An amount owed to another. See installment loan and revolving liability.
The legal document conveying title to a property.
The deed is the document that transfers ownership from the seller to you. Only the seller signs the deed at closing, and you’ll receive a copy of it.
The closing agent will record the deed with you listed as the new property owner. Your name and the names of any other buyers appear on the deed, and it will be sent to you after it is recorded.
The document used in some states instead of a mortgage; title is conveyed to a trustee.
In some states, a “deed of trust” is used instead of a mortgage. When homeowners sign a deed of trust, they receive title to the property but convey title to a neutral third party - called a trustee - until the loan balance is paid in full.
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Failure to make mortgage payments when mortgage payments are due.
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.
The Veterans Administration is a federal government agency authorized to guarantee loans made to eligible veterans under certain conditions. To obtain more information, you can contact the U.S. Department of Veterans Affairs.
The qualification guidelines for VA loans are more flexible than those for either the Federal Housing Administration (FHA) or conventional loans.
If you are a qualified veteran, this can be an attractive mortgage program. To determine whether you are eligible, check with your nearest VA regional office.
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.
See earnest money deposit.
A decline in the value of property; the opposite of appreciation.
The most traditional type of single-family home is one that is “detached.” This type of home stands separate from any other housing structure and serves as a place of residence for the occupants.
The Direct Leveraging Loan Program makes it easier and more economical for rural residents to own a home through lower interest rates and no down payment.
Under this program, the lender offers up to 50 percent of the mortgage amount as a conventional 30-year, fixed-rate first mortgage and the Rural Housing Service (RHS) offers the balance as a second mortgage at an interest rate that is generally below market.
The RHS is part of the U.S. Department of Agriculture.
Discount points are often used to describe a type of fee that lenders charge. Discount points are additional funds you pay the lender at closing to get a lower interest rate on your mortgage.
A point equals 1 percent of the loan amount. So, if you and your lender agree to a mortgage of $100,000, one point would equal $1,000.
Typically, each point you pay for a 30-year loan lowers your interest rate by .125 of a percentage point. If the current interest rate on a 30-year mortgage is 7.75 percent, paying one point would lower the interest rate to 7.625.
Ask your lender if you have the option of paying 1, 2, or 3 discount points - or you can choose not to pay any discount points. It often makes more sense to pay discount points if you plan to stay in your home for a long time.
The rights of a widow in the property of her husband at his death.
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Saving for a down payment is usually one of the most difficult parts of preparing to buy a home. If you believe you have the needed funds, you are in a better position to seek pre-qualification from a lender to get the mortgage that is right for you.
Most homeowners rely on a mortgage from a financial institution, and most mortgage products require buyers to include a portion of their own funds towards the purchase of the home. This is called the down payment. Lenders feel more secure when buyers include a down payment, indicating they are less likely to walk away from their investment if their finances take a downturn.
Historically, buyers usually made a down payment that totaled 20 percent of the home’s purchase price. Under this scenario, a down payment for a $100,000 home is $20,000. But today, new mortgage products allow buyers to put down as little as 3 percent to 5 percent, provided private mortgage insurance is obtained. The down payment for a $100,000 home with 5 percent down payment is just $5,000.
Sources for down payments may come from buyers’ savings accounts, checking accounts, stocks and bonds, life insurance policies, and gifts.
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.
This terminology is usually used for second mortgages.
*See also “due-on-sale provision”.
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
The earnest money deposit is a “good-faith” payment you submit with your offer on a home to show the seller you are serious about proceeding.
The earnest money is deposited in an escrow account and will be applied to your closing costs.
Sometimes, your lender will want you to bring a receipt for the earnest money deposit along with your sales contract to the initial loan application meeting.
A right of way giving persons other than the owner access to or over a property.
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.
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.
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
An improvement that intrudes illegally on another’s property.
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
A person who signs ownership interest over to another party. Contrast with co-maker.
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.
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.
A lender determines how much equity you have in your home by taking the appraised value of the home and subtracting any mortgage debt.
For example, if your house is valued at $150,000 and your mortgage balance is $80,000, you have $70,000 equity in the house.
Your credit report may contain inaccuracies. The best way to ensure there are no errors in your credit report is to request copies and review the information.
Since each of the main credit bureaus keeps its own records, you may want to request copies from all three: Trans Union, Equifax, and Experian.
If you have been turned down for credit because of the information in your credit report, you are entitled to receive a free copy of your report within 60 days of the denial. If you haven’t been denied credit, you can still request a copy of your credit report, usually for a nominal fee.
If you find errors in your report, follow the directions in the credit report and contact the agencies to have the errors corrected. They will investigate the targeted items and remove incorrect information.
You don’t have to delay applying for a mortgage while errors in your report are being corrected. Explain the discrepancies in the report to your lender and state that the credit agency is correcting them.
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.
The account in which a mortgage servicer holds the borrower’s escrow payments prior to paying property expenses.
An escrow account is money that is deposited with a third party - outside the buyer and the seller - to be used to pay various fees. A borrower typically provides funds that will pay taxes, mortgage insurance, lease payments, hazard insurance premiums, and other payments when they are due.
An escrow payment by the holder of a mortgage is also known as “impounds” or “reserves” in some states.
When escrow funds are used to pay taxes, hazard insurance, and other fees, it is called an escrow disbursement. Periodically, an escrow analysis will be performed to determine if current monthly deposits provide sufficient funds to pay bills when they are due.
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.
Funds collected by the servicer and set aside in an escrow account to pay the borrower’s property taxes, mortgage insurance, and hazard insurance.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
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.
It is possible to establish a credit history even if you do not have a traditional credit record that shows credit card payments or payments on a student or car loan.
You can build a nontraditional credit history, for example, by documenting your monthly payments to previous and current landlords; to utility companies for your gas, water and telephone services; and to insurance companies for medical, life, and automobile coverage.
Your lender can provide further details on how you can effectively establish a credit record.
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.
The lawful expulsion of an occupant from real property.
The report on the title of a property from the public records or an abstract of the title.
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner’s right to sell the property alone without the payment of a commission.
A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. “Executrix” is the feminine form.
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.
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.
A New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages.
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.
The greatest possible interest a person can have in real estate.
Fee simple ownership provides the owner with unrestricted powers to dispose of the owned property as the owner sees fit. Of all types of ownership a person can have in real estate, fee simple provides the greatest amount of personal control.
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.
A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor’s default.
With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower.
FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a conventional mortgage through a lender.
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
With FHA insurance, you can purchase a home with a low down payment from 3 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower.
FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. In general, the loan limit is less than what is available with a mortgage through a lender.
Your sales contract should include a clause that allows you to examine the property you want to purchase within the 24 hours before closing.
This walk-through, during which you will be accompanied by the real estate sales professional, is your chance to ensure that the seller has vacated the house and left behind whatever property was agreed upon.
Make sure to check that all lights, appliances, and plumbing fixtures are in working order.
You will also want to make sure that all conditions of the sales contract have been met. If they aren’t, or you observe major problems, you have the right to delay the closing until the problems are corrected.
One other option is to make sure money to correct the problems is placed in an escrow account at closing to cover the cost of repairs.
An index is a number to which the interest rate on an adjustable rate mortgage (ARM) is tied. It is generally a published number expressed as a percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on ARMs. This interest rate is subject to any caps associated with the mortgage.
The interest rate changes on an ARM are tied to some type of financial index. Some of the most common type of indexed ARMs are:
When comparing ARMs, look at how the index to which it is tied has performed recently. Your lender can provide information on how to track the index and a history of the index they use.
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
A lender’s agreement to make a loan to a specific borrower on a specific property.
A mortgage that is the primary lien against a property.
A “first mortgage” is the primary lien against a property. The term is usually coined “first mortgage” only when a “second mortgage” is obtained on a property. A “second mortgage” is a lien that is subordinate to the first mortgage. Usually, the interest rates on second mortgages are slightly higher than the interest rates on a first mortgage. The amount of a second mortgage you can take out will depend on the equity you have built up in your home, the appraised value of your property, your credit history, and any other liens you may have against your property, such as a home equity line of credit.
Borrowers will typically get a second mortgage to tap into the equity they’ve built in their home - and use that for home improvements, debt consolidation, medical bills, or other purposes. You apply for a second mortgage with the same process you follow for a first mortgage. However, some of your closing costs may be less.
When you have a first and second mortgage, you theoretically have two loans, both requiring interest and principal payments.
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
This type of adjustable-rate mortgage (ARM) maintains the same initial interest rate for the first three, five, seven, or 10 years of your loan, depending on the term you choose. Your interest rate then adjusts annually, and can move up or down as market conditions change. Be sure to ask your lender about the interest rate caps for both the annual adjustments and for the life of the loan.
A mortgage in which the interest rate does not change during the entire term of the loan.
Fixed-rate mortgages, the most popular type of mortgage, offer the peace of mind that your interest rate will remain the same for as long as you have your loan. If you expect to live in your home for many years, having the same interest rate may be your key concern. If you decide that you like the stable, predictable payments of a fixed-rate loan, you have the option of choosing from a variety of repayment terms: 15, 20, and 30 years are the most common. Typically, the longer the term of the mortgage, the more interest you pay over the life of your loan. However, stretching out your repayment term means your monthly mortgage payments will be less than they would be with a comparable shorter-term mortgage. Lenders offer a wide array of fixed-rate mortgages:
Personal property that becomes real property when attached in a permanent manner to real estate.
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
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.
If you repeatedly do not make your mortgage payments on time, your lender could sell your home and evict you from it in a legal procedure called foreclosure. A foreclosure on your property can result in the loss of your home and your good credit rating. Foreclosure is most often a last resort effort that lenders will take if you repeatedly don’t make your mortgage payments. Before going to foreclosure, lenders will work with you if you are facing financial hardships to come up with repayment plans that will let you get back on track and remain in your home.
The loss of money, property, rights, or privileges due to a breach of legal obligation.
For Sale By Owner, or FSBO, is the process of marketing, buying and selling of real estate without the representation of a real estate broker. FSBO can refer to both the individual selling the property “They are a FSBO,” or the property itself “that house is a FSBO.”
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.