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• 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. 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 $350.
• 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.
• 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.

• BALLOON PAYMENT: Final payment on a loan that is greater than the previous monthly installments. This pays off the loan entirely and in full.
• 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.

• 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 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.
• 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.
• 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: Used to finance subdivision costs or property improvements.
• CONVENTIONAL LOAN: A mortgage loan that is other than the one guaranteed by the Veterans Administration or insured by the Federal Housing Administration.
• 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.

• 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.
• 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.

• 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.

• 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."
• 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.

• 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.
• 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.

• 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.
• 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.

• JUNIOR MORTGAGE: A mortgage which is paid only after prior mortgages are settled.

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