Mortgage Glossary

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A

Adjustable Mortgage Rate
A mortgage loan where the interest rate on the note is periodically adjusted based on a variety of indices. Adjustable rate mortgages are characterized by their index and limitations on charges (caps). In many countries, adjustable rate mortgages are the norm, and in such places, may simply be referred to as mortgages.
Amortization
The process of decreasing, or accounting for, an amount over a period.
Annual Percentage Rate (APR)
Describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate.
Application
The act of putting to a special use or purpose: the application of common sense to a problem.
Appraisal
The classification of someone or something with respect to its worth; a document appraising the value of something (as for insurance or taxation).
Appraiser
A person qualified by education, training, and experience to provide appraisals.

C

Cash-Out Refi
The process of taking out of a new mortgage at an amount that exceeds the existing balance on the current mortgage in order to refinance the original mortgage and receive additional cash for other use.
Conforming Mortgage
A loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan.
Conventional Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan. also called Fixed-Rate Mortgage (FRM).
Credit Report
A report containing detailed information on a person’s credit history, including identifying information, credit accounts and loans, bankruptcies and late payments, and recent inquiries.
Credit Score
A measure of credit risk calculated from a credit report using a standardized formula.

D

Debt Consolidation
The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period.
Direct Lender
A type of mortgage lender who attaches his or her own name to the mortgage, even if the funding for that lending amount came from funds that were sourced from lines of credit or established with several other lending institutions.
Down Payment
The amount paid in advance of delivery of the purchased good or service, usually to demonstrate good faith.

E

Equity
Ownership interest in a corporation in the form of common stock or preferred stock.

F

FHA Mortgage
A mortgage on which the lender is insured against loss by the Federal Housing Administration, with the borrower paying the mortgage insurance premium.
First Mortgage
Primary claim on a property which takes precedence over all other subsequent claims (called junior claims), and will be paid first from the proceeds in case of the property’s foreclosure sale.
Fixed Rate Mortgage (FRM)
A loan or mortgage with an interest rate that will remain at a predetermined rate for the entire term of the loan.
Foreclosure
The legal process by which an owner’s right to a property is terminated, usually due to default.

G

Good Faith Estimate
Approximate dollar amounts (or a range of amounts) of all the charges, costs, and fees a prospective home owner will have to pay at signing off (closing) the mortgage loan agreement on a particular property.

H

Homeowner’s Equity
Alternative term for home equity. Amount left after subtracting the unpaid debt balance(s) on the property from the property’s current market value as assessed by a valuator.
Home Equity Line of Credit (HELOC)
A line of credit extended to a homeowner that uses the borrower’s home as collateral.

I

Interest Rate
A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal.

J

Jumbo Mortgage
A mortgage loan in an amount above conventional conforming loan limits.

L

Lender
A private, public or institutional entity which makes funds available to others to borrow.
Lien
A legal claim against an asset which is used to secure a loan and which must be paid when the property is sold.

M

Mortgage
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
Mortgage Broker
An individual or company which brings borrowers and lenders together for the purpose of loan origination, but which does not originate or service the mortgages.
Mortgage Company
A company engaged in the business of originating and/or funding mortgages for residential or commercial property.
Mortgage Lead
The form of request for mortgage. Sometimes, mortgage processing firms are also known as Mortgage Leads.
Mortgage Lender
An institution or an authorized individual that extend housing loans to people who cannot buy property with their own funds.
Mortgage Payment
A payment for mortgages.

N

Non-conforming Mortgage
A mortgage for residential real property that does not follow the guidelines established by the Federal National Mortgage Association.

P

Principal
The part of a monthly payment that reduces the outstanding balance of a mortgage.

R

Rate
A value describing one quantity in terms of another quantity. A common type of rate is a quantity expressed in terms of time, such as percent change per year.
Refinance
Paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral.

S

Second Mortgage
Loan secured by the home owner’s equity (market value of the property less balance on the first mortgage) in a property that is already mortgaged.
Short Sale
A technique used by investors who try to profit from the falling price of a stock.
Streamlined Refinancing
An alternative documentation procedure that is specifically designed for ?no cash-out? refinance transaction that allows lenders to use substitute documentation to verify the borrowers employment and income.

V

VA Mortgage
Mortgage that is available to veterans of the United States Armed Forces and guaranteed by the Veterans Administration.