Glossary of Mortgage Terms
A tax-deferred retirement savings account that allows employees to contribute a fixed amount of their income until withdrawn.
Adjustable rate mortgages (ARMs)
A mortgage in which the rate of interest adjusts based on an independently set index.
A fee imposed to cover the administrative portion of settling a loan.
One of many calculators on the Internet which measures how much home a person can afford.
A fee imposed by the real estate agent for providing the buyer with realty services.
A timetable for the gradual repayment of a mortgage loan.
The Annual Percentage Rate refers to the actual cost of a loan including the rate, points, insurance, and any other related fees (not including credit reports or appraisal charges.)
A fee charged by the lender to cover the origination cost of the loan.
The estimate of a property’s value performed by an appraiser on a specific date.
The fee an appraiser charges to assess the property value of a home.
The increase in value of a home over time.
A final lump sum mortgage payment due in full after a set period of time.
Better Business Bureau (BBB)
A nationwide organization supported by businesses who investigate customer complaints regarding dishonest businesses.
A person who borrows money from a lender.
An intermediary between a borrower and a lender.
The person buying a piece of property.
The real estate agent who represents the buyer in a sales transaction.
A financing arrangement where the seller holds a second trust deed or mortgage on the property to allow the buyer to buy the property.
All expenses related to transferring home ownership from the seller to the buyer.
The amount a real estate broker earns (usually 3-6% of the sales price of a home) for selling a home.
A loan that conforms to the standard rules for purchase by Freddie Mac or Fannie Mae.
Constant Maturity Treasury (CMT)
A common index rate which changes weekly that many mortgages are tied to.
The amount it costs to finance the construction of a property.
The fee charged to convert an adjustable rate mortgage to a fixed-rate loan.
A borrower’s record of past payment history.
A comprehensive report issued by a credit reporting agency which profiles a borrower’s credit history.
See FICO score.
A non-profit, cooperative organization which gives its members access to low-cost loans.
A measure of a borrower’s ability to repay a loan. Also referred to as debt-to-income ratio.
A broker who discount his/her commission fees to buy or sell your property.
The process of preparing closing documents for a mortgage.
The amount a buyer pays in cash for a home.
The current market value of a property minus what is owed.
Funds held by a third-party account which are paid-out once certain conditions are met.
The person or company which handles the distribution of escrow funds.
A credit score developed by the Fair Issac Corporation® used to determine a borrower’s level of risk.
Fannie Mae (FNMA)
The Federal National Mortgage Association is a public company that operates under a federal charter. As the nation's largest source of financing for home mortgages, Fannie Mae does not lend money directly to consumers, but instead works to ensure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.
Federal Housing Administration (FHA)
The Federal Housing Administration is a United States government agency which insures loans made by approved lenders to qualified borrowers, in accordance with its regulations.
Interest or other charges paid by a borrower on a revolving mortgage loan.
Insurance covering a borrower’s home from fire damage.
Fixed rate loan
A fixed interest rate mortgage which doesn’t change or adjust during the course of the loan.
A set management fee which doesn’t change or fluctuate.
Insurance coverage for homes that are in known flood areas.
The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Mortgages that are not government loans are classified as conventional loans.
Insurance covering a borrower’s home against hazards.
A construction company or general contractor who builds homes.
Any interior or exterior projects which improve the overall appearance of an existing home.
Homeowner’s association fees
Fees paid by homeowners who live in a common property development and share amenities like grounds maintenance, swimming pool upkeep, use of the community room, etc.
A published cost of money measurement that lenders use to calculate the rate on a mortgage (e.g., T-bill, LIBOR, CMT.)
Coverage against unforeseen property losses in exchange for premiums paid.
A global communication network that allows computers worldwide to connect and exchange information.
A rate that is charged or paid for the exchange to borrow money.
A person whose profession involves giving legal advice.
An agreement which specifies the terms for occupying a property.
An agreement which allows a borrower to purchase a property which is being leased from the lender.
A person or company which lends money to borrowers.
A legal claim against a property that must be paid off when the property is sold before the title transfer can occur.
The maximum interest rate on an adjustable rate mortgage that may be charged at any time over the life of the mortgage.
Loan-to-value (LTV) ratio
The amount of a mortgage loan divided by the appraised value or sales price.
The person at a lending institution who solicits loans, acts as the representative for the lending institution, and represents the borrower at the lending institution.
A quoted rate guaranteed by a lender for a specified period of time even if rates go up or down during the lock-in period.
London Interbank Offering Rate (LIBOR)
An index used to determine interest rate changes for certain ARM plans, based on the average interest rate at which international banks lend to or borrow funds.
A special rate which may be lower than the national average and for a specified period of time.
The difference between the interest rate and the index on an adjustable rate mortgage.
The price a property would be worth on the open market.
A legal document between a lender and a borrower drafted for the purpose of repaying a loan.
An intermediary between a borrower and a lender.
A lender who specializes in mortgages.
The monthly payment amount owed to a lender which covers the principal and interest on a property.
Multiple Listing Service (MLS)
A nationwide database of properties available for sale used by real estate agents.
National Board of Realtors
A membership group for realtors also known as the National Association of Realtors, or NAR.
A loan which does not conform to any strict lending guidelines.
A fee charged by a lender to the borrower for initiating a real estate loan. See points.
An inspection required by a lending or government institution prior to lending money to a borrower to insure that a property is free from structural pest damage and decay.
An upfront fee that a lender may charge a borrower for originating a loan. One point is equal to one percent of the loan amount.
A confirmation stating the amount a lender is willing to give to a borrower after an application has been filled out.
A penalty for paying a loan early before its due date.
A lender’s opinion of how much a borrower may qualify for without filling out an application.
Principal and interest
The actual mortgage amount and interest paid back to the lender.
Principal, Interest, Taxes and Insurance (PITI)
A term used by lenders or brokers to provide a total monthly payment which includes Principal, Interest, Taxes, and Insurance.
Private Mortgage Insurance (PMI)
Insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults on a mortgage loan.
A fee charged by the lender for the work required to process a loan.
The act of keeping a property presentable and livable.
The tax paid on a property based on its assessed value.
A member of the National Association of Realtors.
Real estate agent
A person licensed to sell or purchase a property on behalf of the seller or borrower.
A debt obligation which appears month-to-month until the balance is paid in full.
Replacing an older mortgage with a newer one.
A fee that is charged as part of the closing cost to record a home sale as a matter of public record.
The amount of principal left unpaid on a mortgage loan.
Rural Housing Service (RHS)
An agency of the U.S. Department of Agriculture that provides financing to farmers and qualified borrowers who buy property in rural areas and are unable to obtain loans elsewhere.
The agent who handles and shows the property to the buyer.
The contract signed by the lender and buyer specifying the terms of the sale.
The market where mortgages are bought and sold by investors.
The person who is listing a property for sale.
All expenses related to transferring home ownership from the seller to the buyer. Also referred to as closing costs.
State Board of Realtors
A membership group by state which belongs to the National Board of Realtors.
A type of mortgage loan that is offered to individuals with poor credit.
The amount a borrower can save by writing off the interest on a mortgage loan.
See tax savings.
A special introductory rate on an adjustable rate mortgage which is below current market rates to entice borrowers.
The deed to a property.
A company that assures that the title to the property is clear and free from liens.
The review of a property’s title by the title company against public records.
Insurance which protects a lender or buyer against property disputes.
Treasury bill (T-bill)
Securities auctioned by the U.S. Government to help pay off its debt obligations.
The process a lender uses to determine risk and whether or not to extend a loan to a borrower.
Veterans Administration (VA)
The Veterans Administration (VA) is a government agency responsible for administering benefits to veterans, their families, and survivors.
A tour of a home which can be viewed on the Internet.
When a lender requires no money for a down payment from a borrower.
The rules and regulations used by municipalities which control the use of lands and buildings.
This Glossary has been provided to ERATE by Informa Research Services - © Copyright 2007, Informa Research Services, Inc. (“Informa”). While all attempts have been made to provide effective, verifiable information in this article, neither the author nor Informa assumes any responsibility for errors, inaccuracies, or omissions. You should always seek the guidance of a licensed professional before making any major financial decisions.