permission.

Encumbrance: Any claim on a property, such as a lien, mortgage or easement.

Equal Credit Opportunity Act (ECOA): A federal law that requires lenders to make credit equally available without regard to the applicant’s race, color, religion, national origin, age, sex, or marital status; the fact that all or part of the applicant’s income is derived from a public assistance program; or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. It also requires various notices to consumers.

Equity: The value in your home over and above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, (sometimes also called impounds or reserves) or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. Also a term used in certain parts of the country representing a real estate closing.

Escrow Account: An account that a mortgage company establishes on behalf of a borrower to pay taxes, insurance premiums, or other charges when they are due. Also known as an “impound” or “reserve” account.

Escrow Analysis: The accounting that a mortgage company performs to determine the appropriate balances for the escrow account, compute the borrower’s monthly escrow payments, and determine whether any shortages, surpluses or deficiencies exist in the account.

Eviction: The legal act of removing someone from real property.

Exclusive Right-to-Sell Listing: The traditional kind of listing agreement under which the property owner appoints a real estate agent/broker (known as the listing agent/broker) as exclusive agent to sell the property on the owner’s stated terms, and agrees to pay the listing broker a commission when the property is sold, regardless of whether the buyer is found by the broker, the owner or another broker. This is the kind of listing agreement that is commonly used by a listing broker to provide the traditional full range of real estate brokerage services. If a second real estate broker (known as a selling broker) finds the buyer for the property, then some commission will be paid to the selling broker.

Exclusive Agency Listing: A listing agreement under which a real estate agent/broker (known as the listing broker) acts as an exclusive agent to sell the property for the property owner, but may be paid a reduced or no commission when the property is sold if, for example, the property owner rather than the listing broker finds the buyer. This kind of listing agreement can be used to provide the owner a limited range of real estate brokerage services rather than the traditional full range. As with other kinds of listing agreements, if a second real estate broker (known as a selling broker) finds the buyer for the property, then some commission will be paid to the selling broker.

Executor: A person named in a will that’s approved by a probate court to administer the deposition of an estate in accordance with the instructions of the will. Also applies in the case of a Trust or Living Trust.

F

Fair Credit Reporting Act (FCRA): A consumer protection law that imposes obligations on (1) credit bureaus (and similar agencies) that maintain consumer credit histories, (2) lenders and other businesses that buy reports from credit bureaus, and (3) parties who furnish consumer information to credit bureaus. Among other provisions, the FCRA limits the sale of credit reports by credit bureaus by requiring the purchaser to have a legitimate business need for the data, allows consumers to learn the information on them in credit bureau files (including one annual free credit report), and specifies procedure for challenging errors in that data.

Fair Market Value: The price at which property would be transferred between a willing buyer and willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not under any compulsion to buy or sell.

Fannie Mae (FNMA): A New York stock exchange company. It is a public company that operates under a federal charter and is the nation’s largest source of financing for home mortgages. Fannie Mae does not lend money directly to consumers, but instead works to ensure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.

Fannie Mae-Seller/Servicer: A lender that Fannie Mae has approved to sell loans to it and to service loans on Fannie Mae’s behalf.

Fannie Mae/Freddie Mac Loan Limit: The 2008 Fannie Mae/Freddie Mac loan limit for a single-family home is $417,000 and is higher in Alaska, Guam, Hawaii, and the U.S. Virgin Islands. The Fannie Mae loan limit is $533,850 for a two-unit home; $645,300 for a three-unit home; and $801,950 for a four-unit home. Also referred to as the “Conventional loan limit.”

Federal Housing Administration (FHA): An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders.

FHA-Insured Loan: A loan that is insured by the Federal Housing Administration (FHA) of the U.S. Department of Housing and Urban Development (HUD).

FICO Score: A numerical rating used on credit reports, developed and maintained by Fair Isaac and Company that indicates a borrower’s creditworthiness based on multiple criteria.

Finance Charge: The total paid by the borrower for all of the interest and the related charges for financing on a loan, over the amortization period.

First Mortgage: A mortgage that is the primary lien against a property.

First-Time Home Buyer: A person with no ownership interest in real property during the three-year period preceding the purchase of real property.

Fixed-Period, Adjustable-Rate Mortgage: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified time period, for the remainder of the term. Also known as a “hybrid loan.”

Fixed-Rate Mortgage: A mortgage where the interest rate and monthly payment does not change during the entire term of the loan.

“Float” or “Float the Rate”: This term is used when a mortgage applicant chooses not to secure a rate lock at the time of application, but instead allows the note rate pricing to fluctuate until the applicant decides to lock in, usually no later than five days prior to the mortgage closing.

Flood Certification Fee: A fee charged by independent mapping firms to identify properties located in areas designated as flood zones.

Flood Insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood hazard zones.

Foreclosure: A legal procedure that ends a homeowner’s interest in a property and allows the property which was mortgaged, as security for the loan, to be sold to pay the defaulting borrower’s debt towards that loan.

Forfeiture: The loss of money, property, rights, or privileges due to a breach of a legal obligation.

Freddie Mac (FRE): A New York stock exchange company. It is a public company that operates under a federal charter and is the nation’s second largest source of financing for home mortgages. Freddie Mac does not lend money directly to consumers, but instead works to ensure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.

FSBO (fizz-bow): For Sale By Owner.

Fully Amortized Mortgage: A mortgage in which the monthly payments are designed to pay off in full the obligation at the end of the amortization period or loans term.

G

General Contractor: A person who oversees a home improvement or construction project and handles various aspects such as scheduling contractors/workers and ordering supplies.

Gift Letter: A letter that a family member writes verifying that they have given you a certain amount of money as a gift and that you do not have to repay it. You can use this money towards your down payment and mortgage costs with some mortgages.

Good-Faith Estimate: A form that discloses to the borrower their estimated costs for fees related to obtaining the mortgage for their home that will be paid prior to or at the time of settlement or closing. This form is required by the Real Estate Settlement Procedures Act (RESPA).

Government Mortgage/Loan: A mortgage loan that is insured or guaranteed by a federal government entity such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).

Government National Mortgage Association (Ginnie Mae): A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD) that guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Popularly known as “Ginnie Mae.”

Grace Period: The period of time after the payments due date when a loan payment may be paid without incurring a late fee or rating.

Gross Monthly Income (GMI): The income you earn in a month before taxes and other deductions. It also may include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Ground Rent: Payment for the use of land when title to a property is held as a leasehold estate (that is, the borrower does not actually own the property, but has a long-term lease on it).

Growing-Equity Mortgage (GEM): A fixed-rate mortgage in which the monthly payments increase according to an agreed-upon schedule, with the extra funds applied to reduce the loan balance and loan term.

H

Hazard Insurance: Insurance coverage on your home that compensates you for physical damage to the property from fire, wind, vandalism, or other covered hazards or natural disasters. (see Homeowner’s insurance)

Home Equity Conversion Mortgage (HECM): A special type of mortgage developed and insured by the Federal Housing Administration (FHA) that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Commonly called a “Reverse Mortgage.”

Home Equity Line of Credit (HELOC): A type of revolving loan that enables a home owner 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 the property.

Home/House Inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, structural soundness, heating and cooling systems, roof, electrical wiring, foundation and pest infestation. Buyers should always have a home inspection report as part of their purchase agreement.

Homeowners’ Association: An organization of homeowners residing within a particular area whose principle purpose is to ensure the provision and maintenance of community facilities and services for the common benefit of the residents.

Homeowner’s Insurance (also called Hazard Insurance): A policy that protects the home owner and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; vandalism or damage to your personal property, such as your furniture, clothes or appliances.

Homeowner’s Warranty (HOW): Insurance which can be offered by a seller that covers certain home repairs and fixtures for a specified period of time.

Housing Expense Ratio: The percentage of your gross monthly income that goes toward paying for your housing expenses.

HUD: an acronym for Housing and Urban Development, the US government agency that oversees the Federal Housing Administration (FHA).

HUD 1 – Settlement Statement: A final listing of the closing costs for the mortgage transaction. It lists the sales price and down payment, as well as the individual charges and total settlement costs related to the transaction for the buyer and seller.

Hybrid Loan: A unique adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term.

I

Impound account: An account that a mortgage company establishes on behalf of a borrower to pay taxes, insurance premiums, or other charges when they are due. Also known as an Escrow account.

Income Property: Real estate developed or purchased to produce income, such as a rental unit.

Index: A number used to compute the “base” interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on 1 year U.S. Treasury bills. A predetermined margin is added to the index to determine the interest rate that will be charged on the ARM.

Individual Retirement Account (IRA): A tax-deferred savings plan that can help you build a retirement “nest egg”.

Inflation: An increase in prices for goods or services.

Initial Interest Rate: The original interest rate for an adjustable-rate mortgage (ARM). Sometimes known as the “start rate.”

Inquiry: A request for a copy of your credit report by a lender or other business, often when you fill out a credit application and/or request more credit. Too many inquiries on a credit report can hurt your credit score; however, most credit scores are not affected by multiple inquiries from mortgage lenders within a 1 month period of time.

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

Installment Debt: A loan that is repaid in accordance with a schedule of payments for a specified term (such as an automobile loan).

Insurance: A policy or contract which provides compensation to the owner against a financial loss, if the claim is within the limits and liability of the policy.

Interest/Interest Rate: The cost you pay to borrow money. Interest is usually expressed as an annual percentage of the loan amount and is paid back monthly along with the required principal payment.

Interest Accrual Rate: The percentage rate at which interest accumulates or increases on a mortgage loan.

Interest Rate Cap: For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate can change per the adjustment period or over the lifetime of the loan, as stated in the note. ARM’s have annual and life time interest rate caps.

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

Interest Rate Floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Interim Interest: The interest that accrues, on a per-diem (daily) basis, from the day of closing until the end of the month in which you closed.

Investment Property: A property purchased to generate rental income, tax benefits, or profitable resale rather than to serve as the borrower’s primary residence. Contrast with “second home.”

J

Joint Liability: When liability is shared by 2 or more people for the repayment of a debt. Typically each person is held 100% liable for the debts repayment.

Joint Tenancy: A form of Real Property ownership that gives each person equal interest in the property including the rights of survivorship.

Judgment/Judgment Lien: The decree by a judicial court that determines the rights of the Plaintiff to collect a debt, the amount owed on the debt and their rights to the collection of the debt from the debtor/defendant.

Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. It is also called a “non-conforming loan” because its size exceeds Fannie Mae’s or Freddie Mac’s loan limit for a single mortgage, not because it’s of a lesser credit quality.

Junior Mortgage: A loan that is subordinate to the primary loan or first-lien mortgage loan, such as a second or third mortgage.

K

Keogh Funds: A tax-deferred retirement-savings plan for small business owners or self-employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax-deductible.

L

Land Contract: A type of seller financing. Always make sure that the “Deed Holder” is receiving their expected monthly payments. An attorney is recommended for this type of transaction.

Late Charge: A penalty imposed by the lender when a borrower fails to make a scheduled payment on time.

Lease-Purchase Option: An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.

Lender: The Bank, Mortgage Company or Mortgage Broker who is offering the loan.

Liabilities: A person’s debts and other financial obligations.

Liability Insurance: Insurance coverage that protects property owners against claims of negligence, personal injury or property damage to another party.

LIBOR-Index: An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market.

Lien: A legal claim or charge, attached to a property for payment of a debt. With a mortgage, the lender has the right to take the title/ownership to your property if you don’t make the mortgage payments.

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

Line of Credit: An agreement with a Bank or Creditor that allows the borrower to borrow up to a certain amount of money which can then be repaid and re-borrowed without an additional application to borrow, each time the Line of Credit is used.

Liquid Asset: A cash asset or an asset that is easily converted into cash.

Loan Application: Is the initial statement signed by an individual(s) regarding their personal and financial status with regards to proving their ability to qualify for a loan. Applying for a loan does not legally bind the borrower or the Lender to the loan.

Loan Conditions: These are terms under which the lender agrees to make the loan. They include the interest rate, length of loan agreement, and any requirements the borrower must meet prior to closing.

Loan Origination: The process by which a loan application is made. This may include taking a loan application, processing and underwriting the application’s information and closing the loan.

Loan Origination Fees: Fees paid to your mortgage lender, broker or bank for processing the mortgage application. This fee is usually in the form of a percentage of the loan amount, not to be confused with discount points. A one percent Loan Origination fee, equals one percent of the mortgage amount.

Loan Processing: The preparation of a mortgage loan application which involves the collection of the supporting documentation related to the application. The person collecting and assembling this information is called the Loan Processor.

Loan Settlement/Closing: The conclusion of the mortgage transaction. This includes the delivery of a deed, the signing of a mortgage and note(s), and the disbursement of funds necessary to the mortgage loan transaction.

Loan Term: The time period between the closing date of a loan and when the final payment is paid. The loan will then be paid in full or still have a balance owed.

Loan-To-Value (LTV) Ratio: The ratio between the loan amount and the value of the property (the lower of appraised value or sales price), expressed as a percentage of the property’s value. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.

Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.

Low-Down-Payment Feature: A feature of some mortgages, usually fixed-rate mortgages, that helps you buy a home with a low or no down payment.

M

Manufactured Housing: Homes that are built entirely in a factory in accordance with a federal building code administered by the U.S. Department of Housing and Urban Development (HUD). Manufactured homes may be single-or multi-section and are transported from the factory to a site and installed. Homes that are permanently affixed to a foundation often have a deed and will be classified as real property under applicable state law, and may be financed with a mortgage. Homes that are not permanently affixed to a foundation generally are classified as personal property, and are financed with a retail installment sales agreement.

Margin: A predetermined percentage added to the index of an adjustable-rate mortgage (ARM) to establish the new interest rate until the next adjustment period.

Market Value: The current value of your home based on what a purchaser would pay. An appraisal is sometimes used to determine market value.

Maturity Date: The date on which a mortgage loan is scheduled to be paid in full, as stated in the note.

Merged Credit Report: A single credit report issued by a credit reporting company that combines the borrower’s information from two or three other credit bureaus.

Modification: Any change to the terms of a mortgage loan, including changes to the interest rate, loan balance, or loan term.

Money Market Account: A type of investment in which funds are invested in short-term securities.

Mortgage: A document which allows the Lender to secure their note or loan as a lien, using your home as collateral. Quite often, it is used as a term which actually is describing the note or loan on your home.

Mortgagee: The institution or lender who lends the money to buy a home and is given a mortgage on the property.

Mortgage Broker: An individual or firm that brings borrowers and lenders together for the purpose of providing funds to buy a home.

Mortgage Insurance (MI or PMI): Insurance that protects Lenders against losses caused by a borrower’s default on a mortgage loan. MI typically is required if the borrower’s down payment is less than 20 percent of the purchase price. (see Private Mortgage Insurance).

Mortgage Insurance Premium (MIP): The amount paid by a borrower for mortgage insurance to the Federal Housing Administration (FHA) or Conventional lender that protects Lenders against losses caused by a borrower’s default on a mortgage loan.

Mortgage Lender: The lender providing funds for a mortgage closing.

Mortgage Life Insurance: A type of insurance that will pay off a mortgage if the borrower dies while the loan is outstanding; a form of credit life insurance. Not to be confused with mortgage insurance (see mortgage insurance).

Mortgage Rate: The interest rate you pay to borrow the money to buy your house.

Mortgage Payment: A monthly payment of principal and interest, which is used to pay off a mortgage. The interest portion is applied toward the previous month’s debt and the principal portion is applied to the loans current month’s principal balance owed. If you have an impound or escrow account, this portion is used to pay towards those bills as they come due.

Mortgagor: The owner of real estate who pledges property as security for the loan; the borrower.

Multifamily Mortgage: A mortgage loan on a building with two or more dwelling units. If the building has more than 5 units it is usually financed with a commercial mortgage from a bank.

Multifamily Properties: Typically, broken down into two types of properties. 1 to 4 unit buildings or buildings with five or more dwelling units. 1 to 4 unit buildings can be mortgaged with a “regular mortgage,” while buildings with 5 or more unit are mortgage with a commercial note from a bank.

Multiple Listing Service (MLS): A computer-based, shared listing service for real estate agents that provides the details and descriptions of their homes listed for sale in an area.

Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.

N

Negative Amortization: An increase in the principal balance of a loan caused by adding unpaid interest to the loan balance on a monthly or annual basis; this occurs because the payment is not enough to cover the interest that is due.

Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Net Worth: The value of a company’s or individual’s assets, including cash, minus the total liabilities.

No Cash-out Refinance: A refinance transaction in which the borrower receives NO additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens that were used originally to buy the home.

Nonconforming Loan: Conventional home mortgages that are not eligible for sale and delivery to either FNMA or FHLMC because of various reasons, including loan amount, loan characteristics, or underwriting guidelines.

Non-Liquid Asset: An asset that cannot easily be converted into cash.

Notary: A person who acts as a certified witness to signatures on an official document. Notaries must be licensed, certified and bonded within the state(s) that they serve.

Note: A written promise to pay a specified loan amount under the agreed upon conditions. Usually tied to a property with a mortgage.

Note Rate: The interest rate stated on a note, or other loan agreement.

O

Offer: A formal bid from the home buyer to the home seller to purchase a home.

Open House: When the seller’s real estate agent opens the seller’s house to the public for viewing. You don’t need a real estate agent to attend an open house.

Original Principal Balance: The total amount of principal owed on a mortgage before any payments are made.

Origination Fee: A fee paid to a lender, broker or bank to cover the administrative costs of processing a loan application. The origination fee typically is stated in the form of points. One point is equal to one percent of the mortgage amount.

Owner Financing: A transaction in which the property seller provides all or part of the financing for the buyer’s purchase of the property. Can be in the form of a mortgage or a land contract.

Owner-Occupied Property: A property that serves as the borrower’s primary residence.

P

Partial Payment: A payment that is less than the scheduled monthly payment on a mortgage loan.

Payment Change Date: The date on which a new monthly payment amount takes effect, for example, on an adjustable-rate mortgage (ARM) loan.

Payment Cap: For an adjustable-rate mortgage (ARM) or other variable rate loan, a limit on the amount that payments can increase or decrease during any one adjustment period.

Per Diem Interest: The interest owed on a loan per day, until the next monthly payment is due. This is typically only charged at the time of closing on a loan.

Personal Property: Any property that is not real property.

P I T I: An acronym for the four primary components of a monthly mortgage payment: principal, interest, taxes, and house insurance (PITI).

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

Planned Unit Development (PUD): A real estate project in which individuals hold title to a residential lot and home while the common facilities are owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners. Similar to a Condominium.

Point(s): A percentage of the loan amount. For example, if a loan is for $50,000, one point equals $500.

Power of Attorney: A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval: A process by which a lender provides a prospective borrower with an indication of how much money he or she will be eligible to borrow when applying for a mortgage loan. This process typically includes a review of the applicant’s credit history and may involve the review and verification of income and assets to close. Preferred to a pre-qualification because of the verification of the borrower’s information.

Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.

Pre-Qualification: A preliminary assessment by a lender of the amount it will lend to a potential home buyer. The process of determining how much money a prospective home buyer may be eligible to borrow before he or she applies for a loan. This is based on un-verified information provided by the borrower.

Pre-Qualification Letter: A letter from a mortgage lender that states that you’re pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.

Predatory Lending: Abusive lending practices that include making mortgage loans to people who do not have the income to repay them or repeatedly refinancing loans, charging high points and fees each time and “packing” credit insurance onto a loan.

Prepaids: Costs paid at closing related to the house versus the cost or the mortgage loan. They typically include per diem prepaid interest and initial deposits of monthly escrows for taxes and house insurance.

Prepayment: Any amount paid to reduce the principal balance of a loan before the scheduled due date.

Prepayment Penalty: A fee that a borrower may be required to pay to the lender, in the early years of a mortgage loan, for repaying the loan in full or prepaying a substantial amount to reduce the unpaid principal balance earlier than allowed in the agreement.

Principal: The amount of money borrowed or the amount of the loan that has not yet been repaid to the lender. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid, excluding the interest. Also, that part of the monthly payment that reduces the outstanding balance of a loan. Not to be confused with the head of a school, although spelled the same.

Principle: a personal or a specific basis of conduct or management. A fundamental, primary, or general law or truth from which other laws or truths are derived.

Private Mortgage Insurance (PMI): Insurance for conventional mortgage loans that protects the lender from loss in the event of default by the borrower. This should not be confused with Death benefit life insurance, which is often called mortgage insurance by Life Insurance salesmen. See Mortgage Insurance.

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

Property Appreciation: See “Appreciation.”

Purchase Contract and Sale Agreement: Also referred to as a Buy/Sell agreement, this document details the price and conditions for a transaction. In connection with the sale of a residential property, the agreement typically would include: information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, length of time the offer is valid, and any special contingencies.

Purchase Money Mortgage: A mortgage loan that enables a borrower to acquire a property.

Q

Qualifying Guidelines: Criteria used by Lenders to determine eligibility for a loan.

Qualifying Ratios: Calculations that are used in determining the loan amount that a borrower qualifies for, typically a comparison of the borrower’s total monthly income to the new house payment and other recurring monthly debts and obligations.

Quality Control: A system of safeguards to ensure that loans are originated, underwritten and serviced according to the lender’s standards and, if applicable, the standards of the investor, governmental agency, or mortgage insurer.

Quitclaim Deed (not Quick): A legal document (usually a deed) that transfers any ownership interest that one person has in a property to another person(s). Example, a divorcing person can quitclaim, give up, their interest in the home to the other party.

R

Radon Gas: A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses if not treated with proper permanent ventilation.

Rate Cap: The limit on the amount an interest rate on an adjustable-rate mortgage (ARM) can increase or decrease during an adjustment period. There are annual and life rate caps on adjustable rate mortgages.

Rate Lock: An agreement between the Lender and the borrower, in which an interest rate is “locked in” or guaranteed for a specified period of time prior to closing. See also “Lock-in Rate.”

Ratified Sales Contract: A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspection, making repairs, closing by a certain date, etc.

Real Estate Agent/Professional/Realtor®/Broker: A state licensed sales person who provides services in the buying and selling of homes or real property. The real estate professional is paid a percentage of the home sale price, usually by the seller. Unless you’ve specifically contracted with a buyer’s agent, the real estate professional represents the interest of the seller.

Real Estate Taxes: Monies that are owed to a local government authority for the purpose of paying for governmental services like, schools, fire and police protection. The amount owed is based on a property’s value, multiplied by a millage or tax rate.

Real Property: Land and any structures that is permanently affixed thereto — including buildings, fences, trees, and minerals.

Recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”

Recording: The filing or registering of a lien or other legal documents in the appropriate public record.

Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off the prior mortgage. Also see “cash out refinance” and “no cash out refinance”.

Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing, improving a property. Some rehab mortgages also allow for the funds to purchase the to be improved home.

Remaining Term: The original number of payments due on the loan minus the number of payments that have been made.

Repayment Plan: An arrangement by which a borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.

Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.

Repossession: The Lender’s acquisition of a home or secured item due to the borrower’s inability to repay a loan that was secured by that item. The Lender can then re-sell the item to help them pay off that borrower’s debt.

Rescission: The cancellation or annulment of a transaction or contract by operation of law or by mutual consent. Borrowers have a right to cancel certain mortgage refinance and home equity transactions within three business days after closing.

RESPA (Real Estate Settlement Procedures Act): A federal law that requires lenders to provide home mortgage borrowers with information about transaction-related costs prior to settlement and again at the loans closing or settlement. It also requires information about the life of the loan regarding servicing and escrow accounts. RESPA also prohibits kickbacks and unearned fees in the mortgage loan business.

Reverse Mortgage: A mortgage that is taken out by a home owner that is at least 62 years old, where the home owner receives a payment and is not required to make monthly payments to keep their home. They can either receive a lump sum payment, monthly payments, no monthly payments or any combination of. Credit and income is not analyzed as part of this loan. Also see, “Home Equity Conversion Mortgage (HECM)”.

Revolving Debt: Credit that is extended by a creditor under a plan in which(1) the creditor plans on repeat borrowing type of transactions; (2) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (3) the amount of credit that may be extended to the consumer during the term of the agreement is generally made available to a maximum borrowing limit.

Right of First Refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Rural Housing Service (RHS): An agency within the U.S. Department of Agriculture (USDA), which operates a range of programs to help rural communities and individuals by providing loans and grants for housing and community facilities. The agency also works with private lenders to guarantee loans for the purchase or construction of single-family housing.

S

Sale-Leaseback: A transaction in which the buyer leases the property back to the seller for a specified period of time.

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

Secondary Mortgage Market: The market in which mortgage loans and mortgage-backed securities are bought and sold.

Secured Loan: A loan that is backed by property such as a house, car, jewelry, etc.

Security: The property that will be given or pledged as collateral for a loan.

Securities: A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).

Seller Take-Back Mortgage: An agreement in which the seller of a property provides financing to the buyer for the home purchase. See also “Owner Financing.”

Servicer: A firm that performs the servicing functions, including collecting mortgage payments, paying the borrower’s taxes and insurance and generally managing the borrowers escrow accounts.

Servicing: The tasks a lender performs to protect the mortgage investment, including the collection of mortgage payments, escrow administration, and delinquency management.

Settlement: The process of completing a loan transaction at which time the mortgage documents are signed and then recorded, funds are disbursed, and the property is transferred to the buyer (if applicable). Also called closing or escrow in different parts of the country. See also “Closing” or “Escrow”.

Settlement Statement: A document that lists all closing costs on a consumers mortgage transaction. Also see “HUD 1”.

Single-Family Properties: One- to four-unit properties including detached homes, townhouses, condominiums, cooperatives, and manufactured homes that are attached to a permanent foundation and classified as real property under applicable state law.

Soft Second Loan: A second mortgage whose payment is forgiven or is deferred until resale of the property.

Servicemembers Civil Relief Act: A federal law that restricts the enforcement of civilian debts against certain military personnel who may not be able to pay because of active military service. It also provides other protections to certain military personnel.

Subordinate Financing: Any mortgage or other lien with lower priority than the first lien.

Survey: A precise measurement of a property by a licensed surveyor, showing legal boundaries of a property and the dimensions and location of improvements and or buildings on the property.

Sweat Equity: A borrower’s contribution to the down payment for the purchase of a property in the form of labor or services rather than cash.

Swing Loan: See “Bridge Loan”.

T

Tax Lien: A claim against Real property for unpaid taxes to the local tax authority.

Taxes and Insurance (as part of your payment): Funds collected as part of the borrower’s monthly payment and held in an escrow account for the payment of the borrower’s, or funds paid by the borrower for, local property taxes and house insurance premiums.

Term: The period of time which covers how long it will take to pay back a loan. Example, a 30 year loan has a term of 30 years.

Termite Inspection: An inspection to determine whether a property has termite or pest infestation, which may require treatment to kill the termites and repair of the damage that was caused. In many parts of the country, a home must be inspected to make sure there are no termites, before it can be sold.

Third-Party Origination: A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package a mortgage loan. See also “Mortgage Broker.”

Title: The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of real property.

Title Company: A company that specializes in examining and insuring Titles to real estate.

Title Insurance: Insurance that protects lenders and homeowners against legal problems with errors in the conveyance of title to real property. Typically, Seller’s and Buyer’s policies are issued at the time of a real estate purchase transaction.

Title Search: A check of the public records to ensure that the seller is the legal owner of the property and to identify any liens or claims against the property which must be settled before a change of ownership can take place.

Trade Equity: Real estate or assets given to the seller as part of the down payment for the property.

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

Treasury Index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions by the U.S. Treasury of 1 year Treasury bills and securities, (1 year t-bills).

Truth-In-Lending Act (TILA): A federal law that requires disclosure of a truth-in-lending statement for consumer credit. The statement includes a summary of the total cost of credit, the annual percentage rate (APR) and other specifics of the loan. See “Annual Percentage Rate – APR”.

Two- to Four- Family Property: A residential property that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed; a loan secured by such a property is considered to be a single-family mortgage.

U

Underwriting: The process used to determine a borrower’s loan-ability. It involves evaluating the property, the borrower’s credit and ability to repay the mortgage note.

Uniform Residential Loan Application: A standard mortgage application form that requires information about you and your financial status. The form requests your income, assets, liabilities, and a description of the property you plan to buy, among other things, also called a 10-03.

Unsecured Loan: A loan that is not backed or supported by collateral or security.

V

Veterans Affairs (U.S. Department of Veterans Affairs): A federal government agency that provides benefits to veterans and their dependents, including health care, educational assistance, financial assistance, and guaranteed home loans. A VA loan.

VA Funding Fee: An amount charged by the Veteran’s Administration on VA mortgages to cover administrative costs.

VA Guaranteed Loan: A mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs (VA).

W

W-2: A tax form that reports your earnings and the amount of taxes withheld from your pay by your employer.

Walk-Through: A common clause in a sales contract that allows the buyer to examine the property being purchased at a specified time immediately before the closing, for example, within the 24 hours before closing.

Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.

Z

Zoning: The public regulation, with governmental authority, as to the character and use of real estate within a defined location.

Bob Hein Mortgage p: 616.292.6703