12-Month Treasury Average (MTA)

This is an index that is the 12 month average of the monthly average yields of U.S. Treasury securities adjusted to a constant one year maturity. It is computed by averaging the previous 12 monthly values of the 1-Year Constant Maturity Treasury (CMT). Because this index is an annual average, it is more secure than the 1-Year CMT index. The MTA index usually fluctuates slightly more than the 11th District Cost of Funds Index (COFI), although its movements track each other closely. The MTA and COFI-indexed adjustable rate mortgages (ARM) work much the same way. ARMs tied to the MTA index may have the potential for negative amortization.

Absract of Title

A review of the public records relating to the title to a property. An attorney or title insurance company reviews the abstract of title to establish whether there are any title flaws that must be cleared before a buyer can purchase clear, marketable, and insurable title.

Acceleration Clause

A provision that allows the lender to demand the immediate repayment of the mortgage loan balance due to circumstances such as: failure to make payments, bankruptcy, nonpayment of taxes on mortgaged property, or the breaking of loan covenants.

Acceptance

A contractual agreement that binds the offeree to the terms and responsibilities outlined in the offer.

Accrued Interest

Interest earned for the period of time passed since the interest was last paid.

Acquisition Loan

A loan made for the sole purpose of purchasing land. Also called "land acquisition loan."

Add-on Interest

The amount of interest paid on the principal of a loan for the term of that loan.

Additional Principal Payment

A payment by a borrower made in excess of the required monthly payment in order to reduce the remaining balance on the loan.

Adjustable Rate Mortgage (ARM)

A mortgage where the interest rate is adjusted periodically based on a pre-selected index. Also known as a "floating rate mortgage."

Adjusted Gross Income

The gross income of a building if it is fully rented, not including an allowance for estimated vacancies.

Adjustment Date

The date that the interest rate changes on an adjustable rate mortgage (ARM).

Adjustment Interval

The period of time between changes in the interest rate and/or monthly payments for an adjustable rate mortgage (ARM), typically, one, three, or five years.

Adjustment Period

The period of time passing between adjustment dates for an adjustable rate mortgage (ARM).

Administrator

A person appointed by a probate court to manage and distribute the estate of a person who has died without a will.

Affordability Analysis

An examination of a buyer's ability to afford a house, by reviewing income, liabilities, available funds, mortgage type, home price, and closing costs.

Alt-A

This is a type of loan program that is almost conforming, but slightly off on one or more criteria.

Amortization

The repayment of a mortgage loan, both the principal and interest, through regular installments.

Amortization Term

The number of months required to repay the mortgage loan.

Annual Mortgage Statement

A report sent to the borrower each year stating the amount of taxes, insurance, and interest paid during the year, as well as the remaining mortgage loan balance.

Annual Percentage Rate (APR)

A figure that calculates the full cost of a loan including interest rate and all other fees associated with securing a loan.

Apartment Conversion

The conversion of a rental apartment building to individually owned units.

Application Fee

The fee charged by the lender to the borrower for applying for a loan.

Appraisal

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

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser

A person familiar with local real estate values, 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.

Arms Length Transaction

All parties involved in a real estate transaction with no personal interest in the transaction or other involved persons.

"As-is" Agreement

Certifies that a buyer accepts whatever physical condition a property is in at the time the contract is signed. May be controlled by state and local regulations.

Assessed Value

The valuation placed upon property by a public tax assessor for purposes of taxation.

Assessment

The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

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).

Assignment

The transfer of a mortgage from one person to another.

Assignment of Leases & Rents

The instrument evidencing transfer by a lessee to the Lender and/or assigns of the exact interest of said lessee including rent receipts.

Assumption

The act of taking over an obligation or liability of a mortgage note from the previous borrower.

Assumption Fee

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

Assumption of Mortgage

An obligation undertaken by the purchaser of property to be legally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.

Attorney-in-Fact

One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An 'Assumption of Mortgage' is often confused with 'purchasing subject to a mortgage.' When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage. Both 'Assumption of Mortgage' and 'Purchasing Subject to a Mortgage' are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

Balance Sheet

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

Balloon Mortgage

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

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 or 'Offer to Purchase'

A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Biweekly Payment Mortgage

A mortgage that allows payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or 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.

Bond Financing

A type of financing which is an agreement to repay the principal along with the interest on a specified date.

Borrower

Any entity that is, or when loan is made will become, the obligor on the loan. For commercial loans, the obligor may be an Individual, Corporation, Partnership, Limited Liability Co (LLC) or a Trust, depending on the loan amount.

Breach

A violation of any legal obligation.

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 (real estate)

A licensed real estate professional who, typically, represents the seller of a property. A broker's duties might include: determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.

Builder Loans (also developer loans)

These are loans for builders who are financing the construction of multiple properties or spec/model homes before they are sold to an occupant.

Building Code

Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Line or Setback

Guidelines that limit the distance from the street or adjacent properties where construction may not extend. The building line may be established by building codes, zoning ordinances, or restrictive covenants in deeds or leases.

Buy Down

Money advanced by an individual (seller, builder, etc.) to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.  Normally paid as "points" or "basis points" to reduce the interest rate on a mortgage.  When a Florida mortgage is obtained through a Licensed Florida Mortgage Broker, the buy down is paid to the Mortgage Broker as part of their fee, and the broker then pays the lender to reduce the interest rate on the loan.

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.

Cancellation Clause

The details in a lease, or other contract, under which each party may terminate the agreement.

Cap

A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate may increase or decrease at a given time or in a period of time.

Cap Rate

A rate of return used to derive the capital value of an income stream. Value = Annual Income / Cap Rate.

Capital Expenditure

The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital Improvement

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

Capital Improvements Escrow

A trust account established to hold funds allocated for the completion of rehabilitation, repairs or incomplete items of construction as required by an escrow agreement.

Capitalization Process

A process by which anticipated future income is converted into one lump sum value.

Carryback Financing

A transaction where the seller of the property takes a promissory note for some, or all, of the equity in their house, upon its selling. The promissory note specifies the terms under which the buyer of the property is expected to pay the amount owed to the seller over time. Carrybacks can be secondary financing, after a separate first mortgage obtained elsewhere, or the carryback might be for the whole amount as well. Also referred to as "seller financing."

Carrying Charges

The costs incurred to maintain a property when it is non-productive or in interim use.

Cash Flow

Money available for debt service, less tenant improvement reserves and leasing improvement reserves when applicable.

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 liens. In-hand cash that is received from any given refinance or mortgage.

Certificate of Deposit

A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

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 Sale

An official document that entitles the buyer to receive a deed, pending court confirmation.

Certificate of Title

A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property, which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title, which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Certificate of Veteran Status

A document that enables veterans who have served 90 days of continuous active duty to obtain lower down payments on certian FHA insured loans. It may be obtained by sending DD 214 to the local VA office with form 26-8261: Request for Certificate of Veteran Status.

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 monthly frequency of payments and/or interest rate changes in an adjustable rate mortgage (ARM).

Chapter 11

A type of bankruptcy that allows the debtor to maintain operating control of the business while restructuring and reorganizing debts, and creating an acceptable debt-payment plan. Also known as "debtor in possession."

Chapter 13

A type of bankruptcy plan where the debtor repays the creditor on a scheduled three-to-five year period. Also called "wageearner plan."

Chapter 7

A type of bankruptcy filing which allows the debtor's assets to be distributed among the creditors. Also called a "liquidation."

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 Costs

Costs associated with the purchase of a home that must be paid at the sale closing. These could include mortgage fees, title insurance, appraisal, inspection fees, and points.

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 quit claim deed, release, or court action.

Co-Borrower

An additional borrower on a loan. A co-borrower's obligation on a loan is the same as the borrower's.

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.

Coinsurance

A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

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.

Combination Loan

With this type of loan, you receive a first mortgage for a percentage of the loan amount, and a second mortgage at the same time for the remainder of the balance.  Combination loans are one way of financing a home up to 100%, while still avoiding the payment PMI (mortgage insurance), which usually is required on a Florida mortgage for financing over 80%.

Combined Loan-to-Value (CLTV)

The relationship between the unpaid principal balances of all the mortgages on a property (usually first and second) and the property's appraised value (or sales price, if it is lower).

Commercial Real Estate Loan

Financing given on a commercial property. Financed amount is determined by the particular property, based off previous reported income histories and projected rental income and leaves a reserve of 25% (see Debt Service Coverage).

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 sales price of the property or loan.

Commitment

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 Area Assessments

Levies against individual unit owners in a condominium, town home or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common Areas

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD), a town home 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 can include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, parks, wildlife areas, ponds,undeveloped areas, 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 repairs. The repair work can account for as much as 30 percent of the appraised value.

Community Property

In some 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.  In Florida, a married couples primary residence is normally considered community property, even it was aquired before marriage and the title deed is recorded in only one name.

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

Interest paid on the original principal balance and on the accrued and unpaid interest.

Condemnation

The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

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.

Condominium Hotel

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services, and that is operated as a commercial hotel even though the units are individually owned.

Conforming Loan

The current conforming loan limit is $359,650 and below. Conforming loan limits change annually.  A Licensed Florida mortgage Broker usually has access to lenders who may offer conforming loan rates and terms for Florida mortgages that may be above this amount.  Florida Mortgage Brokers may also have access to "combination loan" plans that eliminate this requirement.

Construction Loan

A short-term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Construction to Permanent

A type of loan to pay off an existing construction loan, lot loan, and any additional construction costs. Must be completed and inspected before loan closes and funds to pay off, but it has to be approved prior to completion

Consumer Credit Counseling

This is a non-profit organization that helps citizens lower their debt payments, and consolidate payments under this orgranization. They are also know as CCCS (consumer credit counseling services).

Consumer Reporting Agency (or Credit 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.  The three main agencies are Experian, TransUnion and Equifax.  See our "Free Credit Report" link for more information.

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 agreement between two or more parties, especially one that is written and enforceable by law.  In purchasing a home in Florida, this normally refers to the sales contract.

Conventional Mortgage

Any mortgage that is insured or guaranteed by the federal government.

Conversion Clause

A condition in an adjustable rate mortgage (ARM) that allows the loan to be converted to a fixed-rate mortgage at some point during the term.

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 time frames after loan closing.

Convertible Arm

An adjustable rate mortgage 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

When an employer pays all or part of the costs to relocate an employee to another location of the company.

Correspondent Lender

A lender who funds loans through Licensed Mortgage Brokers (or sometimes bank), and sells them to a wholesale lender through a prior commitment. The lender who originates the loan then receives a service fee from the correspondent lender.

Cosigner

An individual, other than the borrower, who signs a mortgage loan obligation and, thereby, assumes equal liability.

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.

Coupon Rate

The actual interest rate on a debt, bond, note, or other fixed income security. The coupon rate on a mortgage is the contract rate stated in the mortgage note.

Covenant

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

Credit

A measurement of a person's ability to pay bills on time. Several companies track individuals' credit histories by detailing late or missed payments on loans, credit cards, and other debts, and this information can be obtained for a fee in a credit report.  This can also mean extending credit, which is an agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit Enhancement

A process to reduce credit risk, and provide the lender with reassurance that they will be compensated if the borrower defaults, by requiring collateral, insurance, or other agreements.  It can also mean correcting errors and issues on someone's credit report, which leads to a cleaner credit record ans higher scores in a short period of time.

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 Life Insurance

A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Credit Report

A report of an individual's credit history prepared by a credit bureau and used by lenders to determine a potential borrower's creditworthiness. Independent sources compile the report, which lists the borrower's debts, liabilities, and assets.

Credit Buruea (or 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.

Creditor

An entity, such as a mortgage company or bank, that loans money for repayment and interest.

Cure

A loan that is removed from a delinquency status with no loss to the insurer.

Current Assets

Assets that could be converted into cash within a year, such as cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other such assets.

Debt Consolidation Refinance

A refinance transaction that uses the equity in your house or monies from your mortgage to consolidate your debt into one low rate monthly payment.

Debt Ratio

The total of the proposed monthly payments (usually including all payments such as mortgages, loans, credit cards, car payments, etc.) divided by the total monthly income.  Lenders often consider debt ratios when looking at approval for a loan.

Debt Service Coverage Ratio

The ratio calculated by dividing the property's cash flow available for debt service by the annual principal and interest requirements. ('DSC')

Declaration of Trust

A written document from one having legal title to a property, that the property is held in trust for the benefit of another.

Deed

A document that transfers real estate from one party to another. Officially recorded in government records.

Deed of Trust

Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument

Deed-in-Lieu

A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a 'voluntary conveyance.'

Default

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

Deficiency

The difference between the balance on a loan and profits from the sale of the loan collateral.

Deficiency Judgment

A court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan. Deficiency judgments are not allowed in all states.

Delegated Underwriting and Servicing (DUS)

Fannie Mae allows certain lenders to process and approve FNMA’s multifamily loans wherein the lender takes a percentage of the risk.

Delinquency

A loan in which a payment is overdue but not yet in default.

Delivery

The actual placement of the property to the grantee, usually by delivery of a deed to the buyer or by recording of the deed.

Demand Note

There is no set day for repayment of a this note, but it is due on the “demand” of the lender.

Density

The number of persons or buildings occupying a certain amount of land. An acre is usually used.

Department of Veterans Affairs (VA)

An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

Deposit (see Earnest Money)

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.

Direct Reduction Mortgage

An amortized mortgage in which principal and interest payments are paid monthly with interest being computed on the remaining balance.

Discount Points

Charges levied by the mortgage lender to obtain a better interest rate, usually payable at closing. One point represents 1% of the mortgage loan amount.  See "Buydown" for more information.

Discount Rate

The Federal Reserve System’s rate of interest charged to banks that buy money from them. An increase in the rate discourages banks from borrowing. A compound interest rate used to convert expected future income into a present value income.

Disposition of Real Estate Statement

A requirement for the borrower that they will occupy the property being purchased even though they may own other property. The borrower must state that the other property will be sold or rented.

Documentary Stamps

A state tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

Documentary Transfer Tax

A tax charged by the city or county of a property based on the sales price upon the transfer of that property.

Double Declining Balance Method of Depreciation

A use of the declining balance method, but with double the depreciation allowable by straight line. This is an accelerated method.

Double Escrow

Two concurrent escrows on the same property, having the same buyer and seller of the property. Escrow 1 buys from escrow 2 and then sells the same property to another. This process is illegal in many states unless a full disclosure is made.

Doublewide

A type of manufactured housing that comes as two units joined together at the lot or park it is to be placed on.

Dower

The rights of a widow or widower of the property upon the spouse’s death.

Down Payment

The part of the purchase price, which the buyer pays in cash and does not finance with a mortgage.

Drive by Appraisal

A type of appraisal where valuations are based only on public records and exterior inspections.

Dual Agency

The representation of both the buyer and seller by the same agency at the same time. Full disclosures are required.

Due Diligence

An investigation or audit by the investor of a potential investment. Due diligence examines all material facts in regards to a sale.

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.

Early Occupancy

When the buyer is allowed to take possession of the property before the sale is completed.

Earnest Money

The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement

A right, such as a right of way, afforded a person or entity to make limited use of another's real property.

Easement of Necessity

An easement granted by a court that states an easement is absolutely necessary for the use and enjoyment of the land. Commonly given to landlocked parcels.

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.

Egress

A term concerning a right to come and go across the land of another. The term is usually “ingress and egress.”

Eighty-Ten-Ten Loan (80/10/10)

A loan through one or more lenders that consists of more than one mortgage.  Usually consisits of a first mortgage (80%), a second mortgage (10%), and a HELOC or Home Equity Line of Credit (10%).  One of many possible "combination loans".

Eleemosynary Corporation

Created for charitable purposes that allow tax advantages although they operate the same as a profit-making corporation. They are called nonprofit corporations.

Eminent Domain

The right of the government to appropriate private property for public use, usually with compensation to the owner.

Employer-Assisted Housing

A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment

Any improvement such as a building, wall, fence, or other fixture which overlaps onto an adjoining property.

Encumbrance

A legal right or interest in land that affects a good or clear title, and diminishes the land's value.

Endorsement

Any change or addition to a title insurance policy that affects coverage of the policy as per specific requirements of the insured.  When securing a Florida mortgage, these endorsements and their fees are often listed separately on the closing documents.

Endorser

A person who signs ownership interest over to another party.

Engineering Report

A report created by an architect or engineer describing the current physical condition of the property and its major building systems. Also known as a "structural report."

Entitlements

A right to certain benefits specified by contract or law.

Environmental Site Assessment

A detailed study of the environmental condition of the property and surroundings conducted in accordance with ASTM standard E 1527 or E1528 (Phase I or Transaction Screen Process) Also known as 'ESA'

Environmental Transaction Screen Report

The report prepared in compliance with the American Society for Testing Materials (ASTM) standards to identify recognized environmental conditions of a property (i.e., the presence, or likely presence, of any hazardous substances on the property).

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.

Equitable Conversion

A legal term regarding a land contract which treats the buyer’s interest as a real property interest, even though the seller holds legal title.

Equitable Mortgage

A lien against real property, which is enforceable in a court of equity but does not legally constitute a mortgage. Also, a deed given as security for a debt will be considered a mortgage rather than a transfer of title. Also known as a constructive mortgage.

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.  Basically, this is the actual cash value of property after all claims against the property have been paid.

Equity Capital

Money invested by owners who receive a portion of the profits.

Equity Line of Credit (Home Equity Line of Credit or HELOC)

A deed of trust is recorded against the borrower’s property for a predetermined maximum loan amount and the borrower can borrow up to the amount of the loan amount as needed. Usually interest only for a period of 5 to 10 years and then the loan becomes a fixed mortgage and no more equity can be borrowed. Payments are then principal and interest until payoff.

Equity Loan

A loan based on the borrower's equity in his or her home. Also, an account held by the lender into which a homeowner pays money for taxes and insurance.

Escape Clause

A provision in a contract that allows for the cancellation of all or part of the contract.

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.

Exception

In a title insurance policy, a provision that excludes liability for a specified title defect or outstanding encumbrance.

Exclusive Listing

A contract that gives a licensed real estate agent the exclusive right to sell a property for a set period of time.

Executor

An individual appointed in a will to administer an estate.

Exit Fees

On some transactions, a lender will charge fees upon the repayment of the loan. They can be a penalty for early loan repayment or may be additional compensation for the lender over and above the interest cost.

Expert Testimony

The testimony that is given by a person with special training or knowledge in a particular subject and is therefore considered an “expert.”

Exposure

When a property is for sale or lease, the amount of notice or exposure the property gets through advertising, multiple listing groups, or other means.

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 (Appraised Value)

The value of a property as determined by a licensed, professional appraiser, primarily based on the sales prices of comparable properties recently sold nearby.  Primary factors include heated square footage, area where the property is located, and condition of the property.  This is normally an attempt to calculate the mid point where 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, become the same amount.

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.

Farmers Home Administration (FmHA)

Financing provided to farmers and other qualified borrowers who are unable to acquire loans elsewhere.

FDIC

(Federal Deposit Insurance Corporation). Provides insurance of accounts for institutions whose deposits were formerly covered by the Federal Savings & Loan Insurance Corporation. (FSLIC).

Federal Home Loan Mortgage Corporation, Freddie Mac (FHLMC)

A private corporation authorized by Congress, which became an independent, stockholder-owned government corporation with the passage of FIRREA. FHLMC promotes the flow of funds into the housing markets by purchasing conventional mortgages in the secondary market and selling securities backed by those mortgages in the capital market.

Federal Housing Administration (FHA)

A division of the Department of Housing and Urban Development. The FHA's main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA neither lends money, nor plans, nor constructs housing.

Federal Housing Finance Board (FHFB)

It oversees the credit functions of the twelve regional Federal Home Loan Banks.

Federal National Mortgage Association (FNMA)

A government-sponsored corporation, owned solely by private investors, created to provide support to the secondary market for FHA and VA mortgages and conventional mortgages.

Fee Simple

Private ownership of real estate in which the owner has the right to control, use, and transfer the property at will.

Fee Simple Estate

An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA Loan

Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

FHLBB

(Federal Home Loan Bank Board)

FICO

FICO scores were developed by Fair Isaac & Company, Inc. for each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. These scores only consider the information in an individual's credit file, not income or savings.

Finance Charge

The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee, and any other charges paid to the lender and/or broker. Appraisal, credit report, and title search fees are not included in the finance charge calculation.

Financial Statement

A financial report that includes a balance sheet, income statement, and statement of cash flows.

Finder's Fee

A fee or commission paid to a Licensed Mortgage Broker for finding a mortgage loan for a prospective borrower.  usually expressed as pioints.

FIRREA

(Financial Institutions Reform, Recovery and Enforcement Act of 1989). An act signed into law in August 1989, by President Bush that restructured the thrift regulatory an insurance system.

First Mortgage

The mortgage that is the primary lien against a property and has first claim in the event of default.

Fixed Assets

Assets that will not be turned into cash within a year, such as manufacturing equipment, real estate, or furniture. Also called "long-term assets."

Fixed Installment

The monthly payment due on a mortgage loan.

Fixed Second Mortgage

A second mortgage on a property with a fixed rate of interest.  Has second claim in event of default.

Fixed-Rate Mortgage (FRM)

A mortgage in which the interest rate does not change during the entire term of the loan.

Fixture

Personal property that becomes real property when attached in a permanent manner to real estate.

Floating Rate Mortgage

See Adjustable Rate Mortgage (ARM)

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 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.

Foreclosure Bailout

These are loans designed to take the equity of your home or to refinance your home in order to pay off existing loan payment lates that have gone into default.

Forfeiture

The loss of money, property, rights, or privileges due to a breach of legal obligation.

Foundation

The concrete slab beneath the property that holds the property in place.

Front Ratio

The proportion of a purchaser's income that lenders will allow for principal, interest, taxes, and insurance on a property. Used in the evaluation of a loan application.

Full Disclosure

A requirement that sellers fully disclose all known defects in a property when selling it.  This is a requirement of law in Florida.

Full Recasting

Setting the principal and interest payments to the level that will fully amortize the loan's outstanding balance over the remaining term using the fully indexed accrual rate at the recasting point.

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 Indexed Accrual Rate

The interest (accrual) rate resulting from the index at closing (or at another point in the loan) plus the lender's full spread, rounded as prescribed in the loan documents (often to the nearest 1/8th of 1%).

Future Acquired Property

A loan agreement may state that the loan is a lien on all property presently owned or which the borrower may acquire in the future.

Future Interest

A current interest in the land, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.

Garnishment

A legal proceeding under which a person’s money in control of another, such as salary, is taken for payment of a debt. The amount taken is set by stature, and in most states, a judgment is necessary before garnishment.

General Membership

A partnership made up of general partners, without special (limited) partners.

General Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a 'cloud' on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Georgian Architecture

A colonial style of architecture dating back to the eighteenth century. Characterized by first floor windows extending to the ground, its exterior placements (windows, doors, etc.) are simple and well balanced, yet formal in appearance.

Gerrymander

To divide an area into districts, against the obvious natural divisions, in order to accomplish an unlawful purpose.

Gift Letter

A Gift Letter is a gift of funds given to the borrower in order for them to purchase a home. The letter must indicate that no repayment of the gift is expected. The amount of the gift and the date the funds were transferred should be indicated in the letter. The donor, with the proper identification, can be from relatives, friends, an employer, church, municipality, or non-profit organization. The letter must include the donor's name, address, telephone number, and relation to the borrower.

Gifts

Money received from a relative or close friend to assist in the purchase of a home.

Good Faith Deposit

A deposit made by a purchaser of property to show they are serious about the purchase.

Good Faith Estimate (GFE)

A document that tells borrowers an estimate of the settlement charges the mortgagor incurs at closing. Under the requirements of the Real Estate Settlement Procedures Act (RESPA), a borrower must receive a GFE within three business days after the loan application is received.

Government Loans FHA / VA

Government loans are loans that are guaranteed or purchased by government organizations. Two of the most popular Government Loans are the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

Government National Mortgage Association (GNMA)

A goverment-owned agency, also known as "Ginnie Mae," that provides sources of funds for residential mortgages. Guaranteed or insured by the Federal Housing Administration (FHA) or the Veterans Administration (VA).

Grace Period

A specified time (typically 15 days) after a mortgage payment is due, in which the lender will not charge a late penalty.

Graduated Payment Mortgage

(GPM) A mortgage where the payments are scheduled to increase, usually annually, for a set number of years, and then level off. GPM can be used with either a fixed or adjustable interest rate, and usually has a 30-year term.

Grantee

That party in the deed who is the buyer or recipient.

Grantor

The party in the deed who is the seller or giver.

Gross Income

Total personal income, before the deduction of taxes and expenses.

Growing Equity Mortgage

(GEM) A fixed rate, graduated payment mortgage with small initial payments that increase each year so that the loan pays off in a shortened term, usually 15 years.

Guarantee Mortgage

A mortgage that is guaranteed by a third party if the original party fails to pay.

Guaranty

To accept responsibility for an obligation if the original party fails to pay or perform according to a contract.

Hard Equity

High interest rate financing.

Hard Money Lender

A Lender that customarily funds loans by private money sources and investors but not banks. Interest rates and points can be higher.

Hard Money Lenders

Lenders that customarily fund loans by private money sources and investors but not banks. Interest rates and points can be higher.

Hard Money Loan

An equity based loan with high interest rates and with flexible guidelines.

Hazard Insurance

Insurance to protect the homeowner and the lender against physical damage to a property from fire, wind, vandalism, or other hazards.

Hedging

The sale or purchase of future mortgage contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.

Heir

The person who by law receives the estate of a deceased person.

Hereditaments

Anything that may be inherited or anything considered real property.

Hidden Defect

An encumbrance on a title that is not apparent in the public records.

Holdback

A portion of a loan commitment withheld until a specified event occurs, such as a rental or construction.

Home Equity Line of Credit (HELOC)

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 a pre-determined term, usually 5 years, with interest payments only. After this term, the loan becomes a fixed second and no more equity can be taken.

Homeowner's Insurance

An insurance policy that combines liability coverage and hazard insurance.

Homeowner's Warranty

A type of insurance that covers repairs to specified parts of a house for a specific period of time.

Homestead (Homestead Exemption)

The home and property of the head of the household. Some states, including Florida, allow statutory exemptions that protect homestead property against the rights of non-mortgage creditors, and allow certain property tax reductions and limits on homestead exempt property.

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.

Housing Starts

The number of homes that construction has began on. These figures are used to determine the availability of housing, need for mortgage loans, and labor and materials, etc.

HUD

(Department of Housing and Urban Development). A cabinet department responsible for the implementation and administration of government housing and urban development programs.

Hybrid Investment

An investment that is a combination of both debt and equity.

Hypothecate

Having pledged or mortgaged a security without delivery to the lender.

Impound (Escrow Payments)

The portion of a borrower's monthly payment that is held by the lender in order to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other additional items.

Improvements

Any permanent improvements to a structure such as buildings, streets, utilities, etc.

Inchoate Instrument

An unrecorded instrument, such as a deed, which is valid only between the parties involved but not as it would be after recording.

Income Approach

A method of appraising a property that is based on the property’s anticipated future income. The net income is established and then divided by the estimated capitalization rate to arrive at a fair market value.

Income Property

Real estate developed or improved to produce income.

Index

(Also called 'Rate Index'). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.  This can also be one of many indices used to calculate the rate on ARMs.

Inflation

An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worthless.

Ingress and Egress

Easements that give the right to go in and out of a section of property, but not the right to park on it.

Inheritance Tax

A tax on the transfer of property from a deceased person, based on the right to acquire the property rather than the property itself.

Initial Borrower Interest Rate

The rate on which the borrower's first payment is calculated.

Initial Borrower Payment Rate

The annual interest rate used to calculate the borrower's initial cash payment.

Initial Interest Rate

The original interest rate of the mortgage at the time of closing.

Insolvency

When a debtor is unable to meet his/her debt obligations.

Installment

A borrower's periodic payment to a mortgage lender.

Insurable Title

A property title that a title insurance company agrees to insure against defects and disputes.

Insured Mortgage

A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred, or the insured amount.

Interest Accrual Rate

The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest Only Loans

These are short term loans whose only payment is on the interest, not on the principle loan amount.

Interest Rate

The percentage of an amount of money, which is paid for its use for a specified time.