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Mortgage Knowledge Base
 Mortgage Glossary
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Mortgage Glossary
Acceleration Clause
Acceleration clause is an arrangement in the mortgage document, stating that in case the borrower fails to make mortgage payments or violates any...
Alienation Clause
Alienation Clause is an arrangement in a mortgage document stating that the loan must be paid in full in the case ownership transfer.
Annual Percentage Rate
Annual Percentage Rate is a rate, which is expressed as a yearly percentage rate and is a measure of the total cost of credit i.e. interest as well...
Appraisal Report
Appraisal Report is a report about the evaluation of the property at the given time, which is based on the facts regarding neighborhood, location,...
Appraised Value
Appraised value is an appraiser's opinion about the fair market value of any item, business or the property, which he/she can give by inspecting...
Arrears
An Arrear refers to that payment which is made after its due date. It is a state of being behind in payments.
Facts about Arrears:
This term is...
As If Clause
As If clause is a clause that is sometimes used in the property transfer. It states that the transfer of present property is taking place without...
Assumption
Assumption refers to acquiring title on property on which a mortgage already exists and agreeing to be personally responsible for the terms and...
B/C Loans
This is a type of non-conforming loan. It does not conform to the requirements of Fannie Mae and Freddie Mac. There are different kinds of...
Blended Payment
Blended Payment refers to a mortgage payment, which consists of both the interest and principal repayment. It is a loan repayment scheme, where...
Buy Down
Buy down is a process of buying down the interest rate by paying additional points to the lender. The plus point of buy down is that it results in...
Certificate Of Reasonable Value
Veterans Administration makes an appraisal of the property for the purpose of insurance, and issues certificate, which is known as certificate of...
Closing Cost
Closing cost is a fees paid by the borrower to effect the closing of a mortgage loan.
For Example, attorney fees, survey, insurance escrow...
Cloud on Title
Cloud on title is a claim on property title, which impairs the person's ability to transfer property. It can be removed, if the court makes an...
Cost of Capital
Cost of Capital is an interest rate which the Federal Reserve Bank, charges for loans to member banks. It is also known as discount rate or cost...
Credit Challenged /Sub Prime loan
This is particularly for those who have no-credit or blemished credit history. The risk factor is great and so the interest rates are high. It...
Credit Rating
Credit Rating is a grade given to individuals, reflecting their current and past debt repayments patterns. The three letter grades given under...
Credit Underwriting
Credit underwriting is a process of evaluating borrower's credit. Here, an underwriter studies the applicant credit, to determine the likelihood...
Deed
Deed as a security device plays a very important role in real estate purchase. It is an instrument that transfers ownership. Deed serves an...
Demand Clause
Demand Clause is a provision in a mortgage document empowering the lenders to demand payments of the total outstanding balance for any reasons....
Deposit
Deposit is a part of the down payment paid either to seller or an escrow agent by the real estate buyer. Buyer gives money to the seller as an...
Differential Interest Rate
Differential interest rate is a compensation, which a lender charges on the borrower if he/she pays off the mortgage principal before the maturity...
Direct Endorsement
When FHA grants authority to the lender, empowering him/her to complete the processing and closing of an FHA loan without prior approval from it,...
Disbursement
Disbursement is a transfer of loan funds by a lender to a borrower in whole or part. They are generally made in equal multiple installments. Loan...
Disclosure
Disclosure is a release of mortgage information about finance charges, terms of the loan and annual percentage rate from the creditors to the debtors.
Discount point
Discount point is a unit of measurement for various loan charges. It is an amount paid by the borrower to the lender in exchange for lower rate of...
Discount Rate
Discount rate is a rate of interest charged by Federal Reserve Bank, for loans to member banks. It is also known as cost of capital or cost of...
Down Payment
Down payment is the percentage presentation of the difference between purchase price of the property and the mortgage amount.
Significant...
Dragnet Clause
Dragnet clause is a clause specified in a mortgage or deed of trust, which places the real estate as security for existing debts between the...
Equity
Equity is the difference between the current market value of a property and the remaining mortgage or loan payments against the property. It is...
Escrow
An Escrow is a transaction, which simply means trust. It is a deposit of funds, a deed, or other instruments, to the impartial third party, to be...
FHA Loan
The Federal Housing Administration [FHA] Loan is a government program for loans which have rates as low as 3% as compared to other high interest...
Fixed Rate Of Interest
Fixed rate of interest is the rate of interest, which does not change during the loan term. Here, the outstanding principal remains constant...
Foreclosure
Foreclosure is a legal process, in which a borrower is deprived of his/her interest in mortgaged property when he defaults on paying mortgage...
Good Faith Estimate
According to federal real estate settlement procedures, every mortgage lender has to provide to the mortgage buyer an estimate of fees, which...
Grace Period
Grace period is a time period generally of 20 or 25 days, which is allowed for making penalty free loan payments after their due date.
Index
For calculation of interest rate of an adjustable rate mortgage, a number is used. This number is known as index. The Index when combined with the...
Insurance
Insurance is a contract for protection against future loss. It is a mechanism for shifting a risk from a person, business, or organization to an...
Interest Rate Ceiling
In the mortgage loan agreement, it is specified that a lender can charge from a borrower, certain absolute maximum interest rate for an absolute...
Jumbo loans
This is a kind of non-conforming loan. Here the loan amount exceeds that of
the limit set for purchases and security reasons by Fannie Mae...
Liquid Assets
Those possessions which can be quickly and easily converted into cash are called as Liquid Assets.Such as- certificate of deposits, savings...
Lock
Lock is a written guarantee, given by a mortgage lender to the borrower at the time of mortgage offer, preventing the lender from raising the...
Margin
Margin is an amount the lender adds to the quoted index rate, to determine the interest rate on an adjustable rate mortgage.
Market Value
Market value is the most likely price a given property will fetch, if broadly displayed in the market. It varies according to the type and...
Mortgage Insurance
Mortgage Insurance also known by the names MI or PMI (for private mortgage insurance) is an insurance provided by a private company that protects...
Mortgage Note
Mortgage Note is a note in the form of a document stating details of a mortgage deal. It outlines the amount of debt, the terms and payments of...
Mortgage Term
Mortgage term is a difference between start and maturity date of the mortgage. It ranges from six months to twenty five years. A borrower is...
Negative Amortization
Negative Amortization is a situation in which the borrowers monthly payment is not sufficient enough to cover both the principal and interest of...
Net Assets
Net Assets refers to sum total of all the assets owned by the company or an individual minus all liabilities. It is a signifier of credit...
No Documentation loans
This type of loans involves least amount of paperwork and does away with detailed
income and asset verification. It is for those who wouldn't...
Non Liquid Assets
Those possessions which cannot be easily transformed into cash are called as Non liquid assets. Such as- bonds, real estate, etc
Notary fees
Notary public charges a fee for certifying the signatures on the loan documents. This fee is known as Notary fees.
More References
Periodic Interest Rate Cap
Periodic Interest Rate Cap is a limit on the highest and the lowest amount, by which an interest rate can vary during a specific time period.
Pre-approval of Mortgage
Pre-Approval is the initial assessment of a borrower's creditworthiness ascertained by the lender. Before looking for houses to purchase, one...
Promissory Note
Promissory note is a written promise of loan repayment to a specified person, within the specified time period. It is of a great value, as it is in...
Property Taxes
Property taxes are the taxes which are levied on the assessed value of the property. These taxes are paid by the homeowners for community...
Purchase Agreement
Purchase agreement is a written document stating the sale price and other terms and conditions required for the sale of property. It is signed by...
Rate Lock
Rate Lock is a commitment made by a lender to the borrower, in which he/she promises a specific interest rate on a loan, provided the loan is...
Real Estate
Real Estate refers to land and anything permanently affixed to the land, such as buildings and those things attached to the building. It is also...
Risk Based Capital
Risk Based Capital is a standard of the capital, adopted by saving institutions in 1989. It includes the measurement of four important risk...
Second Ratio
Second ratio is a percentage expression of borrowers total debt to gross monthly income. It is also known as debt to income ratio, back ratio and...
Settlement Cost
Settlement Costs are the fees which are due at the closing, within three days of applying for the loan. These cover every expense, related to the...
Start Rate
Start Rate refers to the original, starting interest rate of a mortgage at the time of closing. This rate changes for an adjustable rate mortgage...
State and Local Housing Loan
This program is provided by some states, counties and localities. The aim of this assistance program is to help citizens buy a home. This is...
Takeout Financing
Takeout financing is a financing technique, which involves a commitment to provide permanent financing, upon the completion of construction.
Tax Base
Tax Base is a total value of all the taxable items such as- property, income, assets, etc.
Title
Title is legal and written evidence recorded in a deed, which gives evidence of person's lawful ownership right to possess, use and transfer the...
Title Contract
Title contract is a written contract involving both the mortgage buyer and the seller, setting forth the terms and condition required, for the...
Title Insurance
Title insurance is an insurance, which offers protection to the lender or the buyer, against losses caused by the disputes over the ownership of...
Variable Rate Of Interest
Variable rate of interest is the interest rate applied on the outstanding principal, which fluctuates as there are fluctuations in the Banks of...
Waiver
Waiver is a voluntary or intentional surrendering of the claim or title.
Facts about waiver
It is a clearly written and expressed document that...
Walk Through
Walk Through is the final inspection of the property by the buyer, prior to the closing. It is done to find out the documentation problems for...
Warehousing
Warehousing is a process of assembling mortgage, in order to sell it to the secondary mortgage market. It includes mortgage portfolios. Examples of...
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