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acceleration clause
A clause in a mortgage which allows
the lender to demand payment of the
outstanding loan balance. The most
common reason for accelerating a
loan is if the borrower defaults on
the loan or transfers title to
another individual without informing
the lender.
adjustable-rate mortgage
(ARM)
A mortgage in which the interest
changes periodically, according to
corresponding fluctuations in an
index. ARM mortgages may begin as
fixed mortgages for a short period
of time and them become adjustable.
adjustment date
The date the interest rate
changes on an adjustable-rate (ARM)
mortgage.
amortization
The loan payment consists of a
portion which will be applied to pay
the accruing interest on a loan,
with the remainder being applied to
the principal. Over time, the
interest portion decreases as the
loan balance decreases, and the
amount applied to principal
increases so that the loan is paid
off (amortized) in the specified
time.
amortization schedule
A table which shows how much of each
payment will be applied toward
principal and how much toward
interest over the life of the loan.
This may also show the corresponding
loan balance until it reaches zero.
annual percentage rate (APR)
This is not the note rate on your
loan. It is a value created
according to a government formula
that reflects the true annual cost
of borrowing. The APR percentage
will always be higher than the
actual rate of your mortgage.
application
(1003)
The form used to apply for a
mortgage loan, containing
information about a borrower's
income, savings, assets, debts, and
more.
appraisal
A professional estimate for the
value of a property. Appraisals are
based on the condition of the
property, as well as square footage
and comparable sales of similar
homes.
appraised value
An opinion of a property's fair
market value, based on an
appraiser's knowledge, experience,
and analysis of the property. For
nearly all purchase loans, the
purchase price is considered the
appraised value.
appraiser
An individual qualified by
education, training, and experience
to estimate the value of real
property and personal property.
appreciation
The increase in the value of a
property due to changes in market
conditions, inflation, improvements
and/or other causes.
assessed value
The valuation placed on property by
a public tax assessor for purposes
of taxation.
assessment
The placing of a value on property
for the purpose of taxation.
assessor
A public official who establishes
the value of a property for taxation
purposes.
asset
Any Item of value owned by an
individual. Assets that can be
quickly converted into cash are
considered "liquid assets". These
include bank accounts, stocks,
bonds, mutual funds, and so on.
Other assets such as: real estate,
personal property, and debts owed to
an individual by others are not
considered "liquid assets".
assignment
When ownership of your mortgage is
transferred from one lender or
investor to another, it is called an
assignment.
assumable mortgage
A mortgage that can be assumed by
the buyer when a home is sold. The
borrower must "qualify" in order to
assume the loan.
assumption
The term applied when a
buyer assumes the seller's mortgage.
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balloon mortgage
A mortgage loan that requires the
remaining principal balance be paid
at a specific point in time. For
example, a loan may be amortized as
if it would be paid over a thirty
year period, but requires that at
the end of the tenth year the entire
remaining balance must be paid. At
that time, the owner will generally
sell the property or refinance into
a new mortgage.
balloon payment
The final lump sum payment that is
due at the termination of a balloon
mortgage.
bankruptcy
By filing in federal bankruptcy
court, an individual or individuals
can restructure or relieve
themselves of debts and liabilities.
Bankruptcies are of various types,
but the most common for an
individual seem to be a "Chapter 7
No Asset" bankruptcy which relieves
the borrower of most types of debts.
A borrower cannot usually qualify
for an "A" paper loan for a period
of twelve months after the
bankruptcy has been discharged and
requires the re-establishment of an
ability to repay debt.
bill of sale
A written document that transfers
title to personal property. For
example, when selling an automobile
to acquire funds which will be used
as a source of down payment or for
closing costs, the lender will
usually require the bill of sale (in
addition to other items) to help
document this source of funds.
biweekly mortgage
A mortgage in which you make
payments every two weeks instead of
once a month. The result is that
instead of making twelve monthly
payments during the year, you make
thirteen. The extra payment goes
directly to the principal,
substantially reducing the interest
paid on a mortgage and the time it
takes to pay off the mortgage.
broker
Broker has several meanings in
different situations. Most Realtors
are "agents" who work under a
"broker." Some agents may be brokers
as well. In the mortgage industry,
broker usually refers to a company
or individual that does not lend
money, but broker loans to larger
lenders or investors. A broker is
anyone who acts as an agent,
bringing two parties together for
any type of transaction and earns a
fee for doing so.
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cap
Adjustable Rate Mortgages have
fluctuating interest rates, but
those fluctuations are usually
limited to a certain amount. Those
limitations may apply to how much
the loan may adjust over a six month
period, an annual period, and over
the life of the loan, and are
referred to as "caps."
cash-out refinance
When a borrower refinances his
mortgage at a higher amount than the
current loan balance with the
intention of pulling out money for
personal use, it is referred to as a
"cash out refinance."
Certificate of Eligibility
A document issued by the Veterans
Administration that certifies a
veteran's eligibility for a VA loan.
clear title
A title that is free of liens or
legal questions as to ownership of
the property.
closing
This has different meanings in
different states. In some states a
real estate transaction is not
consider "closed" until the
documents record at the local
recorders office. In others, the
"closing" is a meeting where all of
the documents are signed and money
changes hands.
closing costs
Closing costs are separated into
what are called "non-recurring
closing costs" and "pre-paid items."
Non-recurring closing costs are any
items which are paid just once as a
result of buying the property or
obtaining a loan. "Pre-paids" are
items which recur over time, such as
property taxes and homeowners
insurance. A lender makes an attempt
to estimate the amount of
non-recurring closing costs and
prepaid items on the Good Faith
Estimate which they must issue to
the borrower within three days of
receiving a home loan application.
co-borrower
IAn additional individual who is
both obligated on the loan and is on
title to the property.
collateral
In a home loan, the property is the
collateral. The borrower risks
losing the property if the loan is
not repaid according to the terms of
the mortgage or deed of trust.
collection
When a borrower falls behind, the
lender contacts them in an effort to
bring the loan current. The loan
goes to "collection." As part of the
collection effort, the lender must
mail and record certain documents in
case they are eventually required to
foreclose on the property.
commission
Most salespeople earn commissions
for the work that they do and there
are many sales professionals
involved in each transaction,
including Realtors, loan officers,
title representatives, attorneys,
escrow representative, and
representatives for pest companies,
home warranty companies, home
inspection companies, insurance
agents, and more. The commissions
are paid out of the charges paid by
the seller or buyer in the purchase
transaction. Realtors generally earn
the largest commissions, followed by
lenders, then the others.
common law
An unwritten body of law based on
general custom in England and used
to an extent in some states.
In some states, especially the
southwest, property acquired by a
married couple during their marriage
is considered to be owned jointly,
except under special circumstances.
comparable sales
Recent sales of similar properties
in nearby areas and used to help
determine the market value of a
property. Also referred to as
"comps."
condominium
A type of ownership in real property
where all of the owners own the
property, common areas and buildings
together, with the exception of the
interior of the unit to which they
have title. Often mistakenly
referred to as a type of
construction or development, it
actually refers to the type of
ownership.
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 condition that must be met before
a contract is legally binding. For
example, home purchasers often
include a contingency that specifies
that the contract is not binding
until the purchaser obtains a
satisfactory home inspection report
from a qualified home inspector.
contract
An oral or written agreement to do
or not to do a certain thing.
conventional mortgage
Refers to home loans other than
government loans (VA and FHA).
convertible ARM
An adjustable-rate mortgage that
allows the borrower to change the
ARM to a fixed-rate mortgage within
a specific time.
credit
An agreement in which a borrower
receives something of value in
exchange for a promise to repay the
lender at a later date.
credit history
A record of an individual's
repayment of debt. Credit histories
are reviewed my mortgage lenders as
one of the underwriting criteria in
determining credit risk.
creditor
A person to whom money is owed.
credit report
A report of an individual's credit
history prepared by a credit bureau
and used by a lender in determining
a loan applicant's creditworthiness.
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debt
An amount owed to another.
deed
The legal document conveying title
to a property.
deed-in-lieu
Short for "deed in lieu of
foreclosure," this conveys title to
the lender when the borrower is in
default and wants to avoid
foreclosure. The lender may or may
not cease foreclosure activities if
a borrower asks to provide a
deed-in-lieu. Regardless of whether
the lender accepts the deed-in-lieu,
the avoidance and non-repayment of
debt will most likely show on a
credit history. What a deed-in-lieu
may prevent is having the documents
preparatory to a foreclosure being
recorded and become a matter of
public record.
deed of trust
Some states, like California , do
not record mortgages. Instead, they
record a deed of trust which is
essentially the same thing.
default
Failure to make the mortgage payment
within a specified period of time.
For first mortgages or first trust
deeds, if a payment has still not
been made within 30 days of the due
date, the loan is considered to be
in default.
delinquency
Failure to make mortgage payments
when mortgage payments are due. For
most mortgages, payments are due on
the first day of the month. Even
though they may not charge a "late
fee" for a number of days, the
payment is still considered to be
late and the loan delinquent. When a
loan payment is more than 30 days
late, most lenders report the late
payment to one or more credit
bureaus.
deposit
A sum of money given in advance of a
larger amount being expected in the
future. Often called in real estate
as an "earnest money deposit."
depreciation
A decline in the value of property;
the opposite of appreciation.
Depreciation is also an accounting
term which shows the declining
monetary value of an asset and is
used as an expense to reduce taxable
income. Since this is not a true
expense where money is actually
paid, lenders will add back
depreciation expense for
self-employed borrowers and count it
as income.
down payment
The part of the purchase price of a
property that the buyer pays in cash
and does not finance with a
mortgage.
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.
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earnest money deposit
A deposit made by the potential home
buyer to show that he or she is
serious about buying the house.
equity
A homeowner's financial interest in
a property. Equity is the difference
between the fair market value of the
property and the amount still owed
on its mortgage and other liens.
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 earnest money deposit
is put into escrow until delivered
to the seller when the transaction
is closed.
escrow account
Once you close your purchase
transaction, you may have an escrow
account or impound account with your
lender. This means the amount you
pay each month includes an amount
above what would be required if you
were only paying your principal and
interest. The extra money is held in
your impound account (escrow
account) for the payment of items
like property taxes and homeowner's
insurance when they come due. The
lender pays them with your money
instead of you paying them yourself.
estate
The ownership interest of an
individual in real property. The sum
total of all the real property and
personal property owned by an
individual at time of death.
eviction
The lawful expulsion of an occupant
from real property.
eviction crew
Workers who accompany the sheriff on
behalf of the lender to assist in
the eviction of an occupant from
real property. The eviction crew are
the workers who will actually move
the occupants belongings from the
home to the
street/yard//driveway/sidewalk and
then change the locks to keep the
previous occupant from retunring to
the home.
examination of title
The report on the title of a
property from the public records or
an abstract of the title.
exclusive listing
A written contract that gives a
licensed real estate agent the
exclusive right to sell a property
for a specified time.
executor
A person named in a will to
administer an estate. The court will
appoint an administrator if no
executor is named. "Executrix" is
the feminine form.
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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 (FNMA)
The Federal National Mortgage
Association, which is a
congressionally chartered,
shareholder-owned company that is
the nation's largest supplier of
home mortgage funds. For a
discussion of the roles of Fannie
Mae, Freddie Mac (FHLMC), and Ginnie
Mae (GNMA), see the Library.
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 Housing
Administration (FHA)
An agency of the U.S. Department of
Housing and Urban Development (HUD).
Its main activity is the insuring of
residential mortgage loans made by
private lenders. The FHA sets
standards for construction and
underwriting but does not lend money
or plan or construct housing.
fee simple
The greatest possible interest a
person can have in real estate.
fee simple estate
An unconditional, unlimited estate
of inheritance that represents the
greatest estate and most extensive
interest in land that can be
enjoyed. It is of perpetual
duration. When the real estate is in
a condominium project, the unit
owner is the exclusive owner only of
the air space within his or her
portion of the building (the unit)
and is an owner in common with
respect to the land and other common
portions of the property.
FHA mortgage
A mortgage that is insured by the
Federal Housing Administration
(FHA). Along with VA loans, an FHA
loan will often be referred to as a
government loan.
firm commitment
A lender's agreement to make a loan
to a specific borrower on a specific
property.
first mortgage
The mortgage that is in first place
among any loans recorded against a
property. Usually refers to the date
in which loans are recorded, but
there are exceptions.
fixed-rate mortgage
A mortgage in which the interest
rate does not change during the
entire term of the loan.
fixture
Personal property that becomes real
property when attached in a
permanent manner to real estate.
flood insurance
Insurance that compensates for
physical property damage resulting
from flooding. 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.
401(k)/403(b)
An employer-sponsored investment
plan that allows individuals to set
aside tax-deferred income for
retirement or emergency purposes.
401(k) plans are provided by
employers that are private
corporations. 403(b) plans are
provided by employers that are not
for profit organizations.
401(k)/403(b) loan
Some administrators of 401(k)/403(b)
plans allow for loans against the
monies you have accumulated in these
plans. Loans against 401K plans are
an acceptable source of down payment
for most types of loans.
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government loan (mortgage)
A mortgage that is insured by the
Federal Housing Administration (FHA)
or guaranteed by the Department of
Veterans Affairs (VA) or the Rural
Housing Service (RHS). Mortgages
that are not government loans are
classified as conventional loans.
Government National Mortgage
Association (Ginnie Mae)
A government-owned corporation
within the U.S. Department of
Housing and Urban Development (HUD).
Created by Congress on September 1,
1968 , GNMA performs the same role
as Fannie Mae and Freddie Mac in
providing funds to lenders for
making home loans. The difference is
that Ginnie Mae provides funds for
government loans (FHA and VA)
grantee
The person to whom an interest in
real property is conveyed.
grantor
The person conveying an interest in
real property.
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hazard insurance
Insurance coverage that in the event
of physical damage to a property
from fire, wind, vandalism, or other
hazards.
Home Equity Conversion
Mortgage (HECM)
Usually referred to as a reverse
annuity mortgage, what makes this
type of mortgage unique is that
instead of making payments to a
lender, the lender makes payments to
you. It enables older home owners to
convert the equity they have in
their homes into cash, usually in
the form of monthly payments. Unlike
traditional home equity loans, a
borrower does not qualify on the
basis of income but on the value of
his or her home. In addition, the
loan does not have to be repaid
until the borrower no longer
occupies the property.
home equity line of credit
A mortgage loan, usually in second
position, that allows the borrower
to obtain cash drawn against the
equity of his home, up to a
predetermined amount.
home inspection
A thorough inspection by a
professional that evaluates the
structural and mechanical condition
of a property. A satisfactory home
inspection is often included as a
contingency by the purchaser.
homeowners' association
A nonprofit association that manages
the common areas of a planned unit
development (PUD) or condominium
project. In a condominium project,
it has no ownership interest in the
common elements. In a PUD project,
it holds title to the common
elements.
homeowner's insurance
An insurance policy that combines
personal liability insurance and
hazard insurance coverage for a
dwelling and its contents.
homeowner's warranty
A type of insurance often purchased
by homebuyers that will cover
repairs to certain items, such as
heating or air conditioning, should
they break down within the coverage
period. The buyer often requests the
seller to pay for this coverage as a
condition of the sale, but either
party can pay.
HUD median income
Median family income for a
particular county or metropolitan
statistical area (MSA), as estimated
by the Department of Housing and
Urban Development (HUD).
HUD-1 settlement statement
A document that provides an itemized
listing of the funds that were paid
at closing. Items that appear on the
statement include real estate
commissions, loan fees, points, and
initial escrow (impound) amounts.
Each type of expense goes on a
specific numbered line on the sheet.
The totals at the bottom of the
HUD-1 statement define the seller's
net proceeds and the buyer's net
payment at closing. It is called a
HUD1 because the form is printed by
the Department of Housing and Urban
Development (HUD). The HUD1
statement is also known as the
"closing statement" or "settlement
sheet."
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Improvement
Privately owned structure (building,
fence, etc.) on a site to enhance
the value of the property.
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joint tenancy
A form of ownership or taking title
to property which means each party
owns the whole property and that
ownership is not separate. In the
event of the death of one party, the
survivor owns the property in its
entirety.
judgment
A decision made by a court of law.
In judgments that require the
repayment of a debt, the court may
place a lien against the debtor's
real property as collateral for the
judgment's creditor.
judicial foreclosure
A type of foreclosure proceeding
used in some states that is | 
Option
1: Contact the Lender and ask for help before falling
behind on payments! Many homeowners assume that the Bank will
not help them restructure payments or modify their mortgage.
Although there is no guaranty that the lender will assist the
homeowner, this is still the first place to start. If there is
little or no equity in the house the
homeowner may decide to give the Bank the property by executing
a deed in lieu of foreclosure. In this scenario, the Bank
releases the debt in return for the homeowner deeding the house
to the bank. This may save the homeowner’s credit if it has not
already gone bad.