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| Glossary |
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A
| actual cash value (ACV) |
Insurance that reimburses you for the replacement value of the insured items minus depreciation. | 
| addendum |
An attachment to a contract to add or remove specified terms or conditions.
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| adjustable rate |
A loan feature where the payment can change in each adjustment period because the interest rate (note rate) fluctuates. The interest rate is based on a formula using a current economic index and the lender’s profit margin.
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| adjustable rate mortgage loan (ARM) |
A mortgage in which the interest rate changes periodically according to a predetermined index.
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| American Association of Home Inspectors (ASHI) |
An association of home inspectors whose voluntary members subscribe to a code of standards.
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| American Land Title Association |
An association of over 2,000 land title companies; provides uniform title insurance documents.
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| amortization |
The gradual repayment of a mortgage by installments, calculated to pay off the obligation at the end of the fixed period.
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| amortization schedule |
A list of each payment due on a mortgage loan, that shows the amount applied to the principal, the amount applied to interest, and the remaining principal balance.
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| amortized loan |
A loan with equal payments over a period of time applied first to interest, and then to principal to reduce the principal balance to zero.
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| annual percentage rate (APR) |
The total cost of a mortgage stated as a yearly rate; includes such items as a base rate, loan origination fee (points), commitment fees, prepaid interest and other credit costs which may be paid by the borrower.
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| appraisal |
The report made by a qualified person, in which he or she gives an opinion as to the market value of a property.
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| appraisal contingency |
A contingency stating that the property must appraise at the same value or more as your offering price.
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| appraisal fee |
The fee charged by an appraiser to make an evaluation of the value of property.
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| appraiser |
A person qualified by education, training, and experience to estimate the value of real property.
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| appreciation |
An increase in the value of real estate (property).
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| assets |
Savings, investments, retirement funds, cars and other valuables that are “liquid” or easily convertible to cash.
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| assumable mortgage |
A mortgage that can be taken over (“assumed”) by the buyer when a home is sold.
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| assumption fee |
The fee charged by a lender to allow someone to assume another person’s mortgage loan under the same terms and conditions.
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| assumption of loan |
A method of transferring a house to a new buyer who agrees to take responsibility for (assume) the existing mortgage.
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| auctioneer |
A real estate professional who conducts auctions for the sale of property, either for a lender or for an individual.
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automated teller machine
(ATM) |
A machine where you can deposit, withdraw, or transfer money from one account to another 24 hours a day. Use of an ATM requires a card issued by the bank and a personal identification number (PIN).
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B
| back-end ratio |
A ratio that indicates what portion of a person's monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card payments, child support and other loan payments. |
| balance |
The amount of money you have in your bank account. Also, the amount owed on a credit account.
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| balloon loan |
The final lump sum payment that is made at the end of the shorter term for a balloon loan and pays the loan in full.
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| balloon payment |
A large payment due at the end of a loan term, often after a series of low monthly payments. A balloon mortgage generally offers very low rates for an initial period of time (usually 5, 7, or 10 years). After the period ends the entire balance is due.
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| bank |
A business that offers you a place to keep your money and uses it to make more money. Banks offer a variety of services including checking and savings accounts, credit and loans.
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| bankruptcy |
A proceeding in a federal court in which a debtor who is financially unable to pay debts when due seeks relief to work out a payment schedule or erase debts.
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| bounced check |
A check that a bank will not cash because it was written for more money than was in the account.
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| broker |
A broker licensed by the state to assist in the sale, purchase or rental of real estate.
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| broker fees |
Fees charged by a real estate broker for providing assistance in a real estate transaction.
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| builder agent |
A real estate agent who represents the interests of a builder under terms of an employment contract.
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| buyer agent |
A real estate agent who represents the interests of the buyer and has fiduciary and/or statutory duties to the buyer.
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C
| C.L.U.E. ® report (Comprehensive Loss Underwriting Exchange) |
The C.L.U.E.® report is a report used by insurance companies that shows a history of claims made on a particular property. |
| capacity |
A person's present income and anticipated future earnings. Lenders consider this when determining if a borrower will be able to make payments on a loan.
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| capital |
The amount of cash and other liquid assets a person has.
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| caps |
Provisions of an adjustable rate mortgage that limit how much the interest rate can change at each adjustment period or over the life of the loan. A payment cap limits how much the payment due on the loan can increase or decrease.
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| carbon monoxide detector |
A detector that provides a warning when carbon monoxide (a colorless, odorless gas) builds to a level that could be dangerous.
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| certificate of deposit (CD) |
An account where you leave your money for a set period of time, such as six months, one, two, or five years, called a term. You usually earn a higher rate of interest on a CD than in a regular savings account.
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| certificate of occupancy |
A document issued by a local jurisdiction certifying that all building codes have been met and properly inspected.
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| Chapter 7 bankruptcy |
A legal procedure that wipes out all allowable debts. It creates a bankruptcy estate out of the debtor’s property, which may then be sold to pay off the debts.
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| Chapter 11 bankruptcy |
Bankruptcy that provides companies with protection from their creditors while the business is downsized or otherwise restructured.
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| Chapter 13 bankruptcy |
A court-approved repayment plan. Debtors repay their debts over three to five years and must submit a plan to the court detailing how they propose to pay off the debts.
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| check cashing outlets |
Businesses that provide check cashing services for personal, payroll, and government checks for a fee.
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| checking account |
An account that lets you write checks to pay bills or to buy goods. The financial institution takes the money from your account and pays it to the person named on the check.
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| circuit breaker |
A device that automatically stops the electrical flow if the circuit becomes overloaded.
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| closing |
A meeting at which a sale of a property is finalized by delivery of a deed from seller to buyer and the buyer signing the mortgage documents and paying closing costs. Also called “settlement.”
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| closing costs |
Various expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property.
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| cloud on the title |
An outstanding claim or lien, revealed by a title search, that adversely affects the owner's title to real estate. Usually, clouds on the title cannot be removed except by a quitclaim deed, release, or court action.
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| COFI |
Cost Of Funds Index. One of the economic indicators used as an index for adjustable rate mortgages.
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| collateral |
An asset (such as a car or a home) that is pledged as security for 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 or promissory note.
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| collection |
The status of an account owed to a lender when it has been transferred to a Collection Department either of the lender’s company or an outside professional debt collecting company.
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| community seconds loan |
An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or non-profit organization.
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| compound interest |
Interest paid on the principal balance and on the accrued and unpaid interest.
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| condominium |
An apartment building or multiple-unit housing area in which the living units are owned individually.
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| condominium association insurance |
A master policy covering the building and common areas of a condominium complex. Owners pay a percentage of this policy in their monthly association dues.
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| conforming loan |
A home loan with a maximum loan amount that is eligible for purchase by FNMA and FHLMC. Maximum amount is determined every year.
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| contingency |
A condition that must be met before a contract is legally binding.
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| contingency addendum |
A clause added to an offer contract stating a condition that must be met before a contract is legally binding.
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| contract |
An oral or written agreement to do or not do something.
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| contractor |
In the construction industry, a contractor erects, repairs, or rehabilitates buildings or portions of them.
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| conventional loan |
A mortgage that is not guaranteed, insured, or made by the federal government.
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| convey |
When an item becomes a part of the transfer of property: for example, a refrigerator may “convey” with the sale of the property.
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| counteroffer |
A new offer made by either a buyer or seller in response to an initial offer that has been rejected.
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| cracking |
A form of identity theft where a computer system is broken into from a remote location. Once a system is compromised, files and personal information are available to the person who cracked the system.
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| credit |
An agreement in which a borrower receives money or something of value in exchange for a promise to repay the lender on specified terms at a later time.
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| credit life insurance |
A life insurance policy that pays off the mortgage if the borrower dies.
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| credit monitoring service |
A service that offers the benefit of early detection of unauthorized activity in order to limit the amount of financial damage that a person may suffer at the hands of an identity thief.
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| creditor |
A person to whom money is owed.
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| credit rating |
An expression of creditworthiness based upon present financial condition and past credit history.
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| credit repair agency/company |
A company that provides services for a fee to repair your credit. These companies cannot do anything for you that you cannot do for yourself for free.
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| credit report |
A report of an individual’s credit history prepared by a credit bureau or consumer reporting agency and used by a lender in determining a loan applicant’s credit risk.
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| credit-reporting agency |
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.
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| credit risk |
The likelihood that a borrower will pay their obligations as agreed. Borrowers who pay as agreed pose less credit risk to lenders.
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| credit score |
A statistical method used to predict the relative likelihood that a person will repay a credit obligation, such as a mortgage loan.
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| credit union |
A non-profit financial institution that is owned and controlled by members who are also shareholders. Insured up to $100,000 by the federal government, they offer the same types of services as banks and savings and loans.
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D
| DD 214 Certificate of Eligibility |
A certificate issued by the Dept. of Veterans Affairs to establish the amount the government will guarantee for a VA mortgage loan. |
| debt consolidation |
Incorporating several debts into one loan, usually repayable at a lower interest rate.
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| debt to income ratio |
A ratio that compares monthly debt expenses to monthly income. Lenders often have debt and income ratio guidelines they follow when considering a consumer’s request for credit.
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| deed |
The legal document conveying title to a property.
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| deed of trust |
The document used in some states instead of a mortgage, which gives the lender a security interest in the property.
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| deed-in-lieu of foreclosure |
When a borrower voluntarily gives the deed to the property to the lender. This is done to satisfy a debt and avoid foreclosure. |
| default |
The failure to make a loan payment on a timely basis or to otherwise comply with other requirements of a mortgage.
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| depreciation |
A decline in the value of property; the opposite of “appreciation.”
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| designated agent |
An agent designated by the broker to represent either a buyer or a seller.
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| direct deposit |
The automatic deposit of wages or benefits directly from your employer or another organization into your bank account.
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| disability insurance |
Insurance that protects you and your family if you are unable to work because of illness or injury. Most disability policies replace a percentage of your pretax salary, with a limit on the amount you can receive each month.
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| discount point |
A single charge imposed by the lender to adjust the interest rate of the loan to the required yield. Discount Points are used to "buy" your interest rate lower, also known as a rate "buydown." These points lower the interest rate for the entire term of the loan.
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| down payment |
The part of the purchase price that the buyer pays in cash and does not finance with a mortgage.
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| dual agent |
A real estate professional who represents both the buyer and seller in the same transaction.
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| dumpster diving |
A form of identity theft where thieves comb through your trash — or the trash of merchants, ATMs, or financial institutions — to collect account numbers, credit card numbers, Social Security numbers or other personal information that they use to take over your account.
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