Glossary of Terms

Term Description
Acceleration clause The section of a mortgage document that allows the lender to speed up the payment date in the event of a default, making the entire principal amount due.
Agreement of sale A document in which a property’s buyer and seller approve the price and other terms of the transfer of title.
Amortization The payment of a debt in installments over an agreed-upon period, during which principal and interest are paid off.
Annual percentage rate (APR) A yearly rate of interest that includes fees and costs paid to acquire the loan, such as loan interest rate, origination costs and mortgage loan insurance (if applicable), among others.
Appreciation An increase in the value of a property based on market condition or other causes.
Adjustable Rate Mortgage (ARM) Home loan in which the interest rate is changed periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase.
Assumable mortgage A home loan that can be transferred to another borrower when the property is sold.
Abstract of title A written history of all the transactions that bear on the title to a specific piece of land. An abstract of title covers the time from when the property was first sold to the present.
Amortization plan Plan to cancel a mortgage loan that shows the amount of money that goes into the principal and interest.
Appraisal An estimate of market value placed on all real estate property.
Closing The meeting at which the sale of a property is completed. Also known as the settlement.
Closing Costs Expenses incurred by buyers and sellers when transferring ownership of property (Lender fees, title charges, government recording fees, escrow and pre paid items).
Credit report A document containing financial information about a person, prepared by a credit report agency.
Conventional Mortgage Loan Any mortgage loan that is not insured or guaranteed by the federal government.
Common tenure A type of common property, real estate union with no survival rights.
Clean title A property title that is free of claims and legal liens.
Deposit Money given by a buyer when making a formal offer to bind the sale.
Due on sale clause A condition of a mortgage that states that the loan must be paid when the house is sold.
Deed Legal document that provides legal title to property.
Escrow account An account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made. The retention of documents and money by a neutral third party before the settlement.
Early withdrawal penalty A depositor is assessed a service charge for withdrawing funds from or closing out a time deposit before its maturity date.
Exclusive tenure Common property that only belongs to a married couple.
Fixed interest rate agreement A written agreement that guarantees buyers a specific interest rate with the condition that the loan is closed in a reasonable period of time. This agreement usually specifies how many points will be paid at settlement.
FHA Loan A residential mortgage from an approved lender and insured by the Federal Housing Administration.
Fixed interest mortgage loan A mortgage loan with an interest rate that does not change during the loan term.
Flood insurance A policy that pays the homeowner for damaged caused by raising water when a property is located in zones designated as a floodable by the federal government (FEMA).
Graduated-payment mortgage A home loan that starts out with smaller payments that gradually increase over the first few years, then remain fixed.
Interests Money paid for a borrower’s use of money.
Lien A legal claim against property for payment of a debt or for services rendered, which has to be paid when the property is sold.
Loan-to-value ratio (LTV) The percentage of the home’s price that is paid for by a mortgage.
Loan service Collecting monthly payments from the borrower and managing related responsibilities.
Mortgage A legal agreement that uses property as collateral to secure payment of a debt.
Mensura A drawing that shows a property’s legal limits and its boundaries.
Mortgage Insurance Policy (MIP) A policy paid to the FHA or a private insurance company for loan insurance.
Mortgage payment A legal document that binds sellers to pay a loan at an interest determined during a specific period of time; the agreement is settled through a mortgage loan.
Owner insurance An insurance policy that combines risk protection and damage compensation.
PITI Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.
Pre-qualification A non-binding evaluation of a prospective borrower’s finances to determine he or she can borrow and on what terms.
Principal The amount of money borrowed; also the amount of money owed, excluding interest.
Points A point equals 1 percent of a mortgage or other loan. A one-time charge charged by the lender to increase the loan’s profitability.
Private Mortgage Insurance (PMI) A policy that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan.
Qualifying ratios The percentage of income that is spent on housing debt and combined household debt.
Real estate broker A person who is licensed to represent a buyer or seller of land and the buildings and other improvements on it and collect commissions for the work.
Refinancing The repayment of a mortgage with another mortgage.
Reserves A requirement from some mortgage bankers that a buyer has enough remaining money after the closing to make the first two mortgage loan payments.
Risk insurance A policy that protects both the borrower and the lender against physical damages at the property caused by fire, hurricanes and earthquakes. This policy is required by the lending company.
Settlement Statement A document that details who has paid how much to whom.
Secondary mortgage market The trade in home loans that are bundled together and sold as securities to investors.
Title Company A company that checks a property’s title for liens and other obstacles to sales.
Title A legal document that establishes the right to a property.

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