glossary of mortgage

The amount of interest that has accumulated on a loan but has not yet been paid.

A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.

The process of gradually paying off a debt over time through regular payments of principal and interest. Each month, the mortgage payment is split into two parts: some of it goes toward paying down the amount borrowed (the principal), and some goes toward interest, which is the cost of borrowing the money. Early on, more of the payment goes toward interest, but over time, more will go toward reducing the loan balance.

The total cost of borrowing a mortgage loan over a year. It includes not just the interest rate but also other fees like closing costs, points, and loan origination fees. This gives borrowers a clearer picture of the overall cost of the loan, making it easier to compare different mortgage offers.

An estimate of the current market value of a property, conducted by a licensed professional.

A mortgage with relatively low fixed payments during the term, followed by a larger lump-sum payment at the end.

A large, lump-sum payment that is due at the end of a loan term after a series of smaller periodic payments.

A unit equal to one one-hundredth of a percentage point, often used in discussing changes in interest rates.

A short-term loan used to bridge the gap between the sale of an existing home and the purchase of a new one.

A refinancing of a mortgage where the new loan amount is greater than the existing loan amount, and the borrower receives the difference in cash.

The documented history of property ownership, showing the transfer of title from one owner to the next.

The closing costs for a mortgage include all of the expenses related to applying for the loan and finalizing a real estate sale. Some of the costs are related to the property, while others are related to the mortgage lender's services and the paperwork involved in the transaction.

A document that outlines all the costs and terms of a mortgage loan, provided to the borrower at least three days before closing.

An individual who signs a loan agreement along with the primary borrower and is equally responsible for repaying the debt.

A measure of a borrower's monthly debt payments compared to their gross monthly income, used to assess creditworthiness.

A legal document that transfers property ownership from one person to another.

A voluntary transfer of property ownership from the borrower to the lender to avoid foreclosure.

Fees paid at closing to reduce the interest rate on a mortgage loan.

The portion of the purchase price that a buyer pays upfront in cash, usually expressed as a percentage of the total price.

A deposit made by a buyer to show serious intent to purchase a home, applied towards the purchase price at closing.

A claim or liability on a property, such as a mortgage, lien, or easement, that may affect its transfer or value.

The difference between the market value of a property and the amount owed on the mortgage.

A financial arrangement where a third party holds funds or documents and regulates the payment of funds until specific conditions in a real estate transaction are met.

An account where funds are held by a third party on behalf of two parties to a transaction, often for paying property taxes and insurance.

The price that a property would sell for on the open market, assuming both buyer and seller act without undue pressure.

The Federal National Mortgage Association (FNMA), a government-sponsored enterprise that buys and guarantees mortgages.

A U.S. government agency that provides mortgage insurance to approved lenders for homebuyers, particularly for first-time homebuyers and those with lower credit scores.

A mortgage insured by the Federal Housing Administration, often requiring lower down payments and easier credit requirements.

A type of credit score created by the Fair Isaac Corporation used to assess a borrower’s credit risk.

A document stating that funds given to a homebuyer from a relative or friend are a gift, not a loan, and does not need to be repaid.

A document that provides an estimate of the costs and fees associated with a mortgage loan.

Total income before taxes and other deductions.

A type of loan in which the borrower uses their home equity as collateral, borrowing up to a predetermined limit over time.

An assessment of a property's condition by a qualified inspector before purchase.

An organization that manages a residential community and enforces rules, often collecting fees to maintain common areas and services.

The U.S. government department responsible for national housing policies and programs.

A benchmark interest rate that reflects market conditions, used to determine the interest rate of an adjustable-rate mortgage.

A loan that is repaid over time with a set number of scheduled payments, including principal and interest.

The cost of borrowing money, expressed as a percentage of the loan amount, typically charged annually.

A limit on the amount the interest rate can increase on an adjustable-rate mortgage.

A type of mortgage where the borrower pays only the interest for a specified period, after which principal payments begin.

A foreclosure process that is handled through the court system.

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, often used to finance luxury properties.

Illegal payments made to someone as a reward for facilitating a transaction, typically a violation of the Real Estate Settlement Procedures Act (RESPA).

A fee charged when a borrower fails to make a scheduled loan payment by the due date.

An agreement that gives a tenant the option to purchase the property at the end of a lease term.

A formal, detailed description of a property's boundaries and location, used in legal documents.

A legal claim against a property as security for a debt, usually in the form of a mortgage.

A lender's formal offer to provide a loan under specific terms, typically after reviewing the borrower’s financial information.

A professional who arranges mortgage loans between borrowers and lenders, usually earning a commission.

Insurance that protects the lender against losses if a borrower defaults on the loan, often required for loans with low down payments.

A tax deduction that allows homeowners to reduce their taxable income by the amount of interest paid on a mortgage.

A legal document obligating the borrower to repay the mortgage loan, specifying the terms of repayment.

A mortgage that does not meet the guidelines of Fannie Mae and Freddie Mac, typically because of loan size or credit quality.

A formal notice filed by a lender indicating that a borrower has missed payments and is in default on their loan.

The percentage of occupied units in a building or property, often used to assess the performance of rental or commercial properties.

An adjustable-rate mortgage that allows the borrower to choose from multiple payment options, including interest-only and minimum payments.

A fee charged by a lender for processing a new loan application, typically a percentage of the loan amount.

A property sale where the seller provides financing to the buyer, allowing them to make payments directly to the seller instead of obtaining a traditional mortgage.

Daily interest that accrues on a loan from the closing date until the first mortgage payment is due.

An acronym for Principal, Interest, Taxes, and Insurance – the four components of a typical monthly mortgage payment.

A type of community that includes a mix of residential, commercial, and recreational properties, with shared amenities and common areas managed by a homeowners association (HOA).

Fees paid directly to the lender at closing in exchange for a reduced interest rate, also known as discount points.

A fee charged to a borrower who pays off their loan before the scheduled maturity date.

Financial ratios used by lenders to determine a borrower's ability to repay a loan, including the debt-to-income ratio.

A legal document used to transfer a person's ownership interest in a property without any warranties or guarantees about the title's status.

An agreement between borrower and lender that locks in the interest rate for a specified period during the loan application process.

A fee charged by a local government for registering a real estate transaction, such as the recording of a deed.

The process of replacing an existing mortgage with a new loan, usually to secure a lower interest rate or better terms.

A loan available to homeowners 62 years or older, allowing them to convert part of their home equity into cash without selling the home.

A written agreement between buyer and seller outlining the terms of a property sale.

A loan taken out in addition to the first mortgage, using the home's equity as collateral.

A document that itemizes all costs and fees associated with the closing of a real estate transaction.

A sale of a property where the proceeds are less than the amount owed on the mortgage, with the lender's approval.

A mortgage offered to individuals with lower credit scores or limited credit history, typically at a higher interest rate due to increased risk.

A legal claim by the government against a property for unpaid property taxes.

A legal document that indicates ownership of a property, evidenced by a deed.

Insurance that protects the buyer and lender against losses arising from disputes over property ownership or defects in the title.

A federal law requiring lenders to provide clear and detailed information about the terms and costs of a loan, designed to help consumers make informed decisions.

The process of evaluating the risk of insuring a home loan, determining the borrower’s ability to repay, and the terms of the loan.

The illegal practice of lending money at unreasonably high interest rates.

A mortgage loan guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans and service members.

An interest rate that can change over time based on market conditions, often associated with adjustable-rate mortgages (ARMs).

A deed in which the seller guarantees that they hold clear title to a property and have the right to sell it.

A type of secondary financing where a new mortgage includes both the unpaid balance of the original loan and an additional loan amount.

Laws and regulations governing how land and property can be used in specific areas.