Becca & InfoMarex

ABA routing number
A series of numbers located at the bottom of an account holder's checks or deposit slips. These numbers identify a particular account at a financial institution.

Adjustable Rate Loan or Adjustable Rate Mortgage (ARM)
A loan with an interest rate that changes during the term of the loan. The payments generally increase or decrease with the interest rate. Rate is based on one of several "index" options.

adjustable-rate mortgage (ARM)
A mortgage whose interest rate changes periodically based on the changes in a specified index.

adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

adjustment period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

amortization
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.

amortization term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amortize
Payoff off a debt in installments which includes both principal and interest.

Amount Financed
A required Truth in Lending Act disclosure for consumer loans. It is calculated by starting with the full amount borrowed (principal) and subtracting out the dollar amount of prepaid finance charges (finance charges the borrower is paying in advance).

Annual percentage rate (APR)
A required Truth in Lending Act disclosure for consumer loans. It is a calculation of the cost of credit as a yearly rate and shown as a percentage. It is often higher than the interest rate because it incorporates prepaid finance charges that are not interest.

annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

annual percentage yield (APY)
The rate of interest earned by an account owner in a year, if no withdrawals occur. All financial institutions must calculate the APY in the same way.

application
A form, commonly referred to as a 1003 form, used to apply for a mortgage and to provide information regarding a prospective mortgagor and the proposed security.

Application Fee
A fee charged by the lender or broker for the loan application.

Appraisal
A report that estimates the value of real estate.

appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.

Appraiser
A person typically hired by a lender to provide an appraisal.

appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.

appreciation
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Arbitration
A privately conducted trial to resolve a dispute. Arbitration can be binding (in which case there is no appeal), or non-binding, in which an appeal may be possible.

asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assets
Anything of value. Any interest in real or personal property which can be appropriated for the payment of debt.

assignment
The transfer of a mortgage from one person to another.

assumable mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

assumption
The transfer of the seller's existing mortgage to the buyer.

assumption clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

assumption fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Automated Clearing House (ACH)
ACH securely and efficiently transfers funds electronically through participating financial institutions.

Bad Debt
A debt that is not collectible and is therefore worthless to the creditor.

Balance Sheet
Financial statement presenting measures of the assets, liabilities and owner's equity or net worth of business firm or nonprofit organization as of a specific moment in time.

balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.

balloon mortgage
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.

Balloon payment
A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. This may be a very large payment. It is designed to occur when the regular payments do not pay off all interest and principal owing (not fully amortizing) on the loan over the term of the loan.

balloon payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.

bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

bankruptcy
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

basis point
A basis point is 1/100th of a percentage point. For example, a fee calculated as 50 basis points of a loan amount of $100,000 would be 0.50% or $500.

before-tax income
Income before taxes are deducted.

beneficiary
The person designated to receive the income from a trust, estate, or a deed of trust.

binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

blanket mortgage
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

bond
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower
A person who receives funds in the form of a loan with the obligation to repay the loan in full.

breach
A violation of any legal obligation.

Bridge Loan
Short-term loan to provide temporary financing until more permanent financing is available.

bridge loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Broker Agreement (Mortgage Broker Agreement)
A contract between a borrower and a mortgage broker. It describes what the broker will do for the borrower, and the terms of the agreement, including compensation.

Broker Compensation or Fee
The amount of money the broker will receive for finding a loan for a borrower. This may be an amount paid by the borrower, an amount paid by the lender or a combination of the two.

Business Plan
A document that describes an organization's current status and plans for several years into the future. It generally projects future opportunities for the organization and maps the financial, operations, marketing and organizational strategies that will enable the organization to achieve its goals.

buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

call option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

Capital
Broadly, all the money and other property of a corporation or other enterprise used in transacting its business.

capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Capital Markets
Those financial markets, including institutions and individuals, that exchange securities, especially long-term debt instruments.

Capitalization
Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund; includes that which has been borrowed from and is repayable to third parties as well as that which is earned or owned by the loan fund (i.e. "permanent capital").

Cash Flow Financing
Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such as the payment(s) of receivables.

cash-out refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

Cash-out Refinancing Loan
A loan that refinances a prior mortgage and that provides additional cash to the borrower. funds.

certificate of deposit
Commonly known as a "CD," certificates of deposit bear a maturity date and a specified rate of interest. Penalties may apply for early withdrawal.

certificate of eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

certificate of reasonable value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.

certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

chain of title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

change frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

clear title
A title that is free of liens or legal questions as to ownership of the property.

closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."

closing cost item
A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement. Click here to see some closing cost times from a HUD-1 statement. Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country.

Closing Costs
A general term to describe the fees that a borrower will pay at closing. Sometimes called "settlement fees."

closing statement
Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.

cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.

co-maker
A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.

combination loan
With this type of loan, you receive a first mortgage for 80% of the loan amount, and a second mortgage at the same time for the remainder of the balance. If avoiding PMI (mortgage insurance) is important to you, consider combination loans. Search Search combo loans

combined loan-to-value (CLTV)
The unpaid principal balances of all the mortgages on a property (first and second usually) divided by the property's appraised value.

commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

commitment letter
A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."

common areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.

community property
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

comparables
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location , and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

compound interest
E-LOAN CDs and Savings accounts compound interest daily. This refers to any interest earned on an account holder's principal balance, as well as any prior interest.

condominium
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

condominium conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

conforming loan
The current conforming loan limit is $417,000 and below. Conforming loan limits change annually.

Conforming Loans
Loans which conform to Fannie Mae guidelines.

construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

consumer reporting agency (or bureau)
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

contract
An oral or written agreement to do or not to do a certain thing.

conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.

convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination

convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

corporate relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

cost of funds index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

Courier Fee
This is a fee that may be charged to send documents or payments by courier, messenger or overnight mail service to various parties involved in the loan transaction.

Covenant
An agreement or promise to do or not to do a particular thing; to enter into a formal agreement; a promise incidental to a deed or contract. The following are functional objectives guiding most covenants: full disclosure of information, preservation of net worth, maintenance of asset quality, maintenance of adequate cash flow, control of growth, control of management, assurance of legal existence and concept of going concern, provision for lender profit or program goals.

covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

credit history
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report
This is a report which is generated by a credit reporting agency (such as Trans Union, Experion or Equifax). It is supposed to show accurately the history of your on-time and late payments on mortgages, credit cards, rent, utilities, and other debts. It may also show how much you owe on your various debts and whether you have taken the maximum amount of credit available to you through credit card borrowing. Your credit reports are used, with other information, to generate a credit score that is supposed to reflect how good a credit risk you are.

credit repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Credit Score
This is a number that is supposed to show the lender how likely you are to repay a loan--whether you are a good or poor credit risk. This score can be a very big factor in determining whether you will get a loan, from whom, and what interest rate and fees you will be charged for your loan. The score is generated by a mathematical formula that considers your credit reports and other factors. It may also be referred to as FICO score (Fair Isaac Company) or Beacon score or some other name-these are companies that create credit scores. (See Chapter 6 in The Complete Guide to Your Real Estate Closing.)

Current Asset
Assets that will normally be turned into cash within a year.

Current Liability
Liability that will normally be repaid within a year.

Current Ratio
Current assets divided by current liabilities -- a measure of liquidity. Generally, the higher the ratio, the greater the "cushion" between current obligations and a firm's ability to meet them.

Debt
An amount owed for funds borrowed. The debt may be owed to an organization's own reserves, individuals, banks, or other institutions. Generally, the debt is secured by a note, bond, mortgage, or other instrument that states repayment and interest provisions. The note, in turn, may be secured by a lien against property or other assets.

debt
An amount owed to another.

Debt Service
Amount of payment due regularly to meet a debt agreement; usually a monthly, quarterly or annual obligation.

Debt Service Reserve
Term used to refer to cash reserves set aside by a borrower, either by internal policy or lender covenant, to repay debt in the event that cash generated by operations is insufficient.

deed
The legal document conveying title to a property.

deed in lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.

Deed of Trust
In some states loans are secured by means of a document called a deed of trust, instead of a mortgage document.

deed of trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.

Default
A failure to discharge a duty. The term is most often used to describe the occurrence of an event that cuts short the rights or remedies of one of the parties to an agreement or legal dispute, for example, the failure of the mortgagor to pay a mortgage installment, or to comply with mortgage covenants.

default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

delinquency
Failure to make mortgage payments when mortgage payments are due.

Delinquent
In a monetary context, something that has been made payable and is overdue and unpaid,

deposit
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

depreciation
A decline in the value of property; the opposite of appreciation.

Document Preparation Fee
An amount of money that you may be charged for the preparation of mortgage loan documents. This charge will be shown on the HUD-1 Settlement Statement.

down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Due Diligence
Refers to the task of carefully confirming all critical assumptions and facts presented by a borrower. This includes verifying sources of income, accuracy of financial statements, value of assets that will serve as collateral, the tax status of the borrower and any other material facts presented by the borrower.

due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

easement
A right of way giving persons other than the owner access to or over a property.

effective age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

effective gross income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable

electronic funds transfer (EFT)
EFT allows account holders to transfer funds from an account electronically. This method of transfer is not only highly secure, but also extremely efficient and easy to transact.

encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

endorser
A person who signs ownership interest over to another party. Contrast with co-maker.

Endowment or Trust
A fund that contains assets whose use is restricted only to the income earned by these assets.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
The value of property in an organization greater than total debt held on it. Equity investments typically take the form of an owner's share in the business, and often, a share in the return, or profits. Equity investments carry greater risk than debt, but the potential for greater return should balance the risk.

Equity
This is the dollar amount of your home that you really own. You can calculate your equity by taking the market value of your home and subtracting out the debt that is secured by your home. For example, if your house is worth $150,000 and you owe $65,000 on a first mortgage and $15,000 on a home equity line of credit. You would take $150,000 - $80,000 (65,000 + 15,000) to arrive at $70,000 in equity.

equity
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.

Equity Participation
An ownership position in an organization or venture taken through an investment. Returns on the investment are dependent on the profitability of the organization or venture.

escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

escrow account
The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.

escrow analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

escrow collections
Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.

escrow disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

escrow payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.

estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

eviction
The lawful expulsion of an occupant from real property.

examination of title
The report on the title of a property from the public records or an abstract of the title

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

fair market value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Fannie Mae's Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

FDIC insured
E-LOAN is a subsidiary of Banco Popular North America (BPNA). E-LOAN and BPNA combine account balances for insurance purposes. The Federal Deposit Insurance Corporation (FDIC) insures the total balances up to the maximum allowed by law.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

fee simple
The greatest possible interest a person can have in real estate.

Fees
This is money you pay or is charged to you up front to get a mortgage loan. You may pay fees in cash or finance them (or a portion of them) as part of the loan. If you finance fees, your loan balance will be higher and your equity will be lower. The fees appear on the Good Faith Estimate and HUD-1 Settlement Statement. Many of these fees are negotiable or can be reduced if you shop around.

FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage

FICO
Credit scores calculated by Fair Isaac Company are often referred to as FICO Normally an average of credit scores taken by 3 national credit bureaus.

Finance Charge
The finance charge is a disclosure that appears on the Truth in Lending Act Disclosure Statement. It is intended to show the cost of your loan as a dollar amount. It includes (1) interest that will be charged over the life of the loan and (2) some up front fees (prepaid finance charges). Prepaid finance charges include such items as mortgage broker fees; lender fees; points; and some closing agent fees. Any closing fees that are unreasonably high should also be included. You may also be required to pay other fees that will not be included in the finance charge.

Finance Companies
These are companies that make loans which are generally at higher rates than are available from banks or credit unions.

finder's fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

first adjustment
When you can expect the first rate adjustment in your ARM loan.

first mortgage
A mortgage that is the primary lien against a property.

Fixed Rate Loan
A loan where the interest rate does not change during the term of the loan.

fixed second mortgage
See home equity loan.

fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.

float down option
An option to choose a lower rate within 30 days before the closing of your loan and "float down" to a lower rate than the previously locked-in rate. This allows you to pick the best rate within that time period.

Flood Certification Fee
A fee charged to determine if the property lies in a flood zone and whether flood insurance is required.

flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Foreclosure
The legal procedure by which a lender holding a mortgage on your house forces a sale of your house to obtain repayment of your loan. Foreclosure proceedings are typically started by a lender when you do not pay your loan on time. It might also be started if you fail to pay property taxes or insurance or keep other promises.

foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term

Fully Amortizing
This describes a loan where the balance owed at the scheduled end of the loan is zero if all regular monthly payments are made as scheduled.

Fund Balance
Net worth in a nonprofit organization; total assets minus total liabilities.

General Recourse
Rights to demand payment from the general assets of the debtor, without seniority in access to any specific assets.

Good Faith Estimate
This document lists the estimated fees you will have to pay to get the loan. It also identifies who is expected to provide services and receive fees in connection with your loan, such as credit bureaus, appraisers, and closing agents.

good faith estimate
An estimate of charges which a borrower is likely to incur in connection with a settlement

Government Recording Fees and Taxes
Fees and taxes required to be paid to the local government where your mortgage documents are filed.

Guaranteed Loan
A pledge to cover the payment of debt or to perform some obligation if the person liable fails to perform. When a third party guarantees a loan, it promises to pay in the event of a default by the borrower.

Hazard insurance
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

home equity line of credit
a credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.

Home Equity Loan
A loan made to a current homeowner that is secured by the equity in the home.

home equity loan
a loan secured by a second deed of trust on a house, typically used as a home improvement loan.

Homeowner's/Hazard Insurance
Homeowner's or Hazard Insurance is insurance required to protect the mortgage lender against possible damage to your home. It can also protect the borrower. A borrower must obtain this insurance and bring proof of its existence to the loan closing.

housing ratio
The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.

HUD
The U.S. Department of Housing and Urban Development

HUD
The U.S. Department of Housing and Urban Development.

HUD Special Information Booklet
This is a booklet published by HUD that describes important terms and provides information about the home buying and mortgage loan process.

HUD-1
Also called a "Settlement Statement" of all costs and fees in your closing.

impound account
An impound account is an account established by the lender to pay a borrower's tax and insurance costs. The borrower's monthly mortgage payment is then increased to cover these costs, with the additional amount being held in the impound account and disbursed by the lender when the payments are due. Lenders typically prefer this arrangement because it reduces the possibility of a lapse in tax or insurance payments that could diminish the value of the lender's investment (your house). Therefore, while it is often possible to opt out of an impound account it will result in additional charges.

Index
A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).

Indorsement
1. the act of signing one's name on the back of a check or a note, with or without further qualification. 2. the signature described above.

Installment note
a note which provides that payments of a certain sum or amount be paid in more than one payment on the dates specified in the instrument.

Installment sale
also known as an agreement of sale or a land contract. This is a method of reporting capital gains by installments for successive tax years to minimize the impact of capital gains tax in the year of the sale.

Institutional lender
a lender which makes a substantial number of real estate loans, such as banks, savings and loan associations, and insurance companies.

Interest Rate:
Cost of borrowing money expressed as a percentage of the amount borrowed.

interest-only loan option
Loan payments have two components, principal and interest. An interest-only loan has no principal component for a specified period of time. These special loans minimize your monthly payments by eliminating the need to pay down your balance during the interest-only period, giving you greater cash flow control and/or increased purchasing power

Interim Financing
Short-term loan to provide temporary financing until more permanent financing is available.

Intermediaries
Non- or for-profit institutions that have specialized lending capacities. They obtain capital in the form of equity and low interest loans from a variety of sources, including foundations and other funders, to form a "lending pool." They then serve as "wholesalers" who process large numbers of small loans or investments. This "economy of scale" often allows intermediaries to be more efficient than a foundation or funder could be if it considered each investment individually. Also, intermediaries often develop expertise in a particular field or region that foundations or funders cannot afford to develop. In the context of this study, non-financial intermediaries include community foundations and financial intermediaries include credit unions, venture capital and loan funds, banks, etc.

Introductory Rate
Some loans have a lower introductory interest rate, which is in effect for a limited time. At the end of the introductory period, the interest rate will increase. It is also known as a "teaser rate."

Jumbo Loans:
Loans which exceed the Fannie Mae guidelines for loan size and amount. Jumbo loans may have different guidelines from a "conforming" loan.

jumbo mortgage
The current loan limit for a conforming loan is $417,000. Loan amounts of $417,001 and above are considered non-conforming or jumbo mortgages and are usually subject to higher pricing

Late Charge
A penalty you will have to pay if you do not make your loan payment on time. This usually is calculated as a percentage of the payment amount or a minimum dollar amount, such as 5% of the late payment, or $25.

Lender
A company or person that makes mortgage loans, such as a mortgage banker, credit union, bank, or savings and loan. Your lender's name will appear on your promissory note.

lender
The bank, mortgage company, or mortgage broker offering the loan.

Lender Paid Compensation to Broker
This is also called the Yield Spread Premium. Fee which the lender pays to the mortgage broker for obtaining the loan for his client.

Leverage
Using long-term debt to secure funds for an organization. In the social investment world, often refers to financial participation by other private, public or individual sources.

Liabilities, Total Liabilities
Total value of financial claims on a firm's assets. Equals total assets minus net worth.

LIBOR
LIBOR stands for London Inter-Bank Offered Rate. This is a favorable interest rate offered for U.S. dollar deposits between a group of London banks. There are several different LIBOR rates, defined by the maturity of their deposit. The LIBOR is an international index that follows world economic conditions. LIBOR-indexed ARMs offer borrowers aggressive initial rates and have proven to be competitive with popular ARM indexes like the Treasury bill.

Lien
A claim (legal interest) against a home. Common types of liens include a mortgage, tax lien or judgment lien.

lien
An encumbrance against property for money due, either voluntary or involuntary.

lifetime cap
A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Limited Liability
Limitation of shareholders' losses to the amount invested.

Limited Recourse
Rights only to specifically stipulated assets to satisfy an unpaid debt.

Line of Credit
Agreement by a bank that a company may borrow at any time up to an established limit.

Line of Credit
Also called an "open line of credit" secured on your home. Often there are no closing costs involved, or the lender offers to pay all closing costs. Use like a checking account, borrowing credit over time up to your credit limit.

Linked Deposit
A deposit in an account with a financial institution to induce that institution's support for one or more projects. By accruing no interest or low interest on its deposit, a foundation essentially subsidizes the interest rate of the project borrowers.

Loan Agreement
A written contract between a lender and a borrower that sets out the rights and obligations of each party regarding a specified loan.

Loan Approval/Commitment
A lender's agreement to make a loan on particular terms, including interest rate, fees and charges.

Loan Term
Length of time until your loan is due and payable.

loan to value ratio (LTV)
The unpaid principal balance of the mortgage on a property divided by the property's appraised value. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.

lock period
The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.

lock-in
A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing

Loss Reserves
That portion of a fund's earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes. Generally accepted accounting principles governing for-profit and regulated financial institutions require that loan loss expense be deducted as an annual expense on an accrual basis and that the loan loss reserve be shown as a contra asset reducing loan assets. To date, no accounting convention has been established to govern loan loss reserve accounting for unregulated nonprofit institutions. The technical treatment is to establish the reserve through periodic charges against earnings, and actual losses, when and if incurred, and are charged against the reserve. For balance sheet purposes a loan loss reserve (should) be shown as a deduction from the loan portfolio to suggest that its true economic value should be reduced by the estimated loss exposure.

margin
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

Market Rate
The rate of interest a company must pay to borrow funds currently. Program-related investments generally are offered at below market rates or at no interest rate.

maturity date
A pre-set date informing account owners when they can withdraw principal funds without incurring a penalty. (Please note that you may withdraw any generated interest before reaching an account's maturity date at E-LOAN.)

Mediation
A process of dispute resolution in which an impartial third party, a mediator, intervenes in a dispute with the consent of the disputing parties and helps them negotiate an agreement. The role of the mediator is to assist the disputants define and clarify issues, help reduce obstacles to communication, explore possible solutions, and reach a mutually satisfactory agreement.

Mortgage
A mortgage is a promise in which you agree to put up your home as security for a loan. The mortgage is the instrument which secures the Promissory Note, in which you promise to repay the loan at a certain date. The mortgage document allows the lender to force a sale of your home (foreclosure) if, for example, you fail to make payments, to pay property taxes or insurance, or keep other promises. In some states the mortgage document is called a "deed of trust." Refer to your copy of The Complete Guide to Your Real Estate Closing for full details of these two documents.

mortgage
A legal document that pledges a property to the lender as security for payment of a debt

Mortgage Banker
A lender, other than a bank, credit union, or savings and loan, that specializes in making residential mortgage loans.

Mortgage Broker
A person or company that obtains a mortgage loan for the borrower from another lender. A mortgage broker will not always be representing the borrower and will not necessarily be looking after the borrower's best interests.

mortgage disability insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.

mortgage insurance (MI)
Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LTV of 80.01% or higher.

Mortgage Insurance (PMI or MI)
Insurance that may be required when a loan is greater than 80% of the value of the home. This insurance protects the lender in the event a borrower fails to make his or her loan payments. The borrower ordinarily pays the cost of MI or PMI, in the form of monthly premiums added to the mortgage payments.

mortgagee
The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.

mortgagor
The mortgage borrower who gives the mortgage as a pledge to repay

negative amortization
Negative Amortization, or "deferred interest," occurs when the mortgage payment is less than a loan's accruing interest. This causes a loan's balance to grow instead of reduce or "amortize."

Negative Covenants
Statements of actions or events of the borrower must prevent from occurring or existing, for example, additional borrowing without the lender's consent.

Net Working Capital
Current assets minus current liabilities.

Net Worth (Fund Balance in nonprofit. organizations)
Total assets minus total liabilities. Aggregate net value of the organization.

no income verification
See "stated income".

non-conforming loan
Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium. The current non-conforming loan limit is $333,701 and above.

note
A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand

Notice of Right to Cancel
Under federal law, you may be permitted to cancel or "rescind" a mortgage loan within a specified time, generally three days, after you have signed loan documents in a refinance, second mortgage or other mortgage loans which do not involve the purchase of a home. . The lender is required to give the borrower notice in writing of this right to cancel or rescind and the deadline to cancel. (read full details in The Complete Guide to Your Real Estate Closing.)

Open-End Loan
A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity line of credit (HELOC) is an open-end loan secured by a home.

Opportunity Cost
The potential benefit that is foregone from not following the best (financially optimal) alternative course of action.

origination fee
A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand

owner financing
A property purchase transaction in which the property seller provides all or part of the financing

Payment Schedule
This information on the Truth in Lending Disclosure Statement shows the amount of the first loan payment, the amount and number of the regularly scheduled payments (usually monthly), the amount of the final payment, and when all those payments are due. The actual payment due may be greater for a number of reasons, including taxes and insurance. If the loan has an "adjustable rate," the actual payments will differ from the payment schedule.

periodic cap
The maximum rate increase for a specific period for a specific loan (ARM) only.

PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage payment.

planned unit developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels

Points
A fee charged by the lender as additional compensation for making the loan. One "point" is equal to 1% of the principal amount of the loan.

points
Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan.

Portfolio
A combination of assets held for its investment benefits, including financial and non-financial returns. The asset mix is usually varied in kind and size to maintain an acceptable level of risk and return.

prepaids
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment Penalty
The charge which can be imposed if you pay off your loan before maturity. The Truth in Lending Disclosure Statement will show whether a loan has a prepayment penalty.

prepayment penalty
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.

Prime Loan
A loan offered to borrowers with better credit history (sometimes called "A" loans). Prime loans generally are priced lower and cost the borrower less.

Principal
In commercial law, the principal is the amount that is received, in the case of a loan, or the amount from which flows the interest.

principal
This term refers to the total amount of money originally deposited into a Savings or CD account. When taking out a loan however, it refers to the amount of debt, not including interest.

Private Mortgage Insurance
Private Mortgage Insurance (PMI or MI)- Insurance required to be paid for by the borrower to protect the lender in the event payments are not made on time; most often required when the loam amount exceeds 80% of the purchase price.

private mortgage insurance (PMI)
Insurance provided by nongovernment insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%

Processing Fee
A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee may be charged to the borrower and shown on the Settlement Statement (HUD-1). A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee may be charged to the borrower and shown on the Settlement Statement (HUD-1)

Program-Related Enterprise
A business or enterprise designed to promote the social purpose goals of an organization as well as generate revenue. Among nonprofits, products and services are usually, but not exclusively, identified with the purpose of the organization. Activities can range from fee-for-service charges to full-scale commercial ventures.

Program-Related Investment
Broad, functional definition: A method of providing support to an organization, consistent with program goals involving the potential return of capital within an established time frame. In the context of this study, program-related investments include loans, loan guarantees, equity investments, asset purchases or the conversion of asset(s) to charitable use, linked deposits, and, in some cases, recoverable grants.

Promissory Note
Broad, functional definition: A method of providing support to an organization, consistent with program goals involving the potential return of capital within an established time frame. In the context of this study, program-related investments include loans, loan guarantees, equity investments, asset purchases or the conversion of asset(s) to charitable use, linked deposits, and, in some cases, recoverable grants.

Promissory Note
A legal contract in which the borrower promises to pay back the loan. The "promissory note" sets forth the terms and conditions that apply to the loan repayment, such as interest rate, when payments are due, where payments are made, what happens if payments are not made, etc.

Purchase Money Loan/Mortgage
A loan for the purpose of purchasing a home.

qualifying ratios
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments

rate
The annual rate of interest on a loan, expressed as a percentage of 100.

rate cap
A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

rate lock-in


rebate
A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.

Receivables
Accounts receivable; an amount that is owed the business, usually by one of its customers as a result of the ordinary extension of credit,

Recording Fees
Refers to the agreement between the borrower and the lender or broker that as long as the loan is closed within a certain period of time (for example, 30 or 60 days), the interest rate on the loan will be set (locked) at an agreed- upon rate. A "rate lock" agreement must be in writing or it will be unenforceable.

Recourse
Refers to the right, in an agreement, to demand payment from the person who is taking on an obligation. A full recourse loan refers to the right of the lender to take any assets of the borrower if repayment is not made. A limited recourse loan only allows the lender to take assets named in the loan agreement. A non-recourse loan limits the lender's rights to the particular asset being financed -- an approach that is common in home mortgages and other real estate loans.

Recoverable Grants
Funds provided by a philanthropist to fulfill a role similar to equity. A recoverable grant may include an agreement to treat the investment as a grant if the enterprise is not successful, but to repay the investor if the enterprise meets with success.

Refinance
To repay one or more existing mortgage loans by getting a new mortgage loan.

refinancing
The process of paying off one loan with the proceeds from a new loan using the same property as security.

Rescind (also Right of Rescission)
Literally means "to take back" or "cancel." If a borrower rescinds a mortgage loan, it is as if the mortgage loan never existed. Some borrowers have by law a right to "rescind" certain mortgage loans. Note: A Borrower is entitled to a refund all fees paid in connection with the loan if the Borrower exercises his right of rescission.

residential mortgage credit report (RMCR)
A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application

Restructure
A revision of a financial agreement that alters the conditions or covenants of the original agreement. For example, parties may agree to restructure a loan agreement, easing the payment schedule, when a borrower is delinquent or otherwise faces default on a loan.

Roll Over
Prior to or at the time of the maturity of an investment or loan, the interested parties agree to continue to carry over the investment or loan for another, successive period of time.

Secondary Mortgage Loan
A mortgage loan that is in addition to a mortgage that already exists on the home.

Security
A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form of security with strong legal standing, because they are publicly registered following a formal legal procedure. A mortgage gives the lender holding a mortgage security the right to reclaim the asset being financed, if repayment is not made.

seller carry back
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Senior Debt
Debt that must be repaid before subordinated debt receives any payment in the event of default.

Settlement
The time when loan and mortgage documents are formally signed and the loan transaction is completed. Sometimes called "Closing."

Settlement Agent (may also be called closing agent or settlement attorney)
The person who organizes and is in charge of the loan closing. The settlement agent is the person who can explain any document the borrower must sign.

Settlement Statement
A mortgage loan closing form required by HUD that is often called a HUD-1. It provides details of all charges and payments made in connection with your loan, and shows to whom they are distributed.

simple interest
An amount earned on an account holder's principal, according to a specified rate. This does not include any compounding interest.

stated/documented income
Some loan products require only that applicants "state" the source of their income without providing supporting documentation such as tax returns.

Sub prime Loans
These loans are priced higher than prime loans, often much higher. Loans to borrowers whose credit is less than perfect will almost always be subprime loans. There are also other circumstances that lead to subprime loans, including high outstanding debt, unproven income, etc. Even borrowers with good credit may receive subprime loans for a variety of reason, including fraud, discrimination, failure to shop around, etc.

Subordinated Debt (Junior Debt)
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt-holders receive payment only after senior debt is paid in full. A subordination of security interest in property allows another creditor to have the rights to the proceeds of the sale of that property before the claim of the subordinated creditor.

subordination
If you are refinancing your first mortgage and have an existing second or home equity line, one option is to "subordinate" the second mortgage: request that your second mortgage holder go back into the second lien position when you replace your existing first mortgage with the new refinance loan.

Survey
A drawing or map showing the precise legal boundaries of a property and other physical features, prepared by a registered land surveyor

survey
A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography

tenants in common
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.

Term
Refers to the maturity or length of time until final repayment on a loan, bond, sale or other contractual obligation.

Term
The period of time during which loan payments are made. At the end of the loan term, the loan must be paid in full.

term
The length of time your money must remain in a CD without incurring an early withdrawal penalty. This term also refers to the period of time that covers the life of a loan.

title
The evidence one has of right to possession of land.

title insurance
Insurance against loss resulting from defects of title to a specifically described parcel of real property.

title search
An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.

Transfer Tax or Charge
This is a government tax or charge that is usually based on a percentage of the property value or loan amount and imposed by state or local law. Many states do not require this charge for a refinance loan, but almost all require it for a home purchase. A transfer tax will be shown on the Settlement Statement (HUD-1).

Truth in Lending Act (return to top)
A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions

Truth in Lending Act (TILA)
This is a federal law designed to protect borrowers and to give them enough information to comparison shop for loans. TILA requires certain disclosures about the loan and when they must be given to the borrower. TILA also provides additional protections and prohibitions.

Truth in Lending Disclosure Statement
This is a very important document that federal law requires for all consumer loans.] It provides key information to enable borrowers to shop around and compare loan terms from various lenders.

Underwriting Fee
This is a fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan. An underwriting fee may be charged to the borrower and shown on the Settlement Statement (HUD-1).

Up Front Costs
These are costs or fees which are charged to the borrower at or before closing of the mortgage loan, such as loan application fees, appraisal fees, points, broker fees, credit report fees, real estate taxes, etc. Up front costs can be paid in several ways: (1) they can be paid by the borrower in cash; or (2) they can be added to the loan amount and financed over the life of the mortgage.

User
A non- or for-profit entity that receives a program-related investment directly from a funder for use in its programs or ventures.

variablerate
An interest rate that may change once an account opens.

Veterans Administration (VA)
A government agency guaranteeing mortgage loans with no down payment to qualified veterans

Warranties
Statement attesting that certain statements are true. For instance, the borrower may warrant that it is a corporation, that it is entering into the agreement legally and that financial statements supplied to the bank are true.

Working Capital
Technically, means current assets and current liabilities. The term is commonly used a synonymous with net working capital. The term often also is used to refer to all short-term funding needs for operations (excluding debt service and fixed assets). A company's investment in current assets that are used to maintain normal business operations. Net working capital, which is the excess of current assets over current liabilities is also interchangeable with working capital. Both reflect the resources in circulation to meet operating needs and obligations as they come due.

Write off
When an investment, such as a loan, becomes seriously delinquent or in default and is determined to be uncollectible, the lender may choose to charge the outstanding investment amount as an expense or a loss.

yield
The amount generated in interest on an account