Additional Living Expense Insurance
Coverage under a Homeowners, Condominium and Renters policy that reimburses costs of residing in a temporary location until the insured's home can be made whole again. It usually provides living expenses from 10-20% of the structural coverage on the home.

Additional Property
Address of real estate that a person owns that is not being financed.

Adjustable Rate Mortgage (ARM)
A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.

Affidavit
A written statement sworn before an authorized official.

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

Auto Pay
A way to set up a monthly payment to be automatically deducted from a bank account.

Agreement of Sale
A written document in which a purchaser agrees to buy property under certain given conditions, and the seller agrees to sell under certain given conditions. Also known as a 'Sales Contract'.

Agent
One that acts for or represents another.

Alimony
Monthly payments received by an ex-spouse. Payments must be received continuously for three years to be counted toward qualifying income for a loan.

Amortization
The process of gradually paying down the principal of the loan. As each payment toward principal is made, the mortgage amount is reduced or amortized by that
amount. This is in contrast to an interest-only payment where the principal balance is never reduced.

Amortized Loan
A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.

Annual Percentage Rate (APR)
The annual cost of a loan, including interest, loan fees, and other costs.

Application
A form commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.

Application Fee
A fee that is charged upon submission of a property application. A loan officer will go over the details about the amount of your specific application fee.

Appraisal
An estimate of the market value of a piece of real estate made by a competent professional who knows local real estate prices and markets.

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

Appreciation
The increase in value or price of a property over time.

Approval
An assessment made by a lender of a borrower's ability to pay for a home and a confirmation of the amount the borrower may obtain.

Assessed Value
The value of a property for tax purposes set by a tax assessor according to a formula.

Assessments
Special and local taxes imposed upon property which benefits from an improvement that has been made in the vicinity.

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

Assignment
The transfer of a mortgage from one person to another.

Assumability
The ability of a mortgage to be taken over by a new borrower.

Assumable
A loan or obligation that can be taken over by a new borrower.

Assumable Mortgage
A mortgage that can be taken over or 'assumed' by the buyer when a home is sold.

Assumption
The taking over by one party of an obligation originally incurred by another.

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

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

Balloon Mortgage
A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date in the future, (usually at the end of the term).

Balloon Payment
A scheduled payment on a mortgage that is larger than other periodic payments, usually the unamortized final payment.

Bankruptcy
A court action under the Federal Bankruptcy Code by which a debtor's debts may be discharged, usually by transferring assets to a trustee, or rescheduled.

Basis Point
A unit of measure: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.

Bill of Sale
A written document that serves as evidence of the transfer of title to personal property.

Binder
An agreement to consider the purchase of real estate. The agreement is secured and backed by a cash deposit as evidence of good faith on the part of the purchaser.

Blanket Mortgage
A mortgage that covers more than one parcel of real estate owned by the same buyer.

Broker
A person or firm who acts on behalf of another.

Cap
A limit on the increase of an adjustment rate or the mortgage payment for an adjustable-rate mortgage (ARM).

Capital
The accumulated wealth (money and/or property) of a person or business.

Capital Gain
Income from the sale of an asset rather than from the general business activity. Capital gains are generally taxed at a lower rate then ordinary income.

Capital Improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

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 outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Cash Reserves
Refer to amount in cash after purchase is complete (i.e. after down payment, closing costs, etc.).

Caveat Emptor
Latin for 'Let the buyer beware'. The buyer must examine the goods or property and buy at his or her own risk.

Certificate of Eligibility
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.

Certificate of Title
A written document stating that the title to a piece of property is legally vested in the present owner.

Child Support
Monthly payments that contribute to the care of a child. Payments must be received continuously for three years to be counted toward qualifying income for a loan.

Clear Title
Title not burdened by liens or legal questions.

Closing
In real estate, the delivery of a deed, the payment of the purchase price, the signing of notes, and the paying of closing costs, which completes a real estate transaction.

Closing Costs
The miscellaneous expenses involved in closing a real estate transaction that are over and above the purchase price. Some of the closing costs include title insurance, appraisal fee, credit report and attorney fees.

Closing Statement
Also referred to as the 'HUD-1'. The final statement of costs incurred to close a loan or to purchase a home.

CMT - Constant Maturity Treasury
The 1-year CMT is the average yield of all Treasury Securities having one year remaining until maturity. The index is calculated weekly. It is made available by the Federal Reserve in the weekly publication "Statistical Release - H15" and can be found on various wire services.

COFI - 11th District Cost Of Funds Index
The monthly weighted average of deposits and borrowings for savings institutions in the Federal Home Loan Bank's 11th District, as made available by the Federal Home Loan Bank of San Francisco.

Collateral
Any property pledged as security for repayment of a debt.

Collection
The efforts used to bring a delinquent mortgage, or other debt current, and the filing of necessary notices to proceed with foreclosure when necessary.

Combination Loan
A loan in which the borrower receives a first mortgage for 80 percent of the loan amount, and a second mortgage at the same time for the remainder of the balance. If borrower is trying to avoid PMI (mortgage insurance) it is important to consider a combination loan or the Advantage90 loan.

Combined Loan-to-Value (CLTV)
The relationship between the unpaid principal balances of all the mortgages on a property (first and second usually) and the property's appraised value (or sales price, if it is lower).

Commission
An agent's fee for negotiating a real estate or loan transaction, often expressed as a percentage of the selling price.

Commitment Letter
A formal offer by a lender which states the terms under which it agrees to lend money to a home buyer. Also known as a 'loan commitment.' This letter will indicate the contingencies that must be cleared prior to funding the loan.

Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD), or condominium project's homeowners' association, or a cooperative project's cooperative corporation that are used by all of the unit owners who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Comparables
An abbreviation for 'comparable properties'; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condominium
A structure of two or more housing units. The interior space of the units are individually owned. The balance of the property (land, building and other amenities) is owned in common by the owners of the individual units.

Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Conforming Loan
A loan that is eligible for purchase by FNMA or FHLMC. The current FNMA or FHLMC conforming loan limit is $300,700 and below for a single-family residence, $384,900 and below for a 2 unit property, $465,200 and below for a 3 unit property, and $578,150 and below for a 4 unit property. Conforming loan limits may change annually. The limit is revised each year according to the change in average sales price of conventionally financed single-family homes.

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.

Contingency
A clause in a contract stating that the buyer or seller must meet a given condition before the purchase can be completed.

Contract
An agreement between two or more parties.

Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government.

Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative
A residential project owned by a cooperative corporation. Residents own shares in the cooperation, which in turn gives them the right to live in the project.

Credit History
The financial worthiness of a borrower. The history of whether the borrower has met financial obligations on time in the past.

Credit Report
A report on a loan applicants willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.

Credit Reporting Agency
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Debt-to-Income Ratio
The ratio of a borrower's monthly debt payments to his or her monthly gross income. Lenders use this ratio to determine how much of a loan a borrower is qualified for.

Deed
The legal document conveying title to a property.

Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.

Deferred Interest
Accrued but unpaid interest, occurring with Adjustable Rate Mortgage loans when a payment remittance does not cover the full amount of interest due for a given period.

Delinquency
Failure to make mortgage payments when mortgage payments are due.

Deposit
A payment made to prove that a buyer is serious about making a given transaction. An earnest money deposit is money a buyer gives to a seller to purchase to prove that he or she is serious about buying the house. It may also be known as a 'good faith deposit.'

Document
An original or official paper relied upon as basis, proof, or support of anything else. Also known as an 'instrument.'

Donor
A person who gives a gift.

Down Payment
The portion of the purchase price a buyer pays, in cash, at the time the loan originates.

Due-on-Sale Provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Dwelling Coverage
Dwelling coverage protects your house and any structures attached to it, like the garage or screened porch. Any materials on your property that are being used to expand or repair the house, such as lumber being used for an addition, would also be covered.

Earthquake Insurance
Insurance that compensates for physical property damage resulting from earthquakes to an extent depending upon the terms of the policy.

Earnest Money
A sum of money given as evidence of one's good faith, used to bind a real estate sale. Also known as a 'Binder.'

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

Eighty-ten-ten (80/10/10)
Also known as a 'Combination Loan.' A loan in which you receive a first mortgage for 80 percent of the loan amount and a second mortgage at the same time for the remainder of the balance. If the borrower is trying to avoid PMI (mortgage insurance) it is important to consider a combination loan or the Advantage 90 loan.

Effective Age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
The value of a property minus outstanding mortgage debt and other liens. Equity is the portion of your property that you have already paid for plus the appreciation, if any, in the value of the property since you acquired it.

Escrow
The process by which money and/or documents are held by a disinterested third party (an escrow company, title company, attorney, etc-) until the terms and conditions of the escrow instructions are fulfilled.

Escrow Account
An account held by the lender/servicer, into which a borrower makes monthly installment payments for property taxes, insurance and special assessments. The lender/servicer disburses these sums as they become due. This type of account is sometimes known as an 'Impound Account.'

Escrow Analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow Fee
Fee charged by the escrow company for handling escrow activities including paying off liens and clearing title and other debts.

Escrow Payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as 'impounds' or 'reserves' in some states.

Estate
The ownership interest of an individual in real property. The total sum of all the real property and personal property owned by an individual at time of death.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Market Value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. Also known as Federal National Mortgage Association (FNMA).

Fannie Mae's Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home buyer education sessions.

Federal Home Loan Mortgage Corporation (FHLMC)
Commonly known as 'Freddie Mac.' A major secondary market investor, government sponsored, but privately owned corporation, which is a major purchaser of mortgages.

Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development (HUD). FHA insures loans made by approved lenders in accordance with their HUD regulations. Washington Mutual is an approved lender.

Federal National Mortgage Association (FNMA)
Commonly known as 'Fannie Mae.' A government sponsored but privately owned corporation whose primary function is to buy and sell conventional FHA and VA mortgages in the secondary market.

FHA Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a 'government mortgage.'

Finance Charge
The charges that include all of the interest expected to be earned over the life of a loan, in addition to the service charges, mortgage insurance premiums and certain other charges related to a loan.

First Adjustment
When you can expect the first rate adjustment in your adjustable-rate mortgage (ARM) loan.

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

Fixed Amortization
The payment of a debt in regular, periodic installments of principal and interest. Fixed amortization occurs when the interest rate and payment never change. The same payment is made over the life of the loan. Each month, as the principal is paid down and, since interest is charged against the remaining amount of principal, the amount charged for interest decreases.

Fixed Rate Mortgage (FRM)
A mortgage in which the interest rate and payments remain the same for the life of the loan. The interest rate and payment amounts are established at the time or of origination.

Floater
Insurance protecting against the loss of movable property, jewelry or furs for example, regardless of its location. The coverage "floats" with the property. Also known as Valuable Article insurance.

Flood Insurance
A form of insurance designed to reimburse property owners from loss due to the defined peril of flood. Usually sold in connection with a government Flood Insurance plan. It is required for properties located in federally designated flood areas.

Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac
A major secondary market investor, government sponsored, but privately owned corporation, which is a major purchaser of mortgages. Also known as 'Federal Home Loan Mortgage Corporation' (FHLMC).

Fully Indexed Interest Rate
This interest rate is the sum of the current index rate on an adjustable-rate mortgage (ARM) plus the margin.

Gift From a Family Member
A gift of cash, to a mortgage applicant from a relative by blood or marriage, which the applicant is not required to repay. In some instances it is necessary to provide a written statement to that repayment is not required.

Good Faith Estimate
A disclosure that must be given to all mortgage loan applicants within three business days of an application. It is an estimate of all settlement charges likely to be incurred at closing.

Government National Mortgage Association (GNMA)
Also known as 'Ginnie Mae.' A government corporation that provides special assistance for the purchase of certain FHA and VA mortgages and guarantees securities based by pools of mortgage loans.

Grace Period
A specified period after the regular due date of a loan payment during which no late charge or other penalty is assessed.

Gross Bonuses
Bonus pay before taxes averaged over previous 24 months. Your bonuses must be averaged over two years to be considered monthly income.

Gross Income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Gross Overtime
Overtime pay before taxes averaged over previous 24 months. Your overtime must be averaged over two years to be considered monthly income. Overtime earned for less than two years will not be considered.

Hazard Insurance
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

Homeowner's Insurance Declaration
A document accompanying a homeowner's insurance policy whose purpose is to verify that the homeowner's property is, in fact, properly insured.

Home Equity Line Of Credit
A credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.

Home Equity Loan
A loan secured by a second deed of trust on a house, typically used as a home improvement loan.

Housing Ratio
The ratio of the monthly housing payment in total (PITI -- Principal, Interest, Taxes and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the 'top ratio' or 'front-end ratio.'

HUD
The U.S. Department of Housing and Urban Development.

Impound Account
Also known as an 'Escrow Account.' An account held by the lender/servicer, into which a borrower makes monthly installment payments for property taxes, insurance and special assessments. The lender servicer disburses these sums as they become due.

Income Property
Real estate developed or improved to produce income. Also referred to as 'non-owner occupied property,' 'rental property,' or investment property.

Index
An economic indicator which lenders use to calculate interest rate adjustments for adjustable-rate mortgages (ARMs). The index used is outside the lender's control.

Initial Fixed Interest Period
The period of time that the interest rate on an adjustable loan is initially fixed. Thereafter, interest rate then becomes fully indexed (the then current index value plus factor/margin). May change in accordance with the index of the loan document

Initial Interest Rate
The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at the first rate adjustment.

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

Interest
Money paid for the use of money borrowed funds, usually expressed as an annual percentage.

Interest Rate Cap
A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.

Jumbo Mortgage
Also known as a 'non-conforming' mortgage. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium.

Keogh Retirement Plan
A retirement plan for the self-employed.

Lender
The bank, mortgage company, or mortgage broker offering the loan.

Lien
A legal hold or claim of a creditor on the property of another.

Lifetime Cap
The maximum allowable interest rate over the life of the loan.

Loan Processing
The steps taken by an institution lender from the time a request for a loan application is received to the time the loan is approved or denied, including taking the application, credit investigation, evaluation of the loan and other steps.

Loan Term
The period granted for loan repayment.

Lock-In
The time at which an interest rate is set and the length of time the rate will be held prior to the closing of a loan.

Loan Servicing
Supervising a loan after it has been made. This could involve collecting payments, keeping accounting records, computing interest and principal, etc.

Loan Terms
Essential conditions of a loan which specify the principal amount, interest rate, maturity, method of repayment, etc.

Loan-to-Value (LTV)
The ratio of the principal amount of the loan to the lesser of the purchase price of the property or the property's appraised value. You may see this expressed as an 80% loan, or 80% LTV.

Low-Documentation
Some loan products require only that applicants state the source of their income without providing supporting documentation such as tax returns.

Margin
The amount expressed as a percentage rate that is added to the current index (subject to any rounding rules) in order to determine the interest rate for a loan, subject to a variety of possible adjustments and caps. The margin remains in effect for the life of the loan.

Market Value
Also known as 'Fair Market Value.' The estimated value of a property which a seller could expect to receive under normal conditions.

Maturity
The term of a loan, or the number or years for which the loan funds are advanced.

Monthly Treasury Average (MTA)
The 12-MTA index is based on yields published in the release entitled the "Selected Interest Rates - G13" which is published by the Federal Reserve Board on the first Tuesday of each month index.

Mortgage
A lien or claim against real property given by the buyer to the lender as security for money borrowed.

Mortgage Disability Insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.

Mortgage Insurance
In Life insurance, a policy covering a mortgagor from which the benefits are intended (1) to pay off the balance due on a mortgage upon the death of the insured, or (2) to meet the payments on a mortgage as they fall due in the case of his death or disability. Also called "Mortgage Redemption Insurance."

Mortgage Insurance (MI)
Also known as 'Private Mortgage Insurance' (PMI). Insurance which protects mortgage lenders against loss in the event of default by the borrower.

Mortgagee
The lender in a mortgage transaction.

Mortgagor
The borrower in a mortgage transaction.

Multi-Family
A building with more than four residential units.

Negative Amortization
Negative amortization occurs with some adjustable-rate mortgage (ARM) loans when the payment amount is insufficient to cover the interest due on the loan. Any interest not covered by payment is deferred and added to the principal balance.

Net Income
The difference between effective gross income and expenses, including taxes and insurance. The term is qualified as net income before depreciation and debt.

Non-Conforming Loan
Also known as a 'Jumbo Mortgage.' Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium.

Non-Owner Occupant
A borrower who will not be residing in the subject property as their principal residence; the borrower on rental/investment property.

Note
A written promise to repay a loan. It includes the loan amount, interest rate and term.

Origination Date
The date on which the loan is funded.

Origination Fee
A fee imposed by a lender to cover the administrative costs of setting up a mortgage. This will include the preparation of documents and certain processing expenses in connection with making a real estate loan. This is usually charged as a percentage of the amount loaned, such as one point or one percent.

Owner Occupant
A borrower who resides in the property used as security for the loan.

Payment Adjustment Period
The time during which payments on an adjustable-rate mortgage (ARM) may go up or down.

Payment Cap
The limit that the monthly payment can change from one adjustment period to another.

Payment Shock
A situation that occurs when an adjustable-rate mortgage (ARM) monthly mortgage payments rise very sharply at an adjustment. The borrower may not be able to afford the payments the loan will require.

Payoff
The complete repayment of loan principal, interest and any other sums due; payoffs occur either over the full term of the loan through monthly amortization or through prepayments.

Periodic Rate Cap
The maximum rate increase for a specific period for a specific loan adjustable-rate mortgage (ARM) only

Personal Property Coverage
A policy that covers possession loss incurred off your property (except for scheduled Valuable Articles.) For example, a homeowner''s policy will only offer 10% of the total contents limit to apply to items off premises such as personal items that your child took away to college.

Personal Umbrella/Personal Liability Protection
An insurance policy that pays and renders service on behalf of an insured for loss arising out of his or her responsibility to another as imposed by law or assumed by contract.

PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage payment.

Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

Points
An upfront fee that is collected in addition to the interest on a loan. Each 'point' charged is equal to 1% of the loan amount. Points may also be referred to as an 'origination fee' or 'discount points' depending on the purpose.

Pre-Approval
A process that mortgage lenders use to determine how much money they would lend you based on a thorough review of your financial situation. Lenders issue a pre-approval letter which strengthens your position when bidding on a home, as it shows sellers that you will be able to raise funds needed to purchase.

Preliminary Title Report
A report made by a title company stating whether there are any other claims to ownership of a property. A necessary step before a mortgage loan can be approved.

Prepaids
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment Clause
A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.

Prepayment Penalty
A charge a borrower pays to prepay a loan before it is due. Not allowed for FHA or VA loans.

Pre-Qualification
An informal process in which a lender will offer an opinion on how much money you may be able to borrow. This opinion is based entirely on the financial information you provide and is neither binding nor necessarily accurate because lenders have not yet verified your financial information.

Prime Rate
This typically refers to the best rate for short-term commercial paper. This is not a stable index.

Principal
The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.

Principal and Interest
The total amount needed to pay on a loan each month. This includes the interest owed as well as the amount being paid towards the principal.

Private Mortgage Insurance (PMI)
Insurance coverage obtained from mortgage insurance companies to protect lenders against risk of making higher loan-to-value loans. Typically required on all first mortgages with an LTV that exceeds 80%. The borrower usually pays the PMI premiums.

Purchase Agreement
A written promise to pay a specific amount for a property at a specified time. The purchase agreement is a written statement of the offer, which both the borrower and the seller will sign if the offer is accepted.

Purchase Contract
A written promise to pay a specific amount for a property at a specified time. The purchase contract is a written statement of the offer, which both the borrower and the seller will sign if the offer is accepted.

Purchase Price
The total selling price of the home, including the cash down payment and the principal on the loan.

Qualifying Rate
The rate used to underwrite a loan. This rate may or may not be equal to the initial or note rate.

Rate Cap
A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

Rate Lock
The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.

Rate Lock-in
A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.

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

Reversal (as it relates to the Transaction History)
A retraction of a monetary loan application, resulting from a payment being returned unpaid, or as part of a correction process to re-credit previously misapplied funds.

Refinancing
Taking out a new loan to pay off an existing mortgage. This is done to obtain a lower interest rate or to borrow cash on the equity in a property that has built up on a loan.

Sales Contract
A written document in which a purchaser agrees to buy property under certain given conditions, and the seller agrees to sell under certain given conditions. Also known as an 'Agreement of Sale.'

Second Mortgage
A mortgage which ranks after a first mortgage in priority. If the loan is not repaid, the first mortgage holder has first right to the property; the second mortgage holder receives anything remaining.

Secondary Mortgage Market
The market where lenders and investors buy and sell existing mortgages or mortgage-backed securities, thereby providing greater availability of funds for additional mortgage lending.

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

Separate Maintenance
An order by the court to send money to an individual on a monthly basis for a specific period of time.

Servicing (or Loan Servicing)
Supervising and administering a loan after it has been made. This involves such things as collecting the payments, keeping accounting records, computing interest and principal, etc.

Settlement Statement
A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale. A separate statement is prepared for the seller and buyer.

Signer
A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment.

Survey
A map executed by a licensed surveyor, which sets down precisely the boundaries of a given property as well as improvements, references to known landmarks, and the property's notable features.

Tenants-in-Common
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.

Term
The period of time which covers the life of the loan. For example, a 30-year fixed loan has a term of 30 years.

Title
Evidence of a person's right to possession ownership of a property.

Title Insurance
The insurance that protects the lender and if an owner's policy is purchased, the homeowner, against loss resulting for any inconsistencies in the title of a property from liens or other title problems relating to a property.

Title Insurance Fees
The insurance that protects a lender, and if an owner's policy is purchased, the homeowner, against loss resulting from incorrect information associated with the title. This protects the lenders and owners from liens or outstanding debts related to the property.

Title Report
A report that discloses whether there are any competing claims, liens or other problems relating to a property. This must be done before title insurance is issued. Also known as a 'Preliminary Title Report' or 'Prelim.'

Title Search
An examination of public records, laws, and court decisions to disclose the current facts regarding ownership of and liens on real estate.

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

Truth-in-Lending Act
Also known as 'Regulation Z.' A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.

Unapplied Funds
Available money credited to a temporary holding (suspense) account, pending determination or instruction on the breakdown of how the money is to be allocated.

Underwriting
The analysis of risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves evaluating the property as outlined in the appraisal report, and also evaluating the borrower's ability and willingness to repay the loan.

Unsecured Personal Loan
A loan that is not backed by collateral.

Valid
Sufficient in law; effective.

VA Loan
A loan that is partially guaranteed by the Department of Veterans Affairs and made by a private lender.

Valuation
The estimation of a property's price value through an appraisal.

Veterans Affairs
A government agency that aids veterans of the United States armed forces in obtaining housing, its assistance takes the form of a partial guarantee of repayment to lenders in the event of borrower default.