Mortage Glossary

Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate varies during the term of the mortgage. Also called a Variable Rate Mortgage.

Amortization - The process of repaying a loan through a series of installment payments.

Appraisal - An estimate of a property's valuation by an appraiser who is usually presumed to be expert in this work.

Balloon Note - A note that usually calls for a final payment greater than that of the regular periodic payments. Most cases borrowers must refinance after the given term of the mortgage.

Bridge Loan - A short-term loan in effect from the end of one loan to the beginning of another loan, or prior to permanent financing.

Conventional Mortgage - A mortgage made by a bank or other private institution and not insured by a governmental agency.

Debt to income ratio - Percentage of borrowers gross monthly income divided by their outstanding debts.

Deed - An instrument in writing duly executed and delivered, that conveys title to real property.

Discount Points - A charge made by the lending institution to the borrower that is based on the loan amount. A point is one percent of the principal mortgage amount.

Equity - The dollar amouont which the owner has in real estate over and above the liens against it.

Escrow - A written agreement between two or more parties providing that certain instruments or property be placed with a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.

Federal Housing Administration (FHA) mortgage - A mortgage loan made by a lender and insured by the Federal Housing Administration.

First Mortgage - The primary mortgage on a property. If a foreclosure occurs, the first mortgage is repaid before any "junior" (second mortgage/equity loan) mortgages.

Fixed Rate Mortgage - A mortgage in which the monthly payments remain the same for the term of the loan.

Foreclosure - A procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in payment or terms.

"Hard Money" Loans - Mortgage loans that are made to borrowers who have significantly adverse credit. These loans are usually made by private investors or funding companies.

In rem - A proceeding against the realty directly; as distinguished from a proceeding against a person. (Used in taking land from nonpayment of taxes, etc.)

Interest - The amount of money earned by the principal during a specified period of time.

Interest Rate - A percentage that when multiplied by the principal determines the amount of money that the principal earns over a period of time, usually one year.

Junior Mortgage - A mortgage that of lesser rank than the first mortgage. A mortgage second in lien to a previous mortgage. A.K.A. Second Mortgage & Home Equity Loans.

Lien - A legal right or claim upon a specific property which attaches to the property until a debt is satisfied.

Lis Pendens - A legal document filed in the office of the county clerk giving notice that an action or proceeding is pending in the courts affecting the title to the property.

Loan to Value (LTV) - The percentage of loan available toward the value of the property. To calculate divide your loan amount divided by the appraised value.

Mortgage - A legal document that establishes real estate as the security for the loan which finances that real estate. The term "mortgage" is used to refer to the loan itself.

Mortgage Commitment - A written offer by a lending institution and specifies the terms and conditions of the mortgage loan being offered to the prospective borrower.  Used in purchasing a home, realtors normaly like to see the commitment upon siging a sales agreement. (see sales agreement) 

Mortgagee - The institution or person who is the lender or creditor on a mortgage loan.

Mortgagor - The institution or person who is the borrower or debtor on a mortgage loan.

Points - A charge made by the lending institution to the borrower that is based on the mortgage amount. A point is one percent of the principal mortgage amount..

Prepayment Clause - A clause in a mortgage enabling the borrower to pay off the mortgage balance before the end of the mortgage term. This privilege sometimes involves a prepayment penalty.

Principal - The employer of an agent or broker; the broker's or agent's client.

Purchase Money Mortgage - A mortgage given by a guarantee in part payment of the purchase price of real estate.

Real Property - Land and generally whatever is erected upon or affixed thereto.

Recording - The act of writing or entering in a book of public record instruments affecting the title to real property.

Refinance - A mortgage which replaces an existing mortgage. Most cases to lower your current rate and or take cash out.

Sales Contract - A contract by which the buyer and seller agree to terms of sale.

Subordination Agreement - An agreement which permits the placing of a mortgage at a later date which takes priority over an existing mortgage.

Title - Evidence that an owner of land is in lawful possession thereto; evidence of ownership.

Title Insurance - A policy of insurance which indemnifies the holder for any loss sustained by reason of defects in the title.

Title Search - An examination of the public records to determine the ownership and encumbrances affecting real property.

Unencumbered - Free of liens and other encumbrances. Free and clear.

Unmarketable Title - Not saleable. A title which has serious defects.

Vendor - The person who transfers property by sale. Another word for "seller". Commonly used in land contract sales.

Waive - To knowingly abandon, relinquish, or surrender a right, benefit, or claim.

Yield - Ratio of income from an investment to the total cost of the investment over a given period of time.

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