Glossary
TERM (BUZZ WORD) DEFINITION
- Adjustable Rate Mortgage (ARM)
A loan that has periodic rate adjustments at specific intervals. (ie. 3mo. 6mo. 12mo. 3yrs) - Balloon Payment
A final lump sum installment due on a note or mortgage that pays the loan off in full. - Combined loan to value ratio (CLTV)
Percentage of all recorded liens on the value of the property. - Conventional Loan
A loan with a fixed rate, fixed term. - Debt Ratio
The relationship between income and debt. - Equity
The cash value of a property after repaying loans. - Escrow
The deposit of funds with a third party to carry out specific transactions. - Federal Deposit Insurance Corporation (FDIC)
Insures up to $100K for each depositor in most commercial banks. - Fair Issacs Company (FICO Score)
A credit risk score that measures from 300 to 800. - First Mortgage (First)
A mortgage with priority over all other mortgages. - Fixed Rate Loan
A loan with a fixed rate over the term of the loan. - Foreclosure
A legal proceeding to take possession of collateral securing a defaulted loan. - Jumbo Loan (Jumbo)
Loans of $350K or more in most states. - Junior Mortgage
A mortgage whose claim against the property will be settled after prior mortgages have been paid. - Lien
A charge against property making it security for the payment of a debt, mortgage or taxes. - Liquidity
Ease of converting assets to cash. - Loan Application (App)
Form used to qualify a borrower for a loan. - Loan To Value Ratio (LTV)
The loan amount compared to the property value. - Mechanic Lien
A lien placed on property by contractors that provide home improvement work. - Mortgage Lien
An encumbrance on property used to secure a loan. The holder of the lien has a claim to the property in case of loan default. - Multifamily Housing
A residential structure with more than one dwelling in the same building, such as a condo or duplex. - Non-conforming Loan
A residential mortgage loan exceeding the loan specification set by FNMA and FHLMC. - Notice Of Default (NOD)
A recorded document that is delivered to a borrower when a default on a deed of trust occurs. - Origination Fees
Charges to cover the costs of issuing a loan, such as credit checks, appraisal, and title expenses. - Private Mortgage Insurance (PMI)
Insurance to cover mortgages incase of a default. - Points
Fees paid to induce lenders to make a mortgage loan. Each point equals 1% of the loan principal. - Preliminary Title Report (Prelim)
Contains legal, vested owner, liens, and derogatory public record information. - Prepayment Penalty (Prepay)
A penalty for prepayment of a mortgage before it actually becomes due. - Prime Rate
The lowest commercial interest rate charged by banks on short term loans to their most credit worthy customers. - Principal and Interest (P&I)
A periodic payment including the interest charges plus an amount applied to the principal balance. - Principal, Interest, Taxes and Insurance Payment (PITI)
A periodic payment including principal, interest insurance premiums and property taxes. - Refinance (REFI)
The process of restructuring or rewriting an original loan term or conditions. - Seasoned Loan
A loan in existence long enough to show a pattern of payments. ie 12 months. - Security
Property that serves as collateral for debt. - Sub-Prime (B&C)
Applicants with minor or major derogatory credit. - Title Search
An examination to determine the ownership and encumbrances affecting real property. - Underwriter
The person who approves or denies a loan based on the property and the applicant. - Workout
A mutual effort by a property owner and lender to avoid foreclosure/bankruptcy following a default.