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GLOSSARY 

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-A-

ABSTRACT OF TITLE: A written document produced by a title insurance company (trustee), giving the history of who owned the property from the first owner forward. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurance title. It also indicates any liens or encumbrances that may affect the title. A lender will not make a loan, nor can a sale be affected until the title to the property is clear.
ACCELERATION CLAUSE: This accelerates the payments in a mortgage, where the entire amount becomes immediately due and payable. Most mortgages have this clause, which comes into effect when, for example, you sell the property. This is also called the "Alienation Clause."
ACCRUED INTEREST: Interest that has accumulated but has not been paid.
ACQUISITION LOAN: Money borrowed to purchase a property.
ADJUSTABLE RATE MORTGAGE (ARM): A mortgage loan that allows the interest rate to be changed or adjusted at specific periods over the entire life of the loan.
ADJUSTMENT DATE: The day on which an adjustment is made in an adjustable rate mortgage. It may occur monthly, every 6 months, or once a year, or whenever agreed upon.
AGREEMENT OF SALE: Also known as the Purchase Contract, Purchase Agreement, or Sales Agreement. It outlines the agreement of the seller to sell and the buyer to buy a certain property. It must be signed by both parties in order to be legally binding.
ALIENATION CLAUSE: The clause that specifies that if the property is sold or transferred to another person, the mortgage becomes immediately due and payable.
AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS (MAI): An association whose members undergo a rigorous training process as appraisers.
AMERICAN LAND TITLE ASSOCIATION (ALTA): The more complete and extensive policy of land title insurance that most lenders insist upon. It involves a physical inspection and often guarantees the property's boundaries. Lenders will often insist on an ALTA policy with themselves named as beneficiaries.
AMERICAN SOCIETY OF APPRAISERS: A professional organization of appraisers.
AMORTIZATION: Gradual repayment of a loan (principal) by way of regular installments.
AMORTIZATION SCHEDULE: A table that shows monthly payments, interest and principal requirements, and unpaid balances over the life of a loan.
ANNUAL CAP: The limit on the number of times an interest rate can be adjusted on an adjustable-rate mortgage over a 12-month period.
ANNUAL PERCENTAGE RATE (APR): The rate of interest for a loan over a one year period, expressed as a percentage value. This disclosure is required by the federal Truth-In-Lending Law.
ANNUITY: Series of equal or near-equal monthly payments.
APPLICATION FEE: A fee for applying for a mortgage. This fee often includes the cost of a full credit report on the borrower, and a property appraisal. The typical amount may be $400.
APPRAISAL: Estimate (or professional opinion)of the value of a property, given by a professional appraiser who visits the property being sold or bought and estimates its market value. This kind of information included in the appraisal ranges from the type of property, its condition, and its comparable value in the area of its location.
APPRAISAL and CREDIT REPORT Fees: These fees are generally collected by the lender and paid to outside companies performing the services.
APPRAISED VALUE: An expert opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.
APPRAISAL REPORT: Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time based on facts regarding the location, improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.
APPRECIATION: The increase in value or worth of property.
ASSIGNMENT OF MORTGAGE: The lender may sell your mortgage without permission from you (which he is entitled to do), and the document that records the transfer of the mortgage from lender A to lender B is the assignment.
ASSUMABLE LOAN: A mortgage loan that lets a purchaser of a home assume the obligation of the mortgage already on that house, without any changes to the loan terms. This is possible for loans that do not have a due-on-sale clause, and FHA and VA mortgages (see Glossary for these terms).
ASSUMPTION OF MORTGAGE: Purchase of property where the buyer accepts and assumes the mortgage that already exists on the property. The seller, in turn, remains responsible to the lender for the loan.
AUTOMATIC GUARANTEE: Some lenders who make VA loans are empowered to guarantee the loans without first checking with the VA. Such lenders can often make the loans quicker.

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-B-


BALLOON LOAN: Mortgage in which the remaining principal balance becomes fully due and payable at a predetermined time. Most of the time, balloon loans have level payments until the note becomes due and payable.
BALLOON PAYMENT: Final payment on a loan that is greater than the previous monthly installments. This pays off the loan entirely and in full.
BANKRUPTCIES: A court action to restructure debt.
BASIS:
 Original cost of property plus value of any improvements put on by the seller minus the depreciation taken by the seller.
BIWEEKLY MORTGAGE: Payments are made twice a month (or every two weeks), and the additional payment is used to reduce the principal amount.
BLANKET MORTGAGE: A single mortgage that covers several properties. It is often used by developers and builders.
BRIDGE LOAN: Financing that "bridges" the period between the end of one loan and the beginning of another.
BUY-DOWN: The payment of additional Discount Points (see Glossary) to a lender in return for a reduced interest rate on a loan.

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CAP
: Limit placed on the number of adjustments in order to protect the borrower from large increases in interest rates or payment levels.
CERTIFICATE OF ELIGIBILITY: Issued by the Veterans Administrations to those who may qualify for VA loans.
CERTIFICATE OF OCCUPANCY: Document issued by a local governmental agency that states a property meets the local building standards for occupancy.
CERTIFICATE OF REASONABLE VALUE (CRV): When getting a VA loan, the Veteran's Association will secure an appraisal of the property, and will issue the Certificate establishing what they deem the maximum value of the property.
CERTIFICATE OF TITLE: A certification issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the public records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.
CHAIN OF TITLE
: This gives the history of ownership of a property. The title to property forms a chain going back to the first owner.
CLOSING: The act of transferring ownership of a property from seller to buyer according to the sales contract. Also, that period of time when a closing is to take place.
CLOSING COSTS: The fees and expenses paid by the buyer and seller at the time of a real estate closing (these are also known as Transaction or Settlement Costs).
CO-BORROWER: Another party who signs for the mortgage loan. Income, debts, assets and credit histories of both borrowers are combined in order to qualify for the mortgage.
COMMITMENT: A written promise by a lender given to the borrower to offer a mortgage at a set amount, a certain interest rate, and cost. Such a commitment will have a time limit on it; usually 30-60 days.
CO-MORTGAGOR: A co-signer of a mortgage who is jointly responsible for the repayment of the loan amount. Such a person also receives a share of ownership in the mortgaged property.
CONDITIONAL COMMITMENT: A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.
CONFORMING LOAN: Also called a Conventional Mortgage that adheres to the loan amounts and mortgage guidelines set by the Federal National Mortgage Association (FNMA, or Fannie Mae) and/or the guidelines of the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). A conforming loan is a mortgage under $203,150. A non-conforming or jumbo loan exceeds $203,150.
CONSTRUCTION LOAN: A type of mortgage that allows a home to be built, by a general contractor, for residential purposes only.  Financing up to 95% of appraised value.  Minimum credit score requirement 700 FICO.  One settlement reduces borrower’s expenses.  Flexible draw schedule.
CONVENTIONAL LOAN: A type of mortgage in which the terms and conditions meet the guidelines and requirements of Fannie Mae and Freddie Mac. These two agencies guarantee or purchase up to 50% of all mortgages. Conventional mortgages may be fixed rate or adjustable rate mortgages. For owner occupied properties, downpayment requirements generally start at 5% down, with a few exceptions. Credit score requirements start at 620, generally speaking.
CONVERTIBLE ARMS: ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.
CO-SIGNOR: A second borrower who signs in conjunction with the first borrower for the mortgage loan. A co-signor is equally responsible for the repayment of the loan.
CREDIT RATING: The evaluation of a person's history and capacity of debt repayment. Such a rating is available from a credit bureau in the form of a report.
CREDIT REPORT: A report of a person's credit history issued by one of three national credit bureaus. The report mentions any delinquent payments, or any failures to pay, as well as bankruptcies and foreclosures. Lenders use such reports to determine the credit-worthiness of a borrower.

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DEED: Formal written document transferring title to real estate; a new deed is used for each transfer. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day.
DEED OF TRUST: A legal instrument used in many states in place of a mortgage, where title to the property is vested in one or more trustees to secure the repayment of the loan.
DEFAULT: The failure to fulfill a promise or pledge such as the timely (monthly) repayment of a loan.
DEFECTIVE TITLE: Title to real property which lacks some of the elements necessary to transfer good title. Title to a negotiable instrument obtained by fraud.
DEFICIENCY JUDGMENT: A court order stating that the borrower still owes money when the security for a loan does not fully satisfy a defaulted loan.
DISCOUNT POINTS: Amounts paid to the lender (often by the seller) to make up the difference between the market interest rate and the lower face rate of the Note (see Glossary).
DOWN PAYMENT: The amount paid for a property in addition to the mortgage loan; usually expressed as a percentage value.
DUE-ON-ENCUMBRANCE: A seldom-used clause in mortgages that allows the lender to foreclose if the borrower gets additional financing, such as a second mortgage.
DUE-ON-SALE CLAUSE: Provision in a mortgage that states that the loan is due upon the sale of the property.

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EFFECTIVE RATE: The true rate of return that takes into account all relevant financing expenses.
ENCUMBRANCE: Also known as a Lien, where a claim is made against a property by a third party. Such an act ensures that a property cannot be transferred without first clearing such a Lien or Encumbrance.
EQUITY: The true value that an owner has in a property over and above the debt upon it.
ESCROW: The placing of property or funds with a third party (usually an attorney) for safe-keeping, pending the fulfillment or performance of a condition or act.
EXCULPATORY CLAUSE: A provision in a mortgage that allows the borrower to surrender the property to the lender without personal liability for the loan.

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FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): A private corporation authorized by federal law to provide secondary mortgage market support for conventional real estate loans. It is popularly known as "Freddie Mac."
FEDERAL HOUSING ADMINISTRATION (FHA): An agency of the U.S. government, Department of Housing and Urban Development, that administers many loan programs, loan guarantee programs and loan insurance programs in order to make housing more widely available.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): A federally chartered, semi-public corporation that purchases conventional and government guaranteed real estate loans. Their stock is traded on the New York Stock Exchange. The FNMA is popularly known as "Fannie Mae."
FEDERAL RESERVE BANK: The regulatory agency for certain commercial banks and bank holding companies. Sets monetary policy for the country and provides liquidity for supervised financial institutions.
FEDERAL TAX LIEN: A lien attached to property for nonpayment of a federal tax.
FEDERAL TAX RETURN: The U.S. government's method to identify individual and company's annual tax responsibility. The tax returns identify the income and taxes.
FIRST MORTGAGE: That mortgage which has priority as a lien (see Glossary) or debt over all other mortgages. In case of foreclosure, the first mortgage must be paid before any other mortgage or lien.
FIXED RATE MORTGAGE: A mortgage loan that has a constant interest rate for the entire term of the loan.
FORECLOSURE: Termination of all rights of ownership of a borrower in a property covered by the mortgage. Statutory foreclosure can be effected without a court-order.

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GENERAL LIEN: A lien such as a tax lien or judgment lien, which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.
GENERAL WARRANTY DEED:
 A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA/GINNIE MAE):
 A government owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees the timely principal and interest payments to investors.
GRADUATED PAYMENT MORTGAGE: A mortgage where the payments vary over the term of the loan, usually starting low, then slowly rising, until they reach a plateau where they remain for the remainder of the term. This mortgage is useful if you want low initial payments. It is often used by first-time home buyers and is often combined with a fixed-rate or an adjustable-rate mortgage.
GRANTEE: The buyer, who receives a deed.
GRANTOR: The seller, who gives a deed.
GROWING EQUITY MORTGAGE: A rarely used type of mortgage where the payments increase according to set a schedule. The purpose is to pay additional money into the principal in order to pay off the loan earlier, and save interest charges.
GUARANTEE: The agreement to indemnify the holder of a loan all or some of the unpaid principal balance in case of default by the borrower.

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-H-

HAZARD INSURANCE: Insurance on a property against damages caused by fire, wind storms, and similar risks.
HOME EQUITY - A type of loan, which is really a second mortgage, that allows the homeowner to borrow against the equity in their property.  Fixed rate and adjustable rate line of credit programs are available.  Fixed terms up to 20 years available.  Maximum total loan to value (TLTV) up to 90% of appraised value.  Minimum credit score 620.
HOMEOWNERS ASSOCIATION: An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.
HOMEOWNER'S POLICY: Policy which expands the insurance for a homeowner. It may include theft, liability, earthquake, etc.
HOMEOWNER'S OR MAINTENANCE FEES: Payments made by property owner (s) of a condominium or a unit in PUD to the homeowners' association for expenses incurred in upkeep of the common areas.
HOUSING AND URBAN DEVELOPMENT (HUD): The federal government agency that oversees FHA.
HUD 1: A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally prepares the document and buyer receives it shortly after the loan is closed.

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-I-


INDEX: A measurement of an established interest rate used to establish the periodic rate adjustments for adjustable-rate mortgages. There are a wide variety of indexes used, including Treasury bill rates, cost of funds to lenders, and a few others.
INSURANCE: The policy purchased by a borrower which shall indemnify the lender in case of foreclosure of the loan.
INSURED MORTGAGE: A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.
INTEREST PAYMENT NOTIFICATION (1098): A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.
INTEREST RATE: The percentage of an amount of money which is paid for its use for a specified time.
INTERIM FINANCING: A loan where the property owner is unable or unwilling to arrange permanent financing. Such financing is usually arranged for less than 3 years. < align="left">
INVESTMENT
 - A type of mortgage used to purchase a non-owner occupied property. One to four units allowed. Downpayment requirements are 20% down on 1 and 2 units, and 25% down on 3 and 4 units.

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-J-


JOINT AND SEVERAL LIABILITY: A liability which allows the creditor to sue any one of the debtors or sue all together.
JOINT TENANCY: An undivided interest in property taken by two or more joint tenants. The interests must equal, accruing under the same conveyance and beginning at the same time. Upon death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.
JUDGMENT: The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
JUNIOR MORTGAGE: A mortgage which is paid only after prior mortgages are settled.

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-L-


LAND CONTRACT: Installment plan for buying a house. It is used as an alternative to obtaining a loan from a traditional, source such as a mortgage banker or savings and loan.
LATE CHARGE: A penalty for failure to pay an installment on time.
LEASE WITH OPTION TO PURCHASE:
 A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.
LEGAL DESCRIPTION:
 An expanded and unique description of a property that is used on legal documents, such as deeds and deeds of trust. Recorded documents generally require a legal description.
LENDER:
 A general term encompassing all mortgages, and beneficiaries under deeds of trust.
LENDER'S INSTRUCTIONS: A document that lenders prepare for the closing agent that outlines the requirements for loan closing.
LIEN: The charge against a property, thus making it security for the payment of a loan, judgment, mortgage, or taxes. It is also a type of encumbrance on a property. A Personal Lien is against all the property owned by the indebted person.
LIFE OF LOAN CAP: The limitation on the maximum interest rate that can be charged on an adjustable-rate mortgage during the term of the loan.
LOAN APPLICATION: Documentation required by a lender before issuing a loan commitment.
LOAN COMMITMENT: An agreement to lend a specified amount of money, at specified terms and conditions.
LOAN DISCOUNT/PREMIUM FEES: Fees that borrowers pay (sometimes seller will pay for borrower) that adjust to the yield requirement of the investor. Loan discount denotes an investor yield requirement higher than the note rate. Loan premium denotes an investor yield requirement lower than the note rate.
LOAN LOCK: Guarantee from a lender that a borrower will receive the interest rate in effect at the time of loan application.
LOAN OFFICER: A person that helps borrowers through the loan selection, processing, and closing of a mortgage loan. Loan officers can be paid a commission or salary for their services and can work for mortgage brokers, mortgage bankers, or depository institutions.
LOAN ORIGINATION FEES:
 The cost to obtain a loan that is paid to the originating lender or broker.
LOAN PACKAGE: The information regarding a borrower and property necessary which is the basis for a lender's credit decision to extend or deny credit.
LOAN SERVICING: The function of collecting loan payments, managing the property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the investor/beneficiary.
LOAN-TO-VALUE RATIO (LTV): The proportion of the amount borrowed compared to the cost or value of the property purchased.

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MARGIN: The constant amount added to the value of the index (percentage of interest) for the purpose of adjusting the interest rate on an adjustable-rate mortgage.
MARKETABLE TITLE: A title that is free and clear of objectionable liens, clouds or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
MARKET PRICE: The price paid for a property; the amount of money that must be given or which can be obtained at the market in exchange under the immediate conditions existing at a certain date. To be distinguished from market value.
MARKET VALUE:
 The highest price estimated in terms of money which a buyer would be warranted in paying and a seller justified in accepting, provided both parties were fully informed, acted intelligently and voluntarily and, further, that all the rights and benefits inherent in or attributable to the property were included in the transfer.
MATURITY: The due date of a loan.
MECHANICS LIEN: A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land.
MORTGAGE: The written instrument that creates a lien upon property as security for the payment of a specified loan. All mortgages are valued according to the chronological order in which they are put placed onto a property. The first mortgage on a property is called a "first" in time, the next mortgage is "second" in time, and the next one after that is called "third" in time, and so on. This order is important because in the event of foreclosure, all the money from a foreclosure will go to pay off the lender of the first. Only if there is any money left over will it go to pay off the holder of the second and the third. The earlier the number, the more superior the mortgage is considered. Usually, when a first mortgage is paid off, the second takes the place of the first, and the third becomes the second, and so on.
MORTGAGEE: The lender of money or the receiver of the mortgage document.
MORTGAGE BANKER: Financial intermediaries that originate mortgage loans through loan officers or independent mortgage brokers and sell the mortgages into the secondary mortgage market.
MORTGAGE BROKER: A professional that helps consumers through the loan selection, processing and closing of a mortgage loan. Most mortgage brokers have access to a wide range of mortgage products through many mortgage lenders. Mortgage brokers are paid a fee by the borrower when a suitable mortgage is found and closed.
MORTGAGE COMMITMENT: A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
MORTGAGE CONSTANT: The percentage ratio between the annual debt service and the loan principal. The formula is expressed in this way: Annual Debt/Loan Principal = mortgage constant.
MORTGAGE INSURANCE: Insurance required for a loan-to-value ratio above 80.01%. Also called Private Motgage Insurance (PMI)
MORTGAGE LIEN: The encumbrance on a property used to secure a loan. The holder of the lien has a claim to the property in case of default. The priority itself depends upon the agreements and conditions of the loan.
MORTGAGE NOTE: The document outlining the amount of the debt, the terms and payments, the interest rate, margins and caps for ARMs, the name of the lender and the borrower, and any other material item required by the lender.
MORTGAGE WAREHOUSING: A funding facility, such as a commercial bank, that is used by mortgage companies to fund loans which are sold to an investor shortly thereafter. The mortgage notes are used as collateral for this interim financing.
MORTGAGOR: The borrower of money or the giver of the mortgage document.

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-N-


NEGATIVE AMORTIZATION: An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance.
NON-CONFORMING LOAN: Loans that are above the loan limits set by FNMA and FHLMC. Also known as jumbo loans.
NONCONFORMING USE:
 A property which does not conform to the zoning of an area.
NOTE: The written instrument that acknowledges a loan and states a promise to pay.

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-O-


OPEN END MORTGAGE: A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.
ORIGINATION FEES: The charges to the borrower to cover the costs of issuing the loan, such as, credit checks, appraisals and title expenses.
OWNER OF RECORD: The individual(s) named on a deed that has been recorded at the local municipality.
OWNERS POLICY: Title insurance for the owner of property, rather than a lien holder.

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PACKAGE MORTGAGE: Mortgage covering both real and personal property.
PAPER: A mortgage, deed of trust or land contract which is given instead of cash.
PARTIAL RELEASE: A release of a portion of property covered by a mortgage.
PERMANENT MORTGAGE: A mortgage on completed construction on the same property under one mortgage or trust deed.
PERSONAL PROPERTY: Any property that does not go with the land. This includes cars, clothing, and furniture. Some items are disputable, such as, appliances and floor and wall coverings.
PHYSICAL DEPRECIATION: A term that is frequently used when physical deterioration is intended. In a broad concept it may relate to those elements contributing to depreciation that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization. Not a clear or proper them without qualification and explanation.
PITI: Principal, Interest, Taxes and Insurance. These are the monthly payments required for most home mortgage loans.
POINTS: A point is equal to one percentage (1%) of a mortgage amount. Lenders use the term "basis points". A basis point is one hundredth of a point. Thus, for example, ½% is 50 basis points.
PORTFOLIO LOAN: Loans held as an investment by a bank, savings and loan or credit union.
PREPAID INTEREST: Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.
PREPAID ITEMS OF EXPENSE: Perorations of prepaid items of expense which are credited to the seller in the closing statement.
PREPAYMENT: Full payment of the principal before the due date; occurs when a property is sold or the borrower refinances the existing loan.  
PREPAYMENT PENALTY
: Fees that must be paid by the borrower for retiring a loan early.
PRIMARY MORTGAGE MARKET: The process of obtaining a real estate loan, including the consumer's completion of a loan application form, validation of the credit and property information, loan underwriting by the lender and closing of the mortgage loan.
PRIMARY RESIDENCE: Considered the permanent location of residency.
PRINCIPAL: The owner of a property. A broker's or agent's client. The amount of money raised by a mortgage, separate from the interest paid upon it.
PRINCIPAL AND INTEREST PAYMENT (P&I): Monthly payment that includes the interest charges for the period, plus an amount applied to amortization of the principal balance.
PRIVATE MORTGAGE INSURANCE (PMI): Insurance on a conventional loan, provided by a private insurance company, which insures the lender against loss in the event that the borrower defaults on the mortgage.
PROCESSING, UNDERWRITING AND DOCUMENT FEES: Charges for the lender's services associated with making the loan.
PROPERTY: The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is generally classified into two groups, personal property and real property.
PROPERTY TAX: A tax levied by the local municipality or county on real and personal property.
PERORATIONS:
 The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.
PRORATE: To divide in proportionate shares, such as taxes, insurance, rent, or other items.
PURCHASE MONEY MORTGAGE: A mortgage given by a buyer to a seller in partial payment of the purchase price of property.

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REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): This act requires lenders to provide the buyer with specified information regarding the cost of securing financing, along with a break-down of actual costs.
REAL PROPERTY: Another term for real estate, including the house and the adjoining land.
RECORDING: The act of writing or entering an instrument in a book or public record, usually in the office of the county clerk and recorder. Such recording constitutes notice to all persons of the rights or claims contained in the instrument. This type of notice is called "constructive notice" or "legal notice."
REDLINING: The practice of refusing to provide loans or insurance in a certain neighborhood.
REFINANCE: The substitution of a new loan for an old loan.
REIT (Real Estate Investment Trusts): A method in investing real estate in a group, with certain tax advantages.
RESPA (Real Estate Settlement Procedures Act): A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the fees required to obtain a mortgage loan.
RESTRICTIVE COVENANTS: Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and be binding only between the original seller and buyer.
REVERSE MORTGAGE: A special program for the elderly that provides income until death. Payment requirements are arranged through the increase in the principal amount of the loan.
RETIRING (a debt): To fully pay off the principal on a loan

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SATISFACTION OF MORTGAGE: Document issued by mortgagee when the mortgage is paid off.
SAVINGS AND LOANS ASSOCIATIONS (S&Ls)
: Institutions that specialize in giving, servicing, and holding mortgage loans, primarily on owner-occupied, residential property.
SECOND HOME: Commonly known as a vacation home. This home is not rented and is occupied occasionally by the owners.
SECOND MORTGAGE: A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages are often used to reduce the amount of a cash down payment.
SECONDARY FINANCING: A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.
SECONDARY MARKET:
 The buying and selling of mortgage notes between sophisticated investors such as pension funds, commercial banks, savings and loans and wall street firms.
SECONDARY MARKET INVESTOR: An entity, such as FNMA or FHLMC, that buys mortgage loans for investment or sells them again to another secondary market investor. Secondary market investors do not service loans and do not collect payments from borrowers.
SECONDARY MORTGAGE MARKET: The buying and selling of first mortgages of trust deds by banks, insurance companies, government agencies, and other mortgagers.
SETTLEMENT: See "closing".
SETTLEMENT COST, A HUD GUIDE: This booklet gives an overview of the lending process and is required by HUD. It is provided to consumers after the loan application is completed.
SETTLEMENT STATEMENT:
 A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated with a real estate transaction.
SHERIFF'S DEED: A deed given at the sheriff's sale in foreclosure of a mortgage.
SINGLE FAMILY DETACHED HOME: A residential home that is not attached physically to another home.
SOCIETY OF REAL ESTATE APPRAISERS (SREA)
: A professional association to which most qualified appraisers belong. It is best to use an SREA designated appraiser.
SPECIAL ASSESSMENTS: A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.
SPECIAL LIEN: A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien.
SPECIAL WARRANTY DEED: A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.
STANDARD UNIFORM APPLICATION: An application developed by FNMA and FHLMC that is widely used in the mortgage industry.
STATE AND LOCAL HOUSING PROGRAMS: Unique housing finance programs to assist first time home buyers and low to moderate housing groups. Each state and local group has different sets of criteria.
STATUTORY LIEN:
 An involuntary lien, includes tax liens, judgment liens, mechanic liens, etc.
SUBJECT PROPERTY: The property being appraised.
SUBJECT-TO MORTGAGE: Condition in which the buyer takes title to a mortgaged property but is not personally liable for the payment of the amount due. The buyer does have to make payments in order to keep the property. In case of default, only the buyer's equity in the property is lost.
SUBORDINATION CLAUSE: A clause that can be inserted into a mortgage document to keep the mortgage secondary to any other mortgages. (See Mortgage for more details).
SWEAT EQUITY: Equity created by the labor of the purchaser or borrower that increases the value of the property.

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TAX BRACKET: Marginal rate for income taxes. It is the percentage of each additional dollar in income required to be paid as income taxes.
TAX LIEN: Lien for nonpayment of taxes.
TAX SALE:
 Public sale of property at an auction by a governmental authority, due to non payment of property taxes.
TEASER RATE
: Interest rate charged on an adjustable-rate mortgage for the initial adjustment interval that is usually much lower than the fully indexed rate. The Teaser Rate is an incentive to encourage borrowers to accept an adjustable-rate mortgage loan. Usually, the interest rate jumps back to the indexed rate at the adjustment date.
TERM: The period of time during which principal and interest payments must be made on a regular basis.
TITLE: This is evidence that you actually have the right of ownership of real property. It takes the form of a deed that specifies the kind of title you have (whether joint, common, or some other). Often used interchangeably with the word ownership.
TITLE INSURANCE POLICY: An insurance policy that covers the title to your home. It may list you or the lender as a beneficiary. This policy is issued by a title insurance company, or by an attorney (underwritten by an insurance company). The policy states that if for any covered reason your title is defective, the company will correct the title or pay you up to a specified amount (usually the purchase price or mortgage). Before issuing this policy, an insurance company fully investigates the chain of title and notifies all parties of any defect (such as liens). These must then be paid off.
TITLE SEARCH: A review of the public records generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the records, which would adversely affect the marketability or value of title.
TRANSACTION COSTS: Costs associated with buying and selling a home. These include: Appraisal Fee, Brokerage Commission (paid by the seller), Legal Fees, Mortgage Discount Points, Mortgage Origination Fees, Recording Fees, Survey Fees, and Title Search Fees.
TRUTH IN LENDING STATEMENT (Regulation Z): A federal government regulation that provides details of the cost of obtaining a mortgage loan. Lenders must provide this shortly after the loan application has been completed.

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USDA Guaranteed Rural Housing -  A program to assist moderate income applicants through the Guarantee of Loans, in the acquisition of modest single family homes, in eligible rural areas. Allows zero downpayment and fixed rates up to 30 years. Subject to acceptable credit history and income limits. Call YES Financial for details.

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VA LOANS: Home loans guaranteed by the Veterans Administration (VA) under the Servicemen's Readjustment Act of 1944 and its later revisions. The VA guarantees payment to the lender in case of default. The home must be the buyer's principal place of residence. Minimum credit score down to 580 - subject to credit requirements of the program. Contact YES Financial for eligibility requirements. Fixed rates up to 30 years.
VALUATION: The act or process of estimating value; the amount of estimated value.

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W2 FORM: Income tax form that is provided by employers to employees that states the income and taxes paid in a calendar year.
WARRANTY DEED: A type of deed in which the grantor makes formal assurance of title.
WRAP-AROUND OR WRAP FINANCING: This is a combination of two mortgages. If the lender is the seller, then he does not get all cash. Instead of giving the buyer/borrower a simple second mortgage, the lender combines the balance due on a previous, existing mortgage (usually a first) with an additional loan. In this way, the wrap-around includes both the second and the first mortgages. The borrower then makes payments to the lender, who keeps part of the payment, and then makes payments on the existing mortgage. The wrap is typically used by a seller who either does not trust the buyer to make payments on a first, or who wants to get a higher interest rate.

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ZONING ORDINANCES: The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

 

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