vLoan Dictionary

203K Loans

203(k) mortgages offer to eligible borrowers is substantial financing for properties that need to be rehabilitated for the purpose of becoming the primary residence of homeowners and their families.

1031 Exchange

a tax-deferred exchange of real estate employed to offset or even avoid capital gains tax.

Adjustable-Rate Mortgage (ARM)

a mortgage with a variable interest rate, which adjusts monthly, biannually, or annually. Option-arms and hybrid mortgages are also considered adjustable-rate mortgages.

Alt-A Mortgage

a home loan that isn’t prime or subprime, but somewhere in the middle.

Alimony

a husband's or wife's court-ordered provision for a spouse after separation or divorce.

Amortization

the way a loan is paid off over time in installments, detailing how much goes toward interest, and how much is paid toward principal.

Annual Percentage Rate (APR)

the actual interest rate you pay on your mortgage, which factors in fees, points, and other costs associated with the loan.

Annual Percentage Yield (APY)

the annual interest rate taking into account the frequency and cost of compounding interest.

Appraisal

a comprehensive report that determines the value of your property based on a number of valuation factors.

Asset

a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

Assumption

the act of assuming responsibility for the payment of a mortgage lien.

Balloon Mortgage

a short-term mortgage with small monthly installments and a large lump sum due at the end of the loan term. An example would be a 30 due in 15, which amortizes like a 30 year fixed, but is due 15 years earlier.

Biweekly Mortgage

a mortgage where 26 half payments, or 13 full payments, are made annually.

Bridge Loan

a short term loan taken out against one property to finance the purchase of a new property.

Buy-Down

the act of securing a lower than par interest rate by paying the bank a lender a premium.

Caps

initial, periodic, and lifetime payment caps which limit how much and how frequently an interest rate can change on an adjustable-rate mortgage.

Cash-In Refinance

a refinance transaction where borrowers bring money to the closing table to lower their mortgage balance.

Cash-out Refinance

A mortgage refinancing transaction in which the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to extract equity from the borrower's home.

Certificate of Reasonable Value (CRV)

an appraisal issued by the Veterans Administration to determine the value of a property. The loan amount may not exceed the CRV on a VA loan.

Closing

the final step in the loan process when loan documents are signed at an escrow or title company.

Closing Costs

the amount of money that must be paid to close your loan, including lender fees and third-party charges, along with taxes and transfer fees.

Conforming Loan

a loan that meets Fannie Mae and Freddie Mac guidelines, which also falls under a certain loan amount.

Construction Loan

a short-term loan given to a builder during intervals of the building process which is due upon completion of the project.

Conventional Mortgage

any mortgage loan that is not insured or guaranteed by the federal government.

Credit Report/Check

a tool used by the bank or lender to review your credit profile and your ability to carry and repay debt.

Credit Score

a number assigned to a person that indicates to lenders their capacity to repay a loan.

Debt-to-Income Ratio

the ratio of monthly liabilities and housing expenses divided by the monthly gross income of the borrower.

Deed-in-Lieu of Foreclosure

a method of avoiding foreclosure by deeding your property to the lender.

Deed of Trust

a security instrument between the borrower and the lender, recorded in public records as a lien on the subject property. It differs from a mortgage in that the bank can foreclose on the property without judicial proceedings.

Deferred Interest

the amount of interest added to the principal loan balance when a borrower pays less than the interest-only note rate (see: option arms).

Delinquency

the failure to make a monthly mortgage payment on time, which can eventually lead to a notice of default, and later a foreclosure.

Discount Rate

the interest rate the Federal Reserve offers to member banks and thrifts.

Down Payment

an upfront payment made by the home buyer toward the property purchase price, usually ranging from five to 20 percent. The remainder of the sales prices makes up the mortgage loan amount.

Due At Signing

Cash you are required to pay to complete the leasing transaction.

Earnest Money

a deposit paid to the seller by the buyer as a pledge to complete a real estate transaction. If the seller accepts the offer, the deposit is held in escrow and applied to closing costs when the deal is closed.

Equal Credit Opportunity Act (ECOA)

a federal law that prevents lenders from discriminating applicants based on race, religion, national origin, sex, age, marital status or involvement in public assistance programs

Escrow

a third party intermediary who holds and allocates funds, including taxes and insurance in a mortgage transaction.

Estimated Property Value

The property value is often referred to as the fair market value. Fair market value is the estimated price a buyer and seller could agree on if both were interested in making a deal.

Federal Funds Rate

the interest rate banks charge one another for overnight use of excess reserves.

Flood Certification

flood certification is a document that states the flood zone status of real property. FEMA flood maps are examined using the address or geographic coordinates of the property. Using the location on the map, the flood certification provider certifies what, if any, flood zone in which the property is located.

FHA Loan

a program originated during The Great Depression that allows lower income borrowers to qualify for mortgages as long as they fit certain criteria set forth by the Federal Housing Administration who insures them.

First-Time Homebuyer

typically defined as someone who has not owned another property at any time during the three years prior to the date of the purchase.

Fixed-Rate Mortgage

a mortgage with a constant interest rate that will not adjust at any point during the life of the loan.

Foreclosure

the legal process by which a bank or lender sells a property after a borrower fails to meet the repayment terms of the loan.

Good Faith Estimate

a disclosure which details your loan summary and an estimate of the charges you’ll incur upon settlement.

Graduated Payment Mortgage

a negative amortization mortgage with flexible payment options that gradually increase over time until leveling off. Intended for young couples who are unable to make the full mortgage payment, but whose income will increase over time.

Hard Money Loan

a mortgage of last resort for borrowers who can’t obtain financing in the standard market due to poor credit.

HARP Loan

a refinance loan offered to those with negative equity.

Hazard Insurance

insurance which protects a property owner from damages caused by fire or severe weather.

Home Equity

the value of a property less any and all existing liens. If a borrower owns a property worth $500,000 and has liens of $400,000, equity is $100,000.

Home Equity Line of Credit

a line of credit that uses the value of a property as collateral.

Homeowners Association

an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties in its jurisdiction.

Homeowners Insurance

A form of property insurance designed to protect an individual's home against damages to the house itself, or to possessions in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property.

Impound Account

an account established by the issuing bank/lender or loan servicer to collect monthly and automatically pay a borrower’s property taxes and insurance costs when payments are due.

Interest Only

paying just the interest portion of the mortgage payment each month.

Jumbo Loan

a loan amount above the conforming loan limits, which is set each year by Fannie Mae and Freddie Mac. These loans typically carry higher interest rates than conforming loans because they can’t be sold to Fannie or Freddie.

Lender Credit

a credit paid by the lender to the borrower for taking an above-market interest rate.

Lender-Paid Mortgage Insurance

the lender pays for your mortgage insurance in exchange for a higher interest rate on your mortgage.

Lender’s Title Insurance

Insurance that covers the loss of an interest in a property due to legal defects and that is required if the property is under mortgage. Most title insurance is lender's title insurance, which is paid for by the borrower but protects only the lender.

Lender Overlay

a guideline (or set of guidelines) in addition to those required by Fannie Mae, Freddie Mac, or the FHA/VA.

Liabilities

A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.

Lien

a claim against a property by the issuing bank or lender to secure repayment of a debt, typically in the form or a mortgage.

Loan Origination

the initiation of the home loan process whereby a borrower submits their information to a bank or lender in order to obtain mortgage financing.

Loan Processor

the individual who handles all the paperwork associated with closing your loan.

Loan-to-Value

the percentage of the appraised property value that is borrowed from a bank or lender. A down payment of 20% would create a loan-to-value of 80%.

Margin

a given amount specified by the bank or lender which when added to the accompanying mortgage index sets the interest rate for an adjustable-rate mortgage.

Military Status

(See VA Mortgage)

Mortgage

a temporary loan used to finance the purchase of real property, also known as a home loan.

Mortgage Discount Points

a form of prepaid interest whereby the borrower lowers the interest rate of the mortgage at closing.

Mortgage Due Date

the date your mortgage payment is due each month during the loan’s duration.

Mortgagee

the issuing bank or mortgage lender.

Mortgage Insurance

required insurance on a mortgage if the down payment is less than twenty percent and a single loan is used to finance the property.

Mortgage Lender

an institution that originates mortgage loans either to keep for interest income or sell on the secondary market.

Mortgage Payment

the cost of your loan, paid monthly.

Mortgage Rate

the interest rate associated with your mortgage.

Mortgage Rate Lock

the act of locking-in a desired interest rate on your mortgage so it cannot change. Borrowers also have the option to float their rate.

Mortgage Term

the length of your mortgage. Most are 30 years, though 15 years is also very common.

Mortgagor

the borrower or homeowner.

Negative Amortization

when a mortgage payment received is below the interest-only payment, the difference will be added onto the principal balance of the loan.

No Closing Cost Refinance

a refinance transaction in which the bank or broker pays all settlement costs.

Notary

a person authorized to perform certain legal formalities, especially to draw up or certify contracts, deeds, and other documents for use in other jurisdictions.

Note

a written promise to repay the mortgage plus interest, which includes the name of the borrower, issuing lender, and the terms and provisions.

Option Arm

a home loan that gives borrowers four payment options, including a negative amortization payment option.

Origination Fee

a percentage of the loan amount charged by the bank or broker for completing the loan process.

Owner’s Title Insurance

Insurance that covers the loss of an interest in a property due to legal defects and that is required if the property is under mortgage. Most title insurance is lender's title insurance, which is paid for by the borrower but protects only the lender.

Par Rate

the interest rate a borrower will qualify assuming there is no rate manipulation.

Payment Shock

a sudden, large increase in the monthly mortgage payment as a result of an adjustable-rate mortgage or through a refinance with new financing terms.

Piggyback Mortgage

a second mortgage that closes simultaneously with the first mortgage to reduce the total necessary down payment.

PITI

the monthly housing expense, expressed as principal, interest, taxes, and insurance (see: mortgage payment).

Points

stands for a percentage point of the loan amount, typically makes up the origination fee, which can be a fraction of a point to multiple points.

Pre-Approval/Pre-Qualification

processes to determine what you can afford to ensure you can obtain mortgage financing when purchasing a property.

Prepayment Penalty

if a loan is refinanced or repaid prior to a certain date as agreed upon in the loan documents, a fee will be charged by the bank or lender.

Principal and Interest

periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to amortization of the principal balance; commonly used with amortizing loans.

Property Location

This is where the property is located, determined by Zip Code, County, and State.

Property Tax

the annual amount paid by a land owner to the local government or the municipal corporation of his area.

Prime Rate

the interest rate offered by commercial banks to its best corporate customers.

Principal

the balance of the liens on a property, not including interest. What you owe on your mortgage.

Property Type

Real estate listing have property types (or building types) fields to describe the kind of property for sale. Also, often people refer to their homes by property type when they describe them to others. For example someone might say they live in a townhouse, or a half-duplex.

Purchase Money Mortgage

a mortgage used to purchase a piece of property.

Purpose of Loan

what the loan will be used for in regards to housing situation. This will be either a new purchase, or a refinance.

Qualified Mortgage

a home loan that meets new underwriting guidelines established by the CFPB. Also known as a QM loan.

Quitclaim Deed

a document by which a person either disclaims interest in a property or transfers interest to another person, typically a spouse.

Rate Quote

to state the current market price of the property or home.

Recording Fee

The fee charged by a government agency for registering or recording a real estate purchase or sale, so that it becomes a matter of public record.

Refinance

the act of replacing your existing loan(s) with a new loan on the same property. There are two main types of refinancing, including a rate and term refinance and cash-out refinance.

Reverse Mortgage

a mortgage reserved for homeowners aged 62 or older who wish to tap their home equity without paying monthly mortgage payments.

Right of Rescission

a law which allows a homeowner to rescind a contract to refinance their primary residence within three days of signing loan documents.

Second Lien Mortgage

Debts that are subordinate to the rights of other, more senior debts issued against the same collateral, or a portion of the same collateral. If a borrower defaults, second lien debts stand behind higher lien debts in terms of rights to collect proceeds from the debt's underlying collateral.

Second Mortgage

a mortgage taken out behind a first mortgage, either concurrently or after the fact.

Seller Carryback

when a seller acts as the bank or lender and carries a second mortgage on the subject property.

Short Sale

a foreclosure alternative where a property is sold for less than the balance on the associated mortgage.

Short Refinance

a refinance transaction where the lender agrees to lower the rate and/or change the term despite the mortgage balance exceeding the property value.

Stated Income Mortgage

a mortgage in which the borrower does not have to document their income.

Streamline Refinance

an expedited refinance that requires limited underwriting, and may even forego the need for an appraisal.

Subprime Mortgage

a home loan reserved for those who have marginal credit or difficulty qualifying for a traditional loan.

Tax Certification

the certificate issued to the purchaser of land at a tax sale certifying to the sale and the payment of the consideration therefor and entitling the purchaser upon certain conditions and at a certain time thereafter to a deed or instrument of conveyance of the land to be executed by the proper officer.

Teaser Rate

the initial, discounted interest rate offered on adjustable-rate mortgages.

Title Insurance

protection against lawsuits and claims tied to the chain of title on the subject property.

Transfer Tax

is a tax on the passing of title to property from one person (or entity) to another.

USDA Loans

Mortgages guaranteed and insured by the USDA offer many attractive features such as: No money down, 100 percent loan-to-value (LTV) ratio financing, Competitive interest rates, efficient underwriting, processing and approval.

Underwater Mortgage

a mortgage whose balance exceeds the value of the property. Also known as an “upside down” mortgage.

Underwriter

the individual who decisions your mortgage by either approving, suspending, or declining it.

VA Mortgage

a mortgage offered to veterans and their families that is guaranteed by the Veterans Administration.

Yield Spread Premium

the commission mortgage brokers receive from banks and mortgage lenders by originating loans.