Home Loans Glossary

The replacement of excavated dirt into a hole, crevice or against a structure such as a foundation.

A contract to buy property that becomes effective if a prior contract fails to be agreed upon.

Some home equity loans may have a balance due at the end of the loan term. This means that if you make the minimum monthly payment during the life of the loan the entire balance will not be paid in full. A "balloon" payment will be due at that time.

A financial statement in a table form that shows assets, liabilities and net worth.

A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.

The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.

A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.

A court proceeding in which a debtor, who owes more than his assets, can relieve the debts by transferring his assets to a trustee.

Income before deducting taxes.

A survey of economic conditions, conducted in the Federal Reserve’s 12 regional banks, in preparation for Federal Open Market Committee meetings. Frequency: twice per quarter. Source: Federal Reserve.

The person designated to receive the benefits resulting from certain acts.

To transfer personal property through a will or last testament. 

An improvement that increases property value as opposed to repairs or replacements that simply maintain value.

A mortgage that requires payment to reduce the debt every two weeks instead of monthly. The 26 (sometimes 27) biweekly payments are each equal to one-half of the monthly payment that would be required with a standard 30 year fixed-rate mortgage. The result is a faster loan balance reduction with substantial savings in interest.

A written instrument that transfers title to personal property.

Any mistake in your monthly statement as defined by the Fair Credit Billing Act.

An agreement between a buyer and seller to purchase real estate.  A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time.  If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.

A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house.  The binder deposit is deducted from the purchase price at closing and is not an additional cost.  Sometimes referred to as earnest money.

A single policy that covers more than one piece of property (or more than one person).

A single mortgage that is secured by more than one parcel of real estate.

In good faith without fraud.

An interest-bearing certificate that serves as evidence of a debt with a maturity date. Typically, bonds represent obligations of a government or business corporation. A real estate bond is a written obligation, usually secured by a mortgage or deed of trust.

A violation of the terms of any legal obligation or agreement.

Sometimes called a "swing loan", a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.

A detailed plan of income and expenses estimated over a specified period of time. Budgets provide guidelines for managing costs and profits.

A category of income or expense data that you can use in a budget.

Regulations established by local governments that control design, construction, and materials used in construction. Building codes are usually based on standardized health and safety guidelines.

Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. It usually excludes weekends and holidays.

An account in which money is held so that it can be applied to the monthly mortgage payments, as each payment comes due, during the period that an interest rate buy-down plan is in effect.

Call Option

A provision in a home loan that gives the mortgagee the right to call the mortgage due and payable at the end of a specified time period for any reason.

A contract provision that gives the right to terminate obligations upon the occurrence of specified events.

Refers to a provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.

1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.

The cost of an improvement made to extend the useful life of a property or to add to its value.

Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.

A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. This additional cash can be used by the borrower for any purpose.

An instrument, issued by a bank or other financial institution, that is evidence of a type of savings deposit. The document includes the institution’s promise to return the deposit, plus earnings at a specified interest rate within a specified period.

A rarely used index that is used to determine interest rate changes for certain adjustable-rate mortgages (ARM) plans.

A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.

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

A statement of opinion rendered by a title company or attorney, stating that a title to real property is legally held by the current owner.

A history of all documents, including conveyances and encumbrances, that affect the title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Term sometimes used to describe the frequency of payment or interest rate changes in an adjustable-rate mortgage (ARM).

Anything tangible and owned, other than real estate. The same as personal property.

A tax that is required in some municipalities if a property changes hands or a new mortgage is obtained.  The amount of this tax can vary with each state, city, and county.  For our comparison purposes, this fee is considered a tax or other unavoidable fee.

An economic indicator that reports the number of new civilian jobs created and the percentage of civilians in the job market who are unemployed. One of the most anticipated and closely watched economic indicators. Frequency: monthly. Source: Labor Department.

A title that is free of clouds, liens, disputed interests, or legal questions as to ownership of the property.

A meeting of the parties involved in a real estate transaction to finalize the process.  In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker, and the lender.  In the case of a refinance, the close of escrow involves the borrower and the lender.  Sometimes referred to as the settlement or closing.

A meeting of the parties involved in a real estate transaction to finalize the process.  In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker, and the lender.  In the case of a refinance, the closing involves the borrower and the lender.  Sometimes referred to as the settlement or the close of escrow.

A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees, and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.

The total of all the items that must be paid at closing related to your new mortgage.

Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Any conditions such as encumbrances, liens, or claims revealed by a title search that adversely affect the title to real estate. Clouds on a title often cannot be removed, except by a quitclaim deed release, or court action. Compare with clear title.

A person who signs a promissory note along with the primary 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. Sometimes called a co-signer.

A sharing of hazard insurance risk between the insurer and the insured, or others. A coinsurance clause states to what extent a loss will be covered based on the percentage of value insured.

Property pledged as security for a debt. The borrower risks losing the collateral if the debt is not repaid according to the terms of the loan contract.

The process of bringing a delinquent debt current and the filing of the necessary notices to proceed with repossession or foreclosure when necessary.

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a small percentage of the price of the property or amount borrowed. Sometimes called points.

A written offer from a lender to provide financing to a borrower.  The commitment letter states the terms under which the lender agrees to provide financing to the borrower.  Also called a loan commitment.

Charges against individual unit owners in a condominium complex, or planned unit development (PUD), for additional funds, to repair, maintain, or improve the common areas of the project.

Those areas of a property (usually a planned unit development or condominium project) that are used by all owners or tenants. Common areas may include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings and parking areas.

The body of law based on general custom in England and used to a certain extent in the United States. Common law sometimes prevails unless superseded by other law.

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.

An alternative financing option that enables low to moderate income homebuyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.

In some western and southwestern states, a form of ownership under which property accumulated through joint efforts of husband and wife is presumed to be owned equally by them unless acquired as separate property of either spouse.

An abbreviated form of comparable properties. Comparables are used for comparative purposes in the appraisal process and are properties that are very similar to the property being appraised. They have been sold recently and have approximately the same size, location, and features. Comparables help the appraiser determine the approximate fair market value of the subject property. Often just called “comps”.

Interest paid on the original principal balance, and on the accumulated and unpaid interest.

The taking of private property for a public purpose by a government under the right of eminent domain. Also, the determination that a building is not fit for use or is dangerous and must be destroyed.

A form of real estate ownership in which each owner has title to a specific unit in a project and joint ownership in the common areas of the project.

Changing the ownership of an existing rental complex building to the condominium form of ownership.

A condominium complex that has registration desks, short-term occupancy, room service, and daily cleaning services. Such properties are often operated as commercial hotels even though the units may be individually owned.

A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as "jumbo mortgages". The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.

A short-term loan that is used to finance the construction of a new home.  During the term of the loan, the lender makes payments to the builder as the work progresses and the borrower makes interest payments on only the funds that have been disbursed to the builder.  Typically, the construction loan is refinanced into a permanent loan after the home is completed.

An economic indicator that measures the total amount of spending in the U.S. on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume. Frequency: monthly. Source: Commerce Department.

A monthly survey of 5,000 households designed to measure Americans’ optimism about their current situation and the future. Frequency: monthly. Source: Conference Board.

Measures the change in the cost of living for most American families. Widely followed as an indicator of inflation of retail purchases. Frequency: monthly. Source: Federal Reserve.

A company that prepares detailed reports used by lenders to determine a potential borrower’s creditworthiness. These agencies obtain data for these reports from a credit repository as well as from other sources. More Commonly referred to as credit bureaus.

An index designed to measure consumer optimism. Includes a preliminary report at mid-month and final report near month-end. Frequency: semimonthly. Source: University of Michigan.

A condition that must be met before a contract is legally binding.  For example, a lender's commitment to provide financing to a borrower may be contingent on receipt of an acceptable appraisal.

An oral or written agreement to do or not to do a certain thing for consideration.

A mortgage that is not insured or guaranteed by a government agency.

A provision in some adjustable-rate-mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at a specified period within the term of the loan.

An adjustable-rate mortgage (ARM) that allows a borrower to convert their mortgage to a fixed rate loan for the remainder of the loan term if certain conditions are met.

A residential or mixed-use building wherein a corporation holds title to the property, sells shares of stock, representing the value of a single apartment, to individuals who then receive a lease, or similar agreement, as evidence of title.

A type of real estate ownership in which residents of a multi-unit property own shares of the corporation that owns the property.  The ownership of these shares gives the owner the right to occupy a unit in the building.

A corporation that holds the title to a cooperative project and grants occupancy rights to shareholders through leases or similar rental agreements.

Another person who signs your loan and assumes equal responsibility for it.

An index that may be used to determine the interest rate changes of an adjustable-rate mortgage (ARM). The Cost of Funds Index, or COFI as it is commonly called, is the weighted average of interest rates that Federal Home Loan banks have paid to their customers recently. Usually, the COFI for the 11th district of Federal Home Loan Banks is used and covers banks in California, Nevada, and Arizona. The index value is announced on the last working day of the month following the month listed.

The fee associated with a lender sending documents to other parties involved in the loan, like an attorney or title company.  For our comparison purposes, this fee is considered a third-party fee, however, some lenders may choose not to pass these costs on to the borrower.

A promise written into deeds, mortgages, and other financial instruments that obligates or restricts the borrower. The violation of some covenants can result in foreclosure.

A lender may reduce the actual amount of the closing costs by a credit in order to offer more competitive fees.

An agency that gathers and keeps your credit record.

A value given to an individual to reflect their current and past debt repayment patterns.  A grade of "A" is considered to be the best.

A record of a person’s debt history, including all open and fully repaid obligations. A credit history helps a lender to determine whether a potential borrower has satisfactory history of repaying debts in a timely fashion.

Refers to a prospective lender's request for a consumer's credit report.

A type of insurance, often bought by borrowers, that will pay off the debt if the borrower dies while the policy is in force.

A legal agreement binding a person to pay back borrowed money.

A record of an individual's current and past debt repayment patterns.  A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner.  For our comparison purposes, the credit report fee is considered to be a third-party fee.

An institution that collects, maintains, stores, and sells financial and publicly recorded information about the payment records of individuals applying for credit.

A numerical representation of the predicted risk for a loan application. Lower scores represent a higher probability that the borrower will not repay the debt.

A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Health, life, or accident insurance designed to pay the outstanding balance of a debt.

A person or business that is owed money.

Economic indicator that measures the level of outstanding consumer installment debt. Can be used in conjunction with real sales to determine whether cash or credit is fueling growth. Frequency: monthly. Source: Federal Reserve.

Damages

Debenture

Debit

Debit Card (EFT)

Debt

Deed

Deed of Trust

Deed Stamp

Deed-in-lieu

Default

Delinquency

Delivery Fee

Department of Veterans Affairs (VA)

Deposit

Depreciation

Devise

Disburse

Disclosures

Discount Points

Discount Rate

Document Preparation

Documentary Stamp

Dower

Down Payment

Draw Period

Due-on-sale Clause

Durable Goods Orders