Amortization
Schedule of repayment of a mortgage debt with equal periodic payments of both principal and interest calculated to retire the obligation at the end of a fixed period of time.
 
Balloon Payment/Mortgage
(1) An installment payment on a promissory note, usually the final one for discharging the debt, which is significantly larger than the other installment payments provided under the terms of the promissory note. (2) A mortgage with periodic installments of principal and interest that do not fully amortize the loan.  The balance of the mortgage is due in a lump sum at the specified date usually at the end of the term.
 
Closing
A meeting at which all parties of a real estate transaction conclude their details and deliver the title of real estate and the disbursal of funds pursuant to the sales contract or refinance of an existing mortgage.
 
Condo
Type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.
 
Conventional Loan
A type of mortgage loan that is customarily made by a bank or savings and loan association or other financial institution that is without government underwriting such as FHA insurance or a VA guarantee and conforms to the lender’s own standards and has been modified within legal bounds by the mutual consent of the parties involved.
 
Construction Loan
A loan that is made to finance the actual construction of improvements on land and the funds are disbursed as the construction progresses.
 
Conventional ARM
An adjustable rate mortgage that allows the borrower the option to convert at a specified point in time to a fixed rate schedule for a nominal fee and at a rate that is determined according to the loan documents.
 
Credit Report
An evaluation of a person’s history or capacity of debt repayment which is generally available for individuals from one of the three retail credit bureaus (Equifax, TransUnion and Experian) for business companies such as Dunn & Bradstreet and for publicly held bonds by Moody’s Standard Poors.
 
Credit Rating
In mortgages, the process of evaluating and rating a loan applicant according to the quality of his or her credit worthiness based on past use of credit, current indebtedness and frequency of application for credit and where a person’s score may determine whether he or she is eligible for conventional loan. 
 
Down payment
An initial partial payment of the total selling price.
 
Earnest Money
A sum of money or other consideration tendered by a prospective purchaser as evidence of good faith in conjunction with an offer to purchase rights in real property.
 
FHA
A loan made by an approved lender in accordance with the FHA’s regulations and insured by the Federal Housing Administration.
 
Fixed Rate Loan
A mortgage secured by real property featuring a constant interest rate for the term of the loan.
 
FHLMC
Freddie Mac is a government sponsored enterprise charged by Congress to provide liquidity, stability and affordability to the US housing and mortgage markets.  Freddie Mac provides funding in the secondary market for mortgage banks, brokers and other mortgage partners to lend funds to home buyers at affordable rates.
 
Flood Certification
An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.
 
FNMA
Fannie Mae is a government sponsored enterprise chartered by Congress to provide liquidity, stability and affordability to the US housing and mortgage markets.  Fannie Mae provides funding in the secondary market for mortgage banks, brokers and other mortgage partners to lend funds to home buyers at affordable rates.
 
Good Faith Estimate
An estimate of closing costs that must be given with residential loans on one to four units under the Real Estate Settlement Procedures Act by a lender to a mortgage applicant within three days after the loan application based on the lender’s best estimate.
 
HUD-1 Form (Uniform Settlement Statement)
The special form known as HUD1 that itemizes all charges to be paid by a borrower and seller in connection with the settlement is required to be given to the borrower, lender and seller at or before settlement by the settlement agent in a transaction covered by RESPA.
 
Hazard Insurance
A form of insurance that protects against certain risks such as from fires or storms.
 
Home Equity Loan
A loan sometimes called a line of credit where an owner uses his or her residence as collateral for a loan, which permits the draw of funds up to a preset amount.
 
Homeowner’s Insurance
A standardized insurance policy package that covers a residential real estate owner against financial loss from fire, theft, liability for property damage, personal liability and other common risks.
 
Home Inspector
A professional who in some states must be bonded or licensed who evaluates the structural and mechanical condition of a home prior to transfer of title.
 
Interest Only Loan
A non-amortizing loan in which a borrower repays the principal in a lump sum at maturity while interest can be paid fully at maturity or in installments.
 
Jumbo Loan
A mortgage generally for $417,000 or more.
 
LIBOR (London InterBank Offered Rate)
A rate that international banks dealing in Eurodollars charge each other for charge each other for large loans and which some domestic banks use as an index for adjustable rate mortgage loans.
 
Loan Application
A source of information on which a lender bases a decision about making a loan which defines the loan contract, shows the desired loan amount, the repayment terms, the name of the borrower, place of employment, salary, bank accounts, credit references and describes the real estate that is to be mortgaged.
 
Loan Origination Fee
A fee charged to the borrower by the lender for the administrative costs of processing and creating a mortgage loan, which is usually computed as a percentage of the loan amount and is often expressed in points.
 
LTV Ratio
The amount of mortgage debt that a lender can or may loan to a borrower compared to the market or appraised value of a property being pledged as collateral expressed as a percentage.
 
Loan Term
The length of time that the mortgage loan will be in effect.
 
Loan Commitment
A lender’s contractual commitment to make a loan based on the appraisal and underwriting.
 
Manufactured Homes
A popular broad group of alternative housing consisting of types such as mobile homes, which are produced mainly in and by factories and later moved to a permanent site
 
Modular Housing
A system used for the construction of factory built homes and other improvements to real property that comply with local building codes, using very little labor thru the on-site assembly of component parts or modules that have been mass produced at a different location.
 
Mortgage Broker
A party who acts as agent and brings a lender and borrower together in order to earn a commission.
 
Mortgage Commitment
A notice in writing from a lending institution promising to make the loan in the future and also specifying its terms and conditions.
 
PMI
A type of mortgage insurance available to conventional lenders on the first, high-risk portion of a loan guarantying payment.
 
Perk Test
A test of soil performed to determine if the soil will absorb and drain water adequately for the disposal of sewage thru a septic system.
 
Prequalification
Initial step in the mortgage process that is fairly simple.  Potential buyer will supply bank or lender overall financial picture including debt, income and assets.  After evaluation, a lender can give an idea of the mortgage amount for which you qualify.  Loan prequalification does not include an analysis of your credit report. 
 
Preapproval
Typically involves a more thorough analysis of your credit history and current credit rating as well as income and assets.  From this the lender can tell you the specific mortgage amount for which you may be approved.  In a competitive market, this puts you at an advantage when dealing with a potential seller, as he/she will know you are one step closer to obtaining an actual mortgage. 
 
Prime Rate
The lowest commercial interest rate charged by banks on short term loans to their most credit worthy customers. 
 
P&I Payment
A payment in an amortized loan that is typically paid monthly that includes interest charged for the period plus an amount that is applied to the amortization of the principal balance.
 
Qualifying Ratio
The maximum percentage of a borrower’s income that a lender or government agency will allow a prospective debtor’s payments to be and still be able to approve the loan and which is often referred to as a debt-to-income ratio or DTI.
 
Recording Fee
The charge made by a Register of Deeds to record a legal document.
 
Right to Rescind
A right to terminate a contract unilaterally or by one side only.
 
Rural
An area outside larger and moderate sized cities and surrounding population concentrations that typically has farms, ranches, small towns and unpopulated regions.
 
Second Mortgage
(1) A mortgage loan made to secure a loan to make home improvements or some other related purpose.  (2) A mortgage loan given by a buyer to generate enough capital to make the downpayment required under the first mortgage loan.  The loan is subordinate to the first mortgage.
 
Sales Contract
A contract by which a buy and a seller agree to the terms to the sale of real property.
 
Seller Financing
A financing arrangement whereby the owner acts as the lender for the buyer until he or she can qualify and obtain financing from an institutional lender.
 
Single Family Home
A dwelling designed for occupancy by one household only.
 
Survey
(1) The method by which a surveyor of real property identifies the boundaries of a parcel of land (2) The map prepared by an engineer or surveyor charting a particular piece of real estate.
 
Townhouse
A house in a row of usually the same or similar design with common side walls or with a very narrow space between adjacent side walls.
 
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender.
 
USDA
Primarily used to help individuals or households with low-moderate income purchase homes in rural areas.  Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.  Loans may be up to 100% of the purchase price.  Applicants for loans may have an income of up to 115% of the median income for the area.  The property must be a primary residence and applicants must have reasonable credit histories.