Glossary of Terms
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Abstract Exam – A fee related to the title insurance required by the lender. Public record searches are done to ensure that there are no liens or encumbrances that may affect the property.
Adjustable Rate Mortgage (ARM) – A mortgage loan in which the interest rate can go up or down based on market conditions. Changes in the interest rate are determined by a financial index. ARM loans have a cap or a limit on how much the interest rate can change.
Amortization – Repayment of a mortgage loan with equal periodic payments of both principal and interest. The payments are calculated so that the debt is paid off at the end of a fixed period of time.
Annual Percentage Rate (APR) - The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction. The APR is normally higher than the advertised interest rate because it includes interest, points and other finance charges. The APR is used to compare different types of mortgages.
Application Deposit – Fee charged by a lender to cover third party charges that may be incurred on your behalf prior to closing. Costs usually include the appraisal, credit report or title fees. If your loan is denied or cancelled, the deposit minus any charges incurred to that point will be refunded to you. If the charges exceed the deposit, you will be billed for the differences. An application deposit will be credited towards your total closing costs at closing.
Asset – An item that has monetary value such as cash, stocks and real estate. Information about your assets is required when applying for a mortgage loan.
Acquisition Cost - Cost of acquiring a property, in addition to purchase price, such as title insurance and lender’s fees (e.g. with FHA, acquisition is a set amount based on the appraised value of the property).
Addendum Rider - An addition to the standard contract (e.g. the lender attached the due-on-sale clause to the loan via an addendum rider).
Adjustable Rate Mortgage (ARM) - a mortgage tied to an index that adjusts based on changes in the economy.
Adjustment Period - The period during which an ARM adjusts (e.g. six months, one year or three years).
Alienation Clause (Due-on-Sale Clause) - A type of acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property.
Amendatory Language - Language usually added to FHA and VA sales contracts when the contract is written prior to the completion of the appraisal. (This specifies what the options are if the appraisal amount varies from the offering price).
Amortization - Retiring a debt through predetermined periodic payments, including principal and interest.
Appraisal - An estimate of value.
ARM - Adjustable rate of mortgage.
Assignment - The transfer of rights to pay an obligation from one party to another, with the original party remaining secondarily liable for the debt, should the second party default.
Assumption - To take over one’s obligation under an existing agreement. (Note: This can be done with varying degrees of release - see assignment, novation and subject-to).
Automatic Approval - The processing of a VA loan, which is done solely by the lender, without prior submission of the documents to the regional office.
B
Balloon Mortgage - A short-term mortgage loan of equal monthly payments in which a large final payment (balloon) is due on a specified date. The final payment is equal to the remaining balance of the loan.
Bridge Loan - A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory. Also known as "interim financing", "gap financing or a "swing loan".
Balloon Payment - A principal sum coming due at a predetermined period of time (may also contain payment of accrued interest).
Bi-weekly Mortgage - A mortgage under which one-half of the regular amortized monthly payment is payable every two weeks, giving the benefit of 13 full payments per year; this allows a 30-year loan to retire in approximately 18 years.
Blended Rate - The melding together of two rates to create a lower overall rate of interest. For example, blending the rate of an 8 percent first mortgage, and a 10 percent second mortgage, allows the buyer to more readily qualify.
Buydown - Permanent: Prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary: Prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows. (A common example of a temporary buydown is the 3-2-1 plan, 3 percent lower interest the first year, 2 percent the second and 1 percent the third).
C
Chain of Title -the succession of conveyances of the title to a particular item of real property (as a house).
Closing – The final step in the mortgage loan process which follows underwriting. The closing is a meeting between the homebuyer, seller and lender in which mortgage documents are signed and title to the property passes from the seller to the buyer. At the same time, the homebuyer receives the funds needed to purchase the property and pledges the property as security for repayment of the debt.
Closing Costs – Fees paid by either buyer or seller at closing which are usually 3 to 6 percent of the mortgage amount. Some examples of closing costs are: realtor fees, attorney fees, appraisal fees and taxes.
Closing Statement - A document commonly used in real estate transactions, detailing the fees, commissions, insurance, etc. that must be transacted for a successful transfer of ownership to take place. This document is prepared by a closing agent and is also known as a settlement statement or HUD1.
Conventional Loan – A mortgage loan made by an approved lender in which the borrower’s ability to repay the debt is not insured by a government agency such as the FHA or VA.
Cap - A ceiling, usually found on ARM loans; can be expressed as “per period” for example, annual, or lifetime, meaning for the entire loan term.
Carryover - an interest rate that is too great to add to the ARM adjustments because of the predetermined caps, so the interest amount is carried over until it can be applied. Note, however, that this amount is not added onto the principal balance, such as in negative amortization. (Because of the 2 percent annual cap on a loan, an additional 1 percent interest adjustment cannot be applied - so it is held until the annual adjustments fall short of their cap, and then applied).
Cash Reserves - The amount of buyer’s liquid cash remaining after making the down payment and paying all closing costs.
Certificate of Commitment - The lender’s approval of a VA loan, which is usually good for up to six months.
Certificate of Eligibility - VA certification, showing the amount of entitlement used and the remaining guaranty available.
Certificate of Reasonable Value (CRV) - The formal name for a VA appraisal.
Chattel - Personal property.
Collateral/Collateral Agreement - Means “additional”, but is generally termed to mean security for a debt.
Commitment Period - The period during which a loan approval is valid.
Contract for Deed (Installment Sales and Land Sales Contract) - A document used to secure real property when it is seller financed; contains the full agreement between the parties, including purchase price, terms of payment and any additional agreements.
Convertible ARM - An adjustable rate mortgage containing a clause allowing for the rate to become fixed during a certain item period (e.g. between months 13 and 60 of the loan term).
Convertibility Option - The clause that allows the ARM loan to convert to a fixed rate during a certain period.
CRV - Certificate of Reasonable Value.
D
Discount Points (Points) – A one-time charge paid to the lender at closing to obtain a lower interest rate on the mortgage loan. One point is equal to 1 percent of the loan amount. For example, two points on a $100,000 mortgage would cost $2000.
Debt Assumption Letter/Assignment of Debt - The formal transfer of debt from one person to another, backed by a formal contract of assumption, signed by the parties. This is done to reduce the amount of a person’s long-term debt.
Debt Ratios - The comparison of a buyer’s housing costs to his or her gross or net effective income (based on the loan program), and the comparison of a buyer’s total long-term debt to his or her gross or net effective income (based on the loan program used). The first ratio is termed housing ratio; the second ratio is total debt ratio. (See particular programs for applicable ratios).
Deed of Trust (Trust Deed) - A document used to secure the collateral in financing the property; title is transferred to the trustee, with payments made to the beneficiary by the trustor (grantor in some states).
Direct Endorsement Lender - Lenders approved by FHA to make loans without having loans first approved by the regional FHA office.
Direct Loan, VA - A loan made to the veteran borrower by the VA, without using a lender (done infrequently, and then only in remote outlying areas).
Discount Points (Points) - A point is equal to 1 percent of the amount financed. Points are used to increase the lender’s yield on the loan, so as to bridge the gap between what the lender could get with conventional Moines, and the lower rates of VA and FHA
Discounting Seller - Reducing the sales price in lieu of paying points or other fees from the Seller’s gross price.
Distributive Share MIP - The FHA mortgage insurance plan in effect prior to 1983.
Dual Contracts - Double contracts on the same property by the same buyer. Usually refers to illegal second contract requesting a higher loan amount from a lender, even though the first contract bears the agreed-upon price between the seller and buyer.
Due-On-Sale Clause (Alienation Clause) - See Alienation Clause.
E
Earnest Money - money given by a buyer to a seller to bind a contract.
Employment Verification – Process by which lender verifies an applicant’s wage and hours worked either through an employer or other third party verifier such as a CPA or credit reporting agency.
Escrow Account - A trust account held by the lender in the
borrower's name to pay obligations such as property taxes and insurance premiums.
Entitlement - Also know as VA Guaranty; the amount of the veteran’s eligibility in qualifying for a VA loan.
Equity - The difference between what is owed and what the property could be sold for.
Equity Loan - Tapping into an owner’s equity, with the property used as the collateral.
Escrow - An impartial holding of documents pertinent to the sale and transfer of real estate; also the term used to describe the long-term holding of documents, such as with seller financing. Called a long-term escrow or escrow collection.
Escrow Holder - An impartial third party who holds the documents pertinent to the transfer and sale of real estate.
F
Finance Charge - interest or a fee charged for borrowing money or buying on credit.
Federal Home Loan Mortgage Corporation(FHLMC) - Called “Freddie Mac”; a part of the secondary market, particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board.
Federal Housing Administration(FHA) - The FHA is part of the federal government’s Department of Housing and Urban Development. It exists to underwrite insured loans made by lenders to provide economical housing for moderate-income persons.
Federal National Mortgage Association (FNMA) - “Fannie Mae”, a privately owned part of the secondary mortgage market used to recycle mortgages made in the primary market, purchases conventional, FHA and VA loans.
FHLMC - Federal Home Loan Mortgage Corporation (“Freddie Mac”).
Fixed-Rate Mortgage (FRM) - a fixed-rate mortgage is a conventional loan with a single interest rate for the life of the loan.
FNMA - Federal National Mortgage Association (“Fannie Mae”).
Foreclosure - A proceeding, in or out of the court, to extinguish one’s rights in a property, and pay off all outstanding debts via a sale of the property.
FRM - Fixed-rate Mortgage.
Fully Indexed Rate - The maximum interest rate on an ARM that can be reached at the first adjustment.
Funding Fee - An origination fee on VA loans, usually equal to 1 percent of the amount financed.
G
Good Faith Estimate (GFE) – A disclosure provided by a mortgage lender in the United States to an applicant, as required by the Real Estate Settlement Procedures Act. The estimate is of the fees due at closing and must be provided within three business days of applying for a loan. These mortgage fees, also called settlement costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges.
Garn-St. Germain Act - Legislation in 1981 that allowed Savings and Loans to diversify out of their investments into more risky venture; this also predicated strict enforcement of the alienation (due-on-sale) clause in mortgages.
GEM - Growing Equity Mortgage.
Gift Letter - A letter from a relative (or party with whom a strong relationship has been established - from some loans) stating that an amount will be gifted to the buyer, and that said amount is not to be repaid.
GNMA - Governmental National Mortgage Association (“Ginnie Mae”).
Government National Mortgage Association (GNMA) - “Ginnie Mae” is a governmental part of the secondary market that deals primarily in recycling VA and FHA mortgages, particularly those which are highly leveraged (e.g. no or low down payment).
Growing Equity Mortgage (GEM) - The Gem has a fixed rate for the life of the loan; but payments increase 3 percent, 5 percent, or 7.5 percent (depending on the program) for a period during the loan (usually not to exceed ten years), with all payment increases applied directly to reduce the principal. Thirty-year amortized GEM loan typically pay off between 13 and 15 years.
Guaranty, VA - The amount which the Veterans Administration will indemnify the lender against loss on a VA loan.
H
Hazard Insurance - Insurance protecting a property owner against damages caused by fires or severe storms. If the owner lives in an area that is prone to natural disasters, like earthquakes and floods, he or she may need a separate policy. Also referred to as home owners insurance.
Home Equity Line of Credit (HELOC) – A line of credit secured by equity value in the borrower’s home. Home equity lines of credit generally do not have a fixed repayment schedule and often payments are interest only on the principal amount of the line used.
Home Equity Loan – A loan secured by equity value in the borrower’s home.
Housing Expense Ratio – The percentage of your income the lender will allow you to use for housing expense.
HUD1 Settlement Statement – the standard real estate settlement form for federally-related mortgage loans. This form provides details of the transaction including fees paid by both buyer and seller and is provided at the loan closing.
Housing Expense Ration - The amount of either gross income or net effective income (depending on the loan program) that can be allocated for borrower’s housing expense. This percent will also vary based on the loan-to-value ratio of the loan.
I
Income Qualification - The amount of either gross income or net effective income (depending on the loan program) required by the lender for loan qualifying.
Index - An indicator used to measure inflation, which is a basis for the ARM loan. There are various sources of indexes, including treasury securities, treasury bills, 11th district cost of funds and the index of the Federal Home Loan Bank Board. The index, plus the margin, becomes the interest rate in the ARM.
Initial Interest Rate - The introductory interest rate on a loan; signals that there may be rate adjustments later in the loan.
In-Service Eligibility - Qualifying a veteran buyer for a VA loan while still in active duty.
Installment Sales Contract (Contract for Deed) - See Contract for Deed.
“Interest Only” - Payments received are only applied to accrued interest on the loan; therefore, there is no principal reduction.
Interest Rate - The note rate charged on the loan.
Interest Rate Cap - The maximum amount of interest that can be charged on an ARM loan. Can be expressed terms of annual or lifetime figures.
J
Jumbo Loans - Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines.
K
Kickback - The illegal payment of a fee or other compensation for the privilege of securing business referrals from a source. (Example: A lender illegally receives $50 per referral sent to the title company).
L
Loan Commitment - Lender's agreement to make money available to a borrower in a specified amount, at a specified rate, and within a specified time.
Lease Option - A lease with an option to buy; said option can either be exercised to culminate in a purchase or forfeited by the optionee.
Lease Purchase - A type of delayed closing. A lease purchase is drafted on a purchase and sales contract, setting the terms of the purchase, as well as a date for closing the sale. Should the buyer default, the seller has all of the remedies available under the sales contract.
Leverage - Using a small asset to purchase a larger asset; using “OPM” - other people’s money! Leverage allows a buyer’s down payment to go further. (Example: Instead of using $50,000 down on a $100,000 property, the buyer could use $10,000 down on five properties of $100,000).
Liability, Release of - The type of liability release for the original borrower, found under a novation.
LID (Local Improvement District) - A legal entity (district) established under sate law to benefit a certain geographic area. Districts issue bonds to finance real property improvements such as water distribution systems, sidewalks and sewer systems. To repay funds, districts then levy assessments on real estate located in the geographic area affected.
Lifetime Cap - The maximum amount of interest an ARM loan can reach during the life of the loan.
Loan Qualifying - Meeting the criteria for a loan as required by mortgage lender; varies greatly from program to program.
Loan-to-Value Ration - The amount of the loan as compared to the appraised value of the property.
Lock-in - The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days and may require a fee or premium in the form of a higher interest rate.
Long-term Debt - For qualifying purposes, debts that cannot be paid off within a certain amount of time, which varies depending on the loan type. (Example: conventional long-term debts are considered to be those in excess of ten months, six months for FHA and 12 months for VA. Note, however, that individual lenders could choose to be more restrictive than these national guidelines).
M
Mortgage Broker – A real estate financing professional who brings homebuyers and lenders together to arrange funding and mortgage contracts.
Margin - N amount added by the lender to an ARM index in order to compute the interest rate. The margin is set by the lender at the time of loan inception and remains constant for the life of the loan. The margin is considered to be the lender’s cost of doing business plus profit.
Maximum Entitlement - The maximum amount of VA guaranty available to a veteran.
Mortgage Insurance Premium (MIP) - The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.
N
Negative Amortization - An interest payment shortfall which is added back onto the principal balance.
Nonsupervised Lender - An FHA lender that operates outside of strict governmental control (such as mortgage companies), and is able to be an automatic approval lender upon application to the FHA regional office.
Note Rate - The rate of interest shown on the face of the promissory note, or in the contract of sale language; the rate of interest charged on an obligation.
Notice of Separation - The VA form received when the veteran is discharged from the services.
Novation - From the root word Nova, meaning new. A novation is a total release of liability to the first borrower under a loan, and the substitution of a subsequent borrower; usually not automatic, requiring a lender’s approval (see assignment, assumption and subject-to).
O
Origination – The first step in the mortgage loan process. During the origination phase, a loan application is filled out with details of your financial position. You will be asked to provide supporting documentation such as W2s and paystubs. Your loan officer will then be required to provide you with a Good Faith Estimate and a Truth-in-Lending disclosure shortly after you initial loan application.
Origination Fee - A fee charged by a lender for processing a loan application, expressed as a percentage of the mortgage amount.
Offer to Purchase - a preliminary agreement setting down the terms of the Buyer for the purchase of the property and the Seller's subsequent acceptance of the terms. Usually this offer is accompanied by a sum of money described as "Earnest Money." When the Buyer presents the "Offer to Purchase", including the earnest money to the Seller and the Seller subsequently accepts the offer, the Buyer has secured the right to purchase the real estate upon agreed terms for a limited period.
On-the-Job Benefits - Noncash compensation to an employee, such as car or day care provided or extra guaranteed per diem. Lenders may consider this for loan qualification if a trackable history can be shown.
Owner Occupancy - Occupied by the buyer of the property; a requirement in VA loans; many times a requirement in conventional and FHA programs as well.
P
Processing – The second step in the mortgage loan process which follows origination. During processing, documents are collected and your loan file is examined to ensure that all information is complete and accurate. Verifications, appraisals, credit reports and other necessary documents are ordered at this time.
Package Mortgage - A mortgage loan that includes the financing of personal property.
PAM - Pledged Account Mortgage.
Payment Cap - The maximum amount the payment can adjust in any one time frame (e.g. 7.5% per period).
Payment Shock - The shock of the payment change affecting the buyer’s ability to repay the loan.
PITI - Principal, Interest, Taxes (property), and Insurance.
Pledged Account Mortgage (PAM) - Instead of using all of the down payment at closing, part of the funds are placed in an interest-bearing account, and drawn from over time to help pay the mortgage payment. These impounded funds are said to be “pledged” to the lender.
PMI - Private Mortgage Insurance
Portfolio Lending - Instead of selling the mortgage into the secondary market, the lender keeps it “in portfolio” (in his or her in-house file) for the life of the loan.
Power of Attorney - Also termed “Attorney In Fact”. A legal power given to a person to act on behalf of another. This right can either be specific (for special circumstances), or general (in all activities).
Prepaids - Property expenses that are paid in advance and will usually be prorated t the time of closing (e.g. insurance).
Prepayment Privilege - The right of the borrower to prepay the entire principal sum remaining on the loan without penalty.
Private Mortgage Insurance (PMI) - Insurance that indemnifies the lender from the borrower’s default, usually on the top 20 percent of the loan. Premiums are paid as an initial fee at time of closing, and as a recurring annual fee based on the principal balance, but paid monthly with the PITI payment. Both the initial and recurring frees are customarily paid by the buyer.
Prohibited Costs - Certain costs that cannot be paid by a particular party to the transaction, as determined by a certain type of loan. (Example: Buyers cannot pay discount fees under VA loan guidelines).
PUD (Planned Unit Development) - A type of housing development based on high density (cluster buildings) and maximum use of open space generally resulting in lower-cost housing requiring less maintenance. The common areas of ground are owned by a nonprofit community association, not by individuals. Developers will often mix residential with light commercial zoning to maximize land use. PUD’s can also be used for resort housing and shopping center projects.
Q
Quit Claim Deed - a legal document by which a person releases or "quits" any claim that they may have had to property. Quit Claim deeds do not release the person quitting claim from their obligations under a mortgage. In order to remove the party who quits claim from the mortgage, you must refinance the mortgage in the name of the party to whom title or interest in the property has been conveyed.
Qualifying Ration - Percentage used by lenders to compare the amount of hosing expense and total debt to that of the buyer’s gross income or net effective income (depending on the loan program).
R
Real Estate Settlement Procedures Act (RESPA) - a consumer protection statute, first passed in 1974. The purposes of RESPA are to help consumers become better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
Reverse Mortgage - A mortgage in which a homeowner borrows money in the form of annual payments which are charged against the equity of the home.
RAM - Reverse Annuity Mortgage.
Rate Cap - The Maximum amount of interest that can be charged on an ARM loan; expressed as either per period or lifetime, or both.
Rate Ceiling - The maximum to which the rate can go in an ARM loan, specified in an interest amount, e.g. 14 percent.
Rate Gap - The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.
Ratio - A percentage; used as a qualifying guideline in mortgage lending.
Regulation Z - A federal regulation requiring disclosure of the overall cost of borrowing (truth in lending); states that if you disclose one piece of financial information, you must disclose in its entirety (including the total of all payments and the number of payments). The only exception to this rule is the use of the annual percentage rate. If this is used, no other piece of financial information is necessary.
Release Clause - A clause allowing a portion of the real estate to be released as security from the loan; usually occurs upon a payment of a substantial portion of the principal.
Re-negotiable Rate Mortgage (RRM) - The forerunner of today’s ARM; RRM’s got a black eye in the late 1970’s in that lenders required the borrower to re-negotiate and re-qualify at specified intervals during the loan.
Reservist - A person who has served in a reserve branch of the armed forces.
Residual Income - Monthly leftover income after deducting housing costs and fixed obligations from the net effective income in qualifying for a VA loan.
RESPA - The Real Estate Settlement Procedures Act is the up-front view of the costs of borrowing in a mortgage loan, including the APR (annual percentage rate), which is the note rate plus the up-front costs of borrowing.
Restoration of Eligibility/Entitlement - When a VA loan is paid in full or otherwise satisfied, or when a veteran assumes another veteran’s VA loan, reinstating the first veteran’s eligibility.
Reverse Annuity Mortgage (RAM) - A loan developed for senior citizens to unlock a portion of their equity in their home without selling the property.
RRM - Re-negotiable Rate Mortgage.
S
Settlement Statement – See HUD1 Settlement Statement.
Subordinate Financing - Subsequent mortgage to the first one on the property when a new loan is taken out.
Sales Concession - A cost paid by the seller or other third party, even though the cost is customarily paid by the buyer. Some loan programs have limits as to the amount of sales concessions that can occur before overage would decrease the amount of loan available.
SAM - Shared Appreciation Mortgage.
Secondary Market - Comprised of FNMA, GNMA, and FHLMC, which recycle lent funds from the primary market.
Section 203 - FHA programs, divided as follows:
203(b): The standard single-family FHA program
203(h): Disaster-victim financing
203(i): Loans to outlying areas
203(k): Rehabilitation loan program
203(n): Co-op financing
203(v): (FHA/VA) for veteran borrowers
220: Urban renewal
220(h): Urban renewal repair
221: Low-cost housing
222: In-service military FHA plan
245: Graduated payment mortgage
251: Adjustable Rate Mortgage
Security Document - A legal document that creates a lien against a property as security for repayment of a debt (such as mortgages or deeds of trust).
Seller Financing - The seller allows the borrower to finance the property, using a portion of the seller’s equity in the property.
SEM - Shared Equity Mortgage
Shared Appreciation Mortgage (SAM) - A mortgage under which a co-borrower investor gives; facetiously called the “CYD” (call your day) loan.
Shared Equity Mortgage (SEM) - A co-borrower mortgage wherein the equity of the property is shared when the property is sold.
Simple Assumption - A type of loan assumption that is actually a no-qualifying assignment with the lender. The original obligor remains secondarily liable should the assumptor default.
Subject To - The transfer of rights to pay an obligation from one party to another, with the first party remaining secondarily liable should the second party default. In addition, the first obligor could be responsible for any deficiency judgment caused by the second borrower. (See assignment, assumption and novation.)
Supervised Lender - An FHA lender that is generally supervised by a governmental regulating body, such as commercial bank that is a member of FDIC.
Surviving Spouse - The widow or widower of a deceased veteran.
Sweat Equity - Material or labor used by a buyer in addition to, or in lieu of, cash
T
Title Insurance – insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It is meant to protect an owner's or lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.
Truth-in-Lending Disclosure (TIL) – A document which the lender is required by law to give to the homebuyer shortly after loan application. This disclosure gives details of the house payments along with the corresponding APR.
Teaser Rate – An unusually low introductory rate for an ARM, used to entice borrowers into a loan and allow them to more readily qualify.
Tenser Rate - An unusually low introductory rate for an ARM, used to entice borrowers into a loan and allow them to more readily qualify.
Transfer Charge - The cost of transferring or assuming an existing mortgage.
V
Veterans Affairs, Department of (VA) - A branch of the federal government that guarantees lenders against borrower’s default in order to assist veterans in the purchase of single-family dwellings.
W-Z
Underwriting – detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower, such as employment history, salary, and financial statements; publicly available information, such as the borrower's credit history, which is detailed in a credit report; and the lender's evaluation of the borrower's credit needs and ability to pay.
VA Loan – A long-term, low- or no-downpayment mortgage loan in which the Veterans Administration guarantees the homebuyer’s ability to repay the debt. Only veterans are eligible for this type of loan.
WDAGO - A veteran’s notice of separation.
Wraparound - An original loan obligation remains stationary, while a new amortizing obligation wraps around the other loan. One payment is made (many times to an escrow holder), out of which the underlying payment is made, with the remainder going to the seller.
Yield - Return on Investment.
Zero-Net - When the seller is receiving little or no net proceeds from selling the property.
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