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"BAD-FAITH ESTIMATE"  look up translate image
The practice of low-balling figures for settlement costs on the Good Faith Estimate to make them appear more attractive to mortgage shoppers. See A Bad Faith Estimate: Any Recourse?
1 MONTH OPTION ARM  look up translate image
Same as Flexible Payment ARM.
100% LOAN  look up translate image
A loan with no down payment. The loan amount equals the property value. See 100% Mortgage Loans: Blessing or Curse?
12 MTA  look up translate image
An interest rate index that is used on some ARMs. It is the average of the most recent 12 monthly values of the Treasury One-Year Constant Maturity series. See Which Adjustable Rate Mortgage Index Is the Best?
12 MTA PAY OPTION ARM  look up translate image
Same as Flexible Payment ARM.
125% LOAN  look up translate image
A loan for 125% of property value.
3.95% ARM  look up translate image
A monthly ARM on which the initial rate is 3.95%. See Is a 3.95% Adjustable Rate Mortgage a Good Deal?
3/2 DOWNPAYMENT  look up translate image
Programs offered by some lenders under which a borrower who is able to secure a grant or gift equal to 2% of the down payment will only have to provide a 3% down payment from their own funds. This can be a good deal for a cash-short borrower.
40-YEAR MORTGAGE  look up translate image
A mortgage with a term of 40 years. See 40-Year Loan or Modify the 30 and 15?
80/10/10, 80/15/5, AND 80/20/0 LOAN PLANS  look up translate image
Combination first mortgages for 80% of sale price or value and second mortgages for 10%, 15%, or 20%. The purpose is to avoid mortgage insurance, which is required on first mortgages that exceed 80% of value. See Piggy Back Loans: Two Mortgages Cost Less than One?
A-CREDIT  look up translate image
A consumer with the best credit rating, deserving of the lowest prices that lenders offer. Most lenders require a FICO score above 720 (see Credit Issues). There is seldom any payoff for being above the A-credit threshold (see Does the Mortgage Market Reward Virtue?), but you pay a penalty for being below it.
ACCELERATION CLAUSE  look up translate image
A contractual provision that gives the lender the right to demand repayment of the entire loan balance in the event that the borrower violates one or more clauses in the note. See Should I Lie About My Income??
ACCRUED INTEREST  look up translate image
Interest that is earned but not paid, adding to the amount owed. Same as Negative amortization.
ADJUSTABLE RATE MORTGAGE (ARM)  look up translate image
A mortgage on which the interest rate, after an initial period, can be changed by the lender. While ARMs in many countries abroad allow rate changes at the lender's discretion ("discretionary ARMs"), in the US most ARMs base rate changes on a pre-selected interest rate index over which the lender has no control. These are "indexed ARMs". There is no discretion associated with rate changes on indexed ARMs. For articles on ARMs, click on Adjustable Rate Mortgages.
ADJUSTMENT INTERVAL  look up translate image
On an ARM, the time between changes in the interest rate or monthly payment. The rate adjustment interval is often displayed in x/y format, where "x" is the period until the first adjustment, and "y" is the adjustment period thereafter. For example, a 5/1 ARM is one on which the initial rate holds for 5 years, after which it is adjusted every year. The rate adjustment interval and the payment adjustment interval are the same on a fully amortizing ARM, but may not be on a negative amortization ARM. See Should You Fear Negative Amortization?
AFFORDABILITY  look up translate image
A consumer's capacity to afford a house. Affordability is usually expressed in terms of the maximum price the consumer could pay for a house, and be approved for the mortgage required to pay that amount. Read How Much House Can You Afford? , How Much House Should You Buy? and Mortgage Affordability: Should Government Require It?
AGENCY  look up translate image
The legal requirement that one party in a relationship has a fiduciary obligation to the other. See Mortgage Brokers: Agents or Independent Contractors? And Should Mortgage Brokers Be Required To Be Agents?
AGREEMENT OF SALE  look up translate image
A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
ALT-A  look up translate image
A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".
ALTERNATIVE DOCUMENTATION  look up translate image
Expedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicant's employer and bank deposits with the applicant's bank, the lender will accept paycheck stubs, W-2s, and the borrower's original bank statements. Alternative documentation remains full documentation, as opposed to the other documentation options. See What Are Mortgtage Documentation Requirements?
AMORTIZATION  look up translate image
The repayment of principal from scheduled mortgage payments that exceed the interest due. The scheduled payment less the interest equals amortization. The loan balance declines by the amount of the scheduled payment, plus the amount of any extra payment. For a detailed explanation, see Mortgage Amortization: How Does It Work? If the payment is less than the interest due, the balance rises, which is negative amortization.
AMORTIZATION SCHEDULE  look up translate image
A table showing the mortgage payment, broken down by interest and amortization, the loan balance, tax and insurance payments if made by the lender, and the balance of the tax/insurance escrow account.
AMOUNT FINANCED  look up translate image
On the Truth in Lending form, the loan amount less "prepaid finance charges", which are lender fees paid at closing. For example, if the loan is for $100,000 and the borrower pays the lender $4,000 in fees, the amount financed is $96,000. A useless number. See Another Truth in Lending Lie.
ANNUAL PERCENTAGE RATE  look up translate image
See APR.
APPLICATION  look up translate image
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, the application refers to a standardized application form called the "1003" which the borrower is obliged to fill out.
APPLICATION FEE  look up translate image
A fee that some lenders charge to accept an application. It may or may not cover other costs such as a property appraisal or credit report, and it may or may not be refundable if the lender declines the loan.
APPRAISAL  look up translate image
A written estimate of a property's current market value prepared by an appraiser.
APPRAISAL FEE  look up translate image
A fee charged by an appraiser for the appraisal of a particular property.
APPRAISER  look up translate image
A professional with knowledge of real estate markets and skilled in the practice of appraisal. When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower.
APPROVAL  look up translate image
Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower. See Mortgage Concepts Home Buyers Should Know.
APR  look up translate image
The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges by the lender. The charges covered by the APR also include mortgage insurance premiums, but not other payments to third parties, such as payments to title insurers or appraisers. The APR is adjusted for the time value of money, so that dollars paid by the borrower up-front carry a...(more)
ARM  look up translate image
An adjustable rate mortgage.
ASSUMABLE MORTGAGE  look up translate image
A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan will save the buyer money if the rate on the existing loan is below the current market rate, and closing costs are avoided as well. A loan with a "due-on-sale" clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable. See Are Mortgage Assumptions a Good Deal?
ASSUMPTION  look up translate image
A method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property. Unless the lender also agrees, however, the seller remains liable for the mortgage.
AUCTION SITE  look up translate image
See Lead-Generation site.
AUTHORIZED USER  look up translate image
Someone authorized by the original credit card holder to use the holders card. The card-holder is responsible for the charges of the authorized user, but the authorized user is not responsible for paying any charges, including his own. But sometimes authorized users are dunned for the unpaid bills of the card holder. See Are Authorized Users At Risk?
AUTOMATED UNDERWRITING  look up translate image
A computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the applicant will be approved, or whether the application will be forwarded to an underwriter. The quick decision is based on information provided by the applicant, which is subject to later verification, and other information retrieved electronically including information about the borrower's credit history and the subject property.
AUTOMATED UNDERWRITING SYSTEM  look up translate image
A particular computerized system for doing automated underwriting. Mortgage insurers and some large lenders have developed such systems, but the most widely used are Fannie Maes Desktop Underwriter and Freddie Macs Loan Prospector.
BACK-END FEE OR COMMISSION  look up translate image
Mortgage broker income paid by the lender, same as yield-spread premium and Negative points.
BAIL-OUT  look up translate image
Government support to a firm in trouble, which is usually limited to protecting creditors and employees. See What Is a Bail-Out"?
BALANCE  look up translate image
The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal. See Mortgage Amortization: How Does it Work?
BALLOON  look up translate image
The loan balance remaining at the time the loan contract calls for full repayment.
BALLOON MORTGAGE  look up translate image
A mortgage which is payable in full after a period that is shorter than the term. In most cases, the balance is refinanced with the current or another lender. On a 7-year balloon loan, for example, the payment is usually calculated over a 30-year period, and the balance at the end of the 7th year must be repaid or refinanced at that time. Balloon mortgages are similar to ARMs in that the borrower trades off a lower rate in the early years against the risk of a higher rate later. They are riskier than ARMs because there is no limit on the extent of a rate increase at the end of the balloon period. See Balloon Mortgages.
BIMONTHLY MORTGAGE  look up translate image
A mortgage on which the borrower pays half the monthly payment on the first day of the month, and the other half on the 15th. See Alternative Early Payoff Plans.
BIWEEKLY MORTGAGE  look up translate image
A mortgage on which the borrower pays half the monthly payment every two weeks. Because this results in 26 (rather than 24) payments per year, the biweekly mortgage amortizes before term. See Biweekly Mortgages.
BLEMISHED BORROWERS  look up translate image
Borrowers with one or more of the following risk factors: they can only make a very small or no down payment; they cannot fully document their income and assets; their property is something other than a single-family home; their loan is intended to raise cash or to purchase an investment property; they have low credit scores; their income is low relative to their expected total obligations; and their mortgage carries an adjustable rate that will result in substantially higher payments in a few years. See HR 3915 Would Stick it to Blemished Borrowers.
BRIDGE LOAN  look up translate image
A short-term loan, usually from a bank, that "bridges" the period between the closing date of a home purchase and the closing date of a home sale. Unsecured bridge loans are available if the borrower has a firm contract to sell the existing house. Secured bridge loans are available without such a contract. Read Buying a New House Before Selling the Old One.
BUILDER-FINANCED CONSTRUCTION  look up translate image
Having the builder finance the construction. Read Should the Builder Finance Construction?
BUY-DOWN  look up translate image
A permanent buy-down is the payment of points in exchange for a lower interest rate. See Points. A temporary buy-down concentrates the rate reduction in the early years. See Temporary Buy-Down.
BUY-UP  look up translate image
Paying a higher interest rate in exchange for a rebate by the lender which reduces upfront costs. See Negative Points.
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Morgage terms
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Created on 2011-10-18 19:15:44
Number of terms 374
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