Homebuying Glossary

A mortgage loan on which the interest rate may be changed, up or down, at established times, usually in relation to an index. Typically, adjustments are made at 1, 3, or 5-year intervals. Adjustments are tied to the movement of an index, such as the Treasury bill, treasury securities index or national or regional average cost of funds index. The new interest rate is calculated by adding a margin - usually 2.75 or 3.00 percentage points - to the index.

The process of reducing the balance of a loan to zero in equal payments over the term of the loan.

The cost of credit on an annual basis, expressed as a percentage of the amount financed, including interest and all prepaid expenses required to close a loan.

A fee charged by a lender to cover costs of processing your application.

A valuation model where a third party conducts an in-person review of your home to determine its value using measurements and data from similar homes in the area. By law, a financial institution cannot conduct an appraisal - but can review an appraisal as part of a valuation model.

The final opinion of value reached by an appraiser based on knowledge, experience and a study of pertinent data. Commonly known as fair market value.

The value that a taxing authority places upon real estate or personal property for the purpose of taxation.

A measurement of interest rates. One hundred basis points equal one percentage point.

A limit on how much the interest rate or monthly payment can change, either at each adjustment or during the life of the mortgage. Applicable only to ARM loans.

The conclusion of a transaction. This includes delivery of a deed, signing of all documentation and the disbursement of funds necessary to the sale or loan transactions.

The costs associated with obtaining your mortgage, including points, title, rate lock, recording fees and other charges.

A report to a prospective lender on a person's credit standing, to help determine credit worthiness.

A percentage relationship between a borrower(s)' gross monthly income and total monthly outstanding obligations. It is derived by adding the borrower(s)' monthly housing payment plus continuing monthly debt payments, divided by gross allowable monthly income.

A written legal document which transfers ownership of real property from one party to another.

Money available to homebuyers in the form of low- or no-interest loans, grants, tax credits, savings programs and more. Homebuyers must meet certain eligibility requirements to receive assistance.

A government regulation engaged in 1975, amended in 1977, to prohibit lenders from discrimination in lending policy by reason of race, color, religion, national origin, gender, marital status or age.

Full value of a property minus the debt. It is a measure of the degree of ownership. Equity reflects how much you've paid down on your mortgage but also how much your home's value has increased over time.

Funds held by lender to cover the payment of anticipated expenses on property, such as taxes or insurance.

A loan with an interest that does not change over the life of the loan.

A contract whereby an insurer, for a premium, agrees to compensate the insured for loss on a specific property due to specific standards.

A lending product that allows borrowers to leverage their home equity to fund large purchases. Provides additional flexibility and features compared to a home equity loan, but typically comes with an adjustable rate.

A multiple perils policy encompassing hazard coverage as well as other coverage, such as personal liability and personal property.

A written evidence of temporary hazard or title coverage that only funds for a limited time and must be replaced by a permanent policy.

Two or more owners with undivided ownership interest of the same degree, usually with the right of survivorship upon the death of any one of them.

A property description recognized by law, which is sufficient to locate and identify the property. This may be a lot number, monument, the boundaries or limits of the land or U.S. government survey.

A legal hold or claim of one person on the property of another as security for a debt or charge. Also may be the right given by law to satisfy a debt, such as a judgment lien.

The maximum percentage the interest accrual rate may increase over the original index plus margin. It may also be stated as an absolute interest rate maximum.

Helps you understand the full cost of your mortgage loan, including key features, costs and risks, as well as details about your closing, like the amount of cash to bring.

The relationship between the amount of the mortgage loan and the value of the property, expressed as a percentage. Value is defined as the lower of sales price or appraised value of the property.

A conveyance of an interest in real property given as security for the payment of a debt.

A type of term life insurance that, in the event the borrower dies, is automatically satisfied by loan proceeds.

The ratio of the borrower(s)' housing obligation to their gross monthly income. It is derived by dividing the monthly mortgage payment by the borrower(s)' gross monthly income.

The process of preparation, evaluation and submission of a proposed mortgage loan package.

A fee or charge for the work involved in loan origination.

The abbreviation for the total housing obligation which includes principal, interest, taxes and insurance.

An amount equal to 1% of the principal amount of an investment or note. Loan discount points are a one-time change assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments.

Borrower applies and is preapproved for a specific loan amount subject to property approval.

An informal process of determining how much house and monthly payment a potential homebuyer can afford.

The outstanding balance of a mortgage, exclusive of interest and any other charges. 

Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default. Sometimes referred to as a mortgage insurance, MI or PMI coverage.

Second mortgage is an umbrella term that typically applies to either a HELOC or a home equity loan.

The duties of the lender as a loan correspondent as specified in the servicing agreement for which a fee is received.

Two or more owners, each with an undivided fractional interest in real estate. Each may sell or divide their interest separately, without consent of the other, unless limited by a contract. The tenants in common do not have survivorship rights in one another's interest.

The length of the loan

The evidence or right which a person has to the ownership and possession of land.

A contract by which the insurer, usually a title company, agrees to pay the insured a specific amount for any loss caused by defects or title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise.

TILA RESPA Integrated Disclosure: Comprised of your loan estimate and closing disclosure, this makes your loan documents easier to understand and helps ensure you have the necessary information you need when choosing a home loan provider.

This federal regulation is designed to promote the informed use of consumer credit by requiring disclosures about its terms and costs. The regulation also gives consumers the right to cancel certain credit transactions that involve a lien on the consumer's principal dwelling, regulates certain credit card practices and provides a means for fair and timely resolution of credit billing disputes. Also known as Regulation Z.

Method by which a financial institution determines the current value of your home.

A deed in which the grantor or seller warrants are guarantees that good title is being conveyed, as opposed to quit-claim deed that contains no representation or warranty as to the quality of title being conveyed.