Acceptance is when you agree to enter into a contract and follow the terms of an offer. In a real estate transaction, the buyer makes an offer to the seller. If the seller agrees to the offer within a set time frame, it turns into a binding contract. This acceptance is documented by the seller signing and returning the purchase agreement.
Acknowledgment
An acknowledgment is when you formally declare in front of a public official (usually a Notary Public) that you have signed a document. This step is necessary before legal real estate documents, like a deed of trust, can be officially recorded.
Additional Principal Payment
An additional principal payment is the extra payment you can make that is more than the scheduled principal amount, which helps reduce the remaining balance on the loan.
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage, or ARM, is a type of mortgage where the interest rate and payments can change over the life of the loan. The interest rate is adjusted based on a chosen interest rate index (like the LIBOR or Treasury index). As the index rate changes, the borrower’s regular payments will increase or decrease accordingly. Different ARMs have different schedules for these adjustments. It's also known as a variable-rate loan.
Adjustment Date
The adjustment date is the specific date when the interest rate changes for an adjustable-rate mortgage (ARM).
Affidavit
An affidavit is a legally binding document that a person signs to confirm that all the information they've provided is accurate.
Agreement Of Sale
An agreement of sale is a written, signed agreement between a seller and a buyer, where the buyer agrees to purchase certain real estate, and the seller agrees to sell it based on the terms of the agreement. This can also be called a contract of purchase, purchase agreement, offer and acceptance, earnest money contract, or sales agreement.
Amenity
An amenity is a feature that makes a property more appealing, even though it's not essential to the property's use. Natural amenities are features like living close to a lake or having a beautiful view. Human-made amenities are features like swimming pools, tennis courts, and community centers.
Amortization
Amortization means paying off a debt, like a mortgage loan, bit by bit over time. Instead of paying back all the money at once, you make regular payments, usually monthly, until you've paid off the entire debt.
Amortization Period
An amortization period is how long it takes to pay off a loan with regular payments. It's determined by factors like how much you owe, the interest rate, and how often you make payments.
Annual Income
Annual income is how much money you make in a year before taxes. It includes everything you earn, like your salary from work, bonuses, tips, dividends, and other sources.
Annual Percentage Rate
The annual percentage rate (APR) represents the annual cost of borrowing money. It's usually higher than the note rate because it combines the interest rate with extra fees, like closing costs, into one percentage. Comparing APRs of loan offers from various lenders can help you find the best deal. But be careful – lenders calculate APRs differently, so it's important to check all the details.
Application
An application is a form you fill out when you want to apply for a mortgage loan. It collects important information about you, like your income and employment history, as well as information about the property you want to buy. The information you provide will help the lender decide if they can approve your loan and under what terms.
Application Fee
The application fee is what a lender charges when you apply for a mortgage to cover the costs of processing your application.
Appraisal
An appraisal is a report created by a qualified expert called an appraiser. This report gives an opinion or estimate of how much a property is worth based on their knowledge, experience, and analysis of the property and market conditions. The term "appraisal" also refers to the process of determining this value.
Appraised Value
The appraised value is the estimated fair market value of a specific property. It's what the appraiser thinks the property would sell for, considering factors like the property's condition, location, and the current real estate market.
Appraiser
An appraiser is an expert in determining the value of properties. They're qualified through education, training, and experience to give an estimate on how much a property is worth.
Appreciation
Appreciation is when the value of a property goes up. This can happen due to increased demand, improvements or additions made to the property, or an increase in neighborhood property values, among other factors.
Asking Price
The asking price is the amount of money a seller wants for their property. It’s also called the list price.
Assessed Value
The assessed value is the value a public tax assessor places on your property for tax purposes. This value isn't always the same as what your property could sell for on the market.
Assets
Assets are anything you own that has monetary value, like cars or bank accounts. Lenders look at your assets to decide how much money they are willing to lend you.
Authorized User
An authorized user is someone who is added to a credit card account by the main cardholder. This person can use the card to make purchases but isn't responsible for paying the bill.
B
Back-End Ratio, Or Debt-To-Income (DTI) Ratio
The back-end ratio, or debt-to-income (DTI) ratio, compares all your monthly debt payments (like a mortgage, car loan, or other loans) to your gross monthly income. It's used to see how much of your income goes toward paying debts.
Balloon Mortgage
A balloon mortgage is a type of loan where you make small monthly payments but have to pay a large final payment, called a balloon payment, at the end of the loan term.
Borrower
A borrower is a person or organization that borrows money from a bank or other financial institution, agreeing to pay it back later.
Broker
See Real Estate Broker or Mortgage Broker.
Buyer's Agent
A buyer's agent is a real estate agent hired by someone looking to buy a property. The agent represents the buyer, finds properties, and negotiates with the seller (or the seller’s agent) to get the best deal for the buyer.
C
Caps
Caps are limits on how much the interest rate on an adjustable-rate mortgage (ARM) can change each year and over the life of the loan. Payment caps limit how much the monthly payments on an ARM can change.
Cash Reserves
Cash reserves are your savings, investments, and other assets. Lenders might require you to have a certain amount in reserves to approve your loan.
Closing Agent
A closing agent is a person who manages the activities related to the closing of a real estate transaction.
Closing Costs
Closing costs are fees you pay in addition to the price of the property when you buy or sell a home. They include things like loan origination fees, attorney fees, title insurance, and prepayments for property taxes insurance. Sometimes the seller helps pay some of these costs; agreements to do so are called seller concessions.
Closing Disclosure (CD)
The Closing Disclosure (CD) is a document that itemizes all closing costs, including commissions, loan fees, points, and escrow amounts. A lender is required to provide a CD to a borrower 3 business days before the scheduled closing date.
Closing Or Loan Closing
Closing is the final step in a real estate transaction, where the buyer signs the mortgage documents, pays closing costs, and the property title is transferred to the new owner. It's also called the settlement date.
Co-Borrower
A co-borrower is someone who signs the mortgage note with the primary borrower and shares the title and responsibility for paying the loan and owning the property.
Collateral
Collateral is money or property a borrower offers as security for a loan. If the borrower defaults, the lender can take the collateral. In a mortgage, the home itself is usually the collateral.
Collections
Collections are the actions a mortgage company takes to collect overdue payments from a borrower.
Commitment Letter
A commitment letter is a document from your lender stating the mortgage amount, term, interest rate, loan origination fee, annual percentage rate, and monthly charges.
Common Areas
Common areas are parts of a building, land, or amenities that everyone in a planned community or condo shares and uses. These include parking areas, hallways, entrances, and recreational facilities like pools and tennis courts. These areas are usually maintained by a homeowners association.
Comparables
Comparables are recently sold properties that are similar to a property under consideration in terms of size, location and amenities. They help an appraiser determine the fair market value.
Condominium Or Condo
A condominium, or condo, is a type of property ownership where you own a specific unit and share ownership of common areas with other unit owners.
Construction Loan
A construction loan is a short-term loan to pay for building a home. The lender typically releases money to the builder in stages as construction progresses. Once the building is finished, a permanent loan is used to pay off the construction loan.
Construction Loan Draw
A construction loan draw is a partial payment of the loan funds, distributed based on the payment schedule in the loan agreement.
Consumer Financial Protection Bureau (CFPB)
The Consumer Financial Protection Bureau (CFPB) is a U.S. government agency that ensures banks, lenders, and financial institutions treat consumers fairly.
Contingency
A contingency is a condition in a purchase contract that must be met for the contract to be binding. For example, the sale of a home to a buyer might be contingent on the buyer getting financing.
Conventional Loan
A conventional loan is a mortgage not insured or guaranteed by the government, unlike FHA or VA loans. It follows accepted standards and is agreed upon by the lender and borrower. It's also known as a conventional residential mortgage.
Cooperative
A cooperative is a type of property ownership where a corporation owns the building, and residents own shares in the corporation, giving them rights to live in specific units.
Counter Offer
A counter offer is when the buyer or seller rejects part or all of an offer and proposes different terms to reach an agreement.
Credit
Credit is the ability to borrow money or get goods on time with the promise to pay later, based on the lender’s opinion of your reliability and ability to repay.
Credit Bureau
A credit bureau collects and sells your credit information to banks and lenders. They create credit reports and calculate credit scores. The 3 largest credit bureaus in the U.S. are Experian, Equifax, and TransUnion.
Credit Enhancement
Credit enhancement is a method lenders use to reduce the risk of a borrower defaulting, such as requiring mortgage insurance.
Credit History
Credit history is a record of your debts and your payment history. Lenders use it to determine if you can repay a loan.
Credit Report
A credit report is a detailed report of your credit and payment history, including information on revolving and installment accounts and public records like tax liens and judgments.
Credit Risk
Credit risk is a term lenders use to describe how likely it is that a borrower will default on a loan.
Credit Score
A credit score is a number that shows your credit risk at a specific time. Lenders use it to decide if you qualify for a loan.
Creditworthiness
Creditworthiness is the lender's judgment of how capable a borrower is of repaying a loan.
D
Debtor
The borrower.
Debt-To-Income (DTI) Ratio
The debt-to-income (DTI) ratio compares the total of all monthly debt payments (a mortgage, real estate taxes, insurance, car loans, etc.) to gross monthly income.
Deed
A deed is the official written document that transfers ownership and possession rights of a property from the seller to the buyer. It's also called a title or certificate of title.
Default
If a borrower defaults, they did not meet the legal obligations in a contract, such as making monthly mortgage payments.
Deferred Payments
Deferred payments are payments that lenders allow to be postponed as part of an agreement with you to help you avoid foreclosure.
Delinquency
Delinquency is failure to make a payment when it's due. A loan is usually considered delinquent if it's 30 or more days late.
Depreciation
Depreciation is a decrease in property value due to physical wear and tear, or because something has become outdated or less useful.
Disbursement
A disbursement is a payment made during escrow or at closing.
Discount Point
A discount point is a fee paid to a lender to lower the interest rate on a loan.
Down Payment
A down payment is the amount of money a buyer pays up front for a property. It's the difference between the sale price of a property and the mortgage loan amount.
Down Payment Assistance (DPA) Programs
Down payment assistance (DPA) programs provide homebuyers with cash grants or favorable loan terms to help them with their down payment. They are usually sponsored by nonprofit organizations or government entities, and they typically help low- to moderate-income families, first-time homebuyers, and community service workers such as teachers and first responders.
E
Earnest Money
Earnest money is a deposit made by a buyer toward the down payment to show "good faith," or that they are serious about buying a property. This money is usually held by real estate brokers or an escrow company until the real estate transaction is complete.
Eclosing
eClosing is the process of closing a mortgage loan electronically in a secure digital environment, where some or all closing documents are accessed, reviewed, and signed online, though some may still be printed and signed physically.
Emergency Fund
An emergency fund is a cash reserve set aside for unexpected expenses or financial emergencies, like car repairs or medical bills.
Equity
Equity is the market value of a property minus any liens or debts owed on it.
Escrow Account
A borrower pays monthly installments into an escrow account held by a lender for property taxes, insurance, and special assessments. The lender then uses this account to pay those expenses when they are due.
Eviction
Eviction is the legal process of removing a tenant from a property. The steps to evict someone can be different depending on the state.
F
Fair Credit Reporting Act
The Fair Credit Reporting Act is a law that protects consumers by regulating how credit reporting agencies disclose credit information and by ensuring there are ways to fix mistakes on credit reports.
Fair Housing Act
The Fair Housing Act is a law that bans discrimination in the homebuying process based on sex/gender, national origin, religion, race or color, familial status, or disability.
Federal Home Loan Mortgage Corporation (Freddie Mac)
The Federal Home Loan Mortgage Corporation (Freddie Mac) is a government-sponsored enterprise (GSE) that buys and sells home mortgages, turning them into securities for investors. Freddie Mac helps provide funds to lenders so they can offer more loans to homebuyers.
Federal Housing Administration (FHA)
The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), offers mortgage insurance to protect lenders if borrowers default. This allows lenders to offer loans to people who might not otherwise qualify.
Federal National Mortgage Association (Fannie Mae)
The Federal National Mortgage Association (Fannie Mae) is a government-sponsored enterprise (GSE) that buys residential mortgages and turns them into securities for investors. Fannie Mae helps provide funds to lenders so they can offer more loans to homebuyers.
FHA Mortgage
An FHA mortgage is a loan insured by the Federal Housing Administration, available to all U.S. homebuyers. FHA mortgages are popular among buyers with lower credit scores or smaller down payments.
FICO (FICO Score)
See Credit Score.
First Mortgage
A first mortgage is the primary loan on a property, which has priority over any other loans. In foreclosure, the first mortgage is paid off first.
Fixed-Rate Mortgage
A fixed-rate mortgage is a loan where the interest rate stays the same for the entire term of the loan.
Fixture
A fixture is personal property that's attached to land or a building in such a way that it's considered part of the property, like a built-in bookshelf.
Flood Insurance
Flood insurance protects against losses from flooding. If a home is in a flood-prone area, the lender will usually require this insurance.
For Sale By Owner (FSBO)
A home for sale by owner (FSBO) is a property that the owner is selling without using a real estate agent.
Forbearance
Forbearance is a temporary reduction or suspension of mortgage payments through an agreement with your lender. It's often combined with a plan to repay the missed payments.
Foreclosure
Foreclosure is the legal process where a lender takes ownership of a property because the borrower has failed to make payments. The property is usually then sold to pay off the debt.
Front-End Ratio
The front-end ratio is the percentage of your gross monthly income that goes toward paying your mortgage, including principal, interest, taxes, and insurance (PITI). Lenders use this to see if you can afford the loan, and a lower ratio is better.
G
Gift Letter
A gift letter is a document stating that part of a borrower’s down payment comes from a gift provided by relatives or friends and does not need to be repaid.
Government National Mortgage Association (Ginnie Mae)
The Government National Mortgage Association (Ginnie Mae) is a government corporation within the U.S. Department of Housing and Urban Development (HUD) that helps people buy homes by guaranteeing loans for FHA and VA mortgages.
Gross Income
Gross income is your total income before any deductions like taxes, insurance, and retirement contributions. Lenders use various documents, such as pay stubs, W-2s, tax returns, and bank statements, to calculate gross income.
H
Hazard Insurance
Hazard insurance protects a homeowner against damage to their home and its contents from disasters like fire or storms. It's usually included in a homeowners insurance policy.
Home Equity Line Of Credit (HELOC)
A home equity line of credit (HELOC) is a type of mortgage where you can borrow money up to a certain limit whenever you need it – similar to a credit card, but secured by the equity in your home. For example, if you have a HELOC for $20,000, during the draw period you can borrow any amount up to that, over time and as you need it. After the draw period is the repayment period, when you can no longer access additional funds and must make regular payments toward what you owe.
Home Equity Loan
A home equity loan uses your home as collateral, but it's secondary to your main mortgage. If you can't pay back the loan and your home is sold, the lender of your main mortgage gets paid first before the lender of your home equity loan.
Home Inspection
A home inspection is a thorough examination of a house to make the buyer aware of the condition of the house and any potential repairs needed. The buyer usually pays for this inspection. A home inspection is a common contingency in a purchase contract because if the inspector finds major problems, the buyer can ask to change the sale price or even cancel the contract without penalty.
Home Purchase Price
The home purchase price is the final selling price of a home.
Homeowners Association
A homeowners association is a group of homeowners in a building, neighborhood or community that manages shared areas and makes and enforces rules for the community.
Homeowners Insurance
Homeowners insurance protects a homeowner against damage to their home and belongings, as well as against claims for injuries that occur on their property. Most lenders require homeowners insurance.
Housing Expense Ratio
The housing expense ratio is the percentage of your monthly income that goes toward paying for housing costs like a mortgage, insurance, and taxes.
Housing Finance Agency (HFA)
A housing finance agency (HFA) is a local or state agency that helps finance and support affordable housing in a community.
I
Income
Income is the money you earn, especially on a regular basis, from working or through investments.
Index
An index is a measure used to determine a new interest rate at the time of adjustment on an adjustable-rate mortgage (ARM). It is usually based on market interest rates, is independent of the lender, and is easy to verify.
Inflation
Inflation is a rise in prices for goods and services over time.
Initial Interest Rate
The initial interest rate is the starting interest rate on an adjustable-rate mortgage (ARM) before any adjustments.
Inquiry
An inquiry is when someone requests a copy of your credit report, such as when you apply for credit. Too many inquiries can lower your credit score.
Insurance Premium
An insurance premium is the amount charged by an insurance company for coverage.
Interest
Interest is the cost of borrowing money, usually expressed as a percentage of the amount borrowed.
Interest Rate
An interest rate is the percentage of the loan amount charged for borrowing, usually expressed as an annual percentage.
Interest-Only Mortgage
An interest-only mortgage is a type of mortgage where you only pay the interest and not the principal for a certain period. The loan balance doesn't change during that time.
Investor
An investor is the person or company who eventually owns a loan, whether it's the original lender or someone who buys the loan later.
L
Lease
A lease is a written agreement between a property owner and a tenant. It outlines the terms and conditions for renting the property, such as how much money the tenant needs to pay each month, how long they can stay, and any rules they need to follow while renting.
Lender
A lender is a person or company that provides funds to someone for a specific purpose, such as buying real estate. They usually expect the borrowed amount to be repaid with interest over time and according to agreed-upon terms and conditions.
Liabilities
Liabilities are a borrower's financial obligations.
LIBOR Index
An average of interest rates at which international banks are willing to lend funds to or borrow funds from the London Interbank market. The rates are an international benchmark in determining interest rates for adjustable-rate mortgages (ARMs).
Lien
A lien is when a mortgage lender has a legal right to your home until the mortgage is fully paid off. A home can have more than one lien if there's more than one mortgage on it.
List Price
The list price is the price at which the home is listed for sale in the multiple listing service (MLS) or other listing service. The seller decides this based on the home's condition, recent sales prices of similar homes in the area, and current market conditions.
Loan Balance
The loan balance is the amount of money you owe on a mortgage. Every payment you make toward the principal on a loan reduces your loan balance.
Loan Estimate
The Loan Estimate (LE) is a form that shows the estimated costs you'll have to pay when you close on a mortgage, along with terms of the loan, including the annual percentage rate (APR). Lenders are required to provide the LE to the borrower within 3 business days of receiving a loan application.
Loan Modification
A loan modification is a written agreement between you and your mortgage company that changes some terms of your loan to make your payments more affordable.
Loan Officer
A loan officer works for a lender or mortgage company and helps you through the process of applying for and getting a loan.
Loan Origination Fees
Loan origination fees are charged by your mortgage lender for processing your loan. These fees are usually in the form of points, with one point equal to 1% of the mortgage amount, and are paid at closing.
Loan Servicer
A loan servicer is the company that collects your monthly mortgage payments and pays property taxes and insurance from those funds.
Loan Term
The loan term is the length of time you have to pay back your mortgage loan, usually expressed in years.
Loan-To-Value Ratio
The loan-to-value ratio (LTV), expressed as a percentage, is the amount of a loan divided by the selling price of the home.
Lock-In
Lock-in is a written agreement where the lender promises a certain interest rate if your mortgage closes within a certain time frame. It also usually specifies how many points you'll pay at closing.
Loss Mitigation
Loss mitigation is when you and your mortgage company work together to find a way to catch up on missed payments and avoid foreclosure.
M
Market Value
The market value is what your home would sell for in the current market. Sometimes an appraisal helps determine this value.
MGIC
MGIC, the principal subsidiary of MGIC Investment Corporation, is the nation's largest private mortgage insurer. MGIC serves lenders throughout the United States, Puerto Rico, and other locations, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality. MGIC provides a critical component of the country's residential mortgage finance system, protecting mortgage investors from credit losses. Mortgage insurance from MGIC also benefits consumers by helping them achieve homeownership sooner with low-down-payment loans.
Minimum Payment
A minimum payment is the smallest amount you can pay each month on a credit account to keep it in good standing with the creditor.
Monthly Housing Expense Ratio
Your monthly housing expense ratio is the percentage of your monthly income that will go toward paying your mortgage, property taxes, insurance, and other housing costs.
Mortgage
A mortgage is a legal agreement that gives the lender a claim to the property as security for a loan.
Mortgage Banker
A mortgage banker is a person or company that creates and services loans. They usually sell these loans to investors but may continue to service them.
Mortgage Broker
A mortgage broker helps a borrower find a loan by placing loans with lenders. Mortgage brokers are paid a fee by either the borrower or the lender when a loan closes.
Mortgage Insurance
Mortgage insurance (MI) protects the lender if the borrower defaults on the loan, enabling lenders to give loans with smaller down payments. MI is provided by private companies like MGIC and by the federal government through the Federal Housing Administration (FHA). MI helps people afford to buy a home sooner with low-down-payment loans.
Mortgage Lender
A mortgage lender lends money to people who want to buy or refinance homes. Mortgage lenders include banks, credit unions and online lenders.
Mortgage Life Insurance
Mortgage life insurance is a type of life insurance that pays off the mortgage if the borrower dies while the policy is active. The coverage amount decreases as the mortgage balance goes down.
Mortgage Payment
A mortgage payment is the amount you pay every month on your mortgage loan. This typically includes the loan principal, interest, property taxes, and insurance (PITI).
Mortgage Rate
The mortgage rate is the yearly cost of borrowing money for your home loan, expressed as a percentage of the loan amount. This rate directly influences your monthly mortgage payment and can be fixed or adjustable. Lower rates usually mean lower monthly payments.
Multi-Unit Home
A multi-unit home is a residential property with 2, 3, or 4 separate living units, each with its own kitchen, bathroom, and living area.
N
Negative Amortization
Negative amortization happens when your monthly mortgage payments don’t cover all the interest you owe. The unpaid interest gets added to your loan balance, increasing the total amount you owe.
Net Monthly Income
Your net monthly income is the money you take home after taxes are taken out of your paycheck.
Nonfixed-Rate Mortgage
A nonfixed-rate mortgage is a type of mortgage where the interest rate can change over the term of the loan.
Non-Occupant Co-Borrower
A non-occupant co-borrower is someone who signs a mortgage with you and shares the responsibility for making payments but doesn’t live in the home. Homebuyers often use non-occupant co-borrowers when they can’t qualify for a mortgage due to low income or bad credit.
Note
A note, also called a promissory note, is a written promise to pay a specific amount of money to someone else under conditions that both parties agree to.
Note Rate
The note rate is the interest rate charged on your mortgage loan.
O
Offer Or Offer To Purchase
An offer or offer to purchase is a document you complete as a homebuyer that outlines the terms and conditions for buying a property.
Origination Fee
A lender charges an origination fee to process your loan. It covers tasks like checking your credit and collecting information about the property. This fee is different from discount points, which are used to lower the interest rate.
Owner-Occupied Property
An owner-occupied property is the property where the borrower lives as their main home.
P
Payment Cap
A payment cap is a limit on how much your monthly mortgage payment can increase during each adjustment period, regardless of the interest rate charged. This cap is usually a percentage. With payment caps, there’s a chance for negative amortization, meaning you could end up with a mortgage payment that doesn't cover the interest you owe.
PITI
PITI is the total monthly mortgage payment, which includes principal (P), interest (I), taxes (T), and insurance (I).
Private Mortgage Insurance (PMI)
Private mortgage insurance (PMI) is insurance from a private company that protects the lender if the borrower defaults on their mortgage. This allows lenders to give you a loan with a smaller down payment. Companies like MGIC offer this insurance, and the government offers similar insurance through the Federal Housing Administration (FHA).
Points
Points are fees paid to lenders. 1 point equals 1% of the loan amount. On a $100,000 loan, 1 point is $1,000. Points can be origination points (fees for processing the loan) or discount points (used to lower the interest rate).
Pre-Approval
Pre-approval is when a lender commits to loaning you a specific amount based on your completed loan application, credit reports, debt, savings, and review by an underwriter. However, this doesn’t guarantee a loan until the property passes inspections and meets other guidelines.
Predatory Lending
Predatory lending refers to unfair lending practices where borrowers are given loans with notably worse terms or higher costs than similarly qualified borrowers in the same area. This can include convincing a borrower to refinance in a way that is harmful to them, without fully explaining the consequences.
Prepaid Costs
Prepaid costs are homeowner expenses, like property taxes and insurance, that you pay up front at the closing of the home purchase. Mortgage lenders estimate these costs in your Loan Estimate (LE) and Closing Disclosure (CD).
Prepayment Penalty
A prepayment penalty is a fee some lenders charge if you pay off all or part your mortgage early. Not all mortgages have this penalty.
Pre-Qualification
Pre-qualification is the process of finding out how much money you might be able to borrow before officially applying for a loan.
Prime Rate
The prime rate is the interest rate that banks charge to preferred customers.
Principal Balance
The principal balance is the amount of money you still owe on your mortgage, not including interest or other charges.
Principal Residence
Your principal residence is the home you live in most of the year and use as your address for activities like taxes and voting.
Property Taxes
Property taxes are the money you pay to the city, town, or county based on your property's value.
Q
Qualifying Debt Ratio
The qualifying debt ratio is the percentage of your monthly income that goes toward paying all your debts, including your mortgage payment (PITI), credit cards, and loans.
R
Rate Cap
A rate cap is a limit on how much the interest rate can increase for an adjustable-rate mortgage (ARM).
Real Estate Agent
A real estate agent is a licensed professional who helps people buy or sell homes. They negotiate prices and guide clients through the process.
Real Estate Broker
A real estate broker is licensed to work independently, usually owning or managing their own real estate company and hiring real estate agents to work for them. Brokers often have additional training and licensing requirements in order to do business. They also represent buyers or sellers in real estate transactions.
Real Estate Settlement Procedure Act
The Real Estate Settlement Procedure Act (RESPA) is a law that requires lenders to disclose all the costs, practices, and relationships involved in real estate transactions.
Realtor®
A Realtor® is a real estate professional who is a member of the National Association of Realtors.
Refinance
A refinance is when a homeowner replaces their current mortgage with a new one, often with different terms. They do this to get a lower interest rate, change the loan period, or take cash out of their home.
S
Seller Concessions
Seller concessions happen when a seller agrees to cover some or all of the closing costs for the buyer. Concessions are usually limited to the total closing costs and can help the buyer afford the purchase. Both parties can negotiate seller concessions during the sale.
Seller's Agent
A seller's agent, also called a listing agent, represents the seller in a real estate deal. They set the selling price, market the home, negotiate offers, and help the seller through the closing process.
Servicer
A servicer is an organization that collects your monthly mortgage payments and manages your escrow account. Servicers often service mortgages that have been purchased by an investor in the secondary mortgage market.
Servicing
Servicing consists of all the management and operational procedures that the mortgage company handles for the life of the mortgage, up through foreclosure if necessary, including: collecting the mortgage payments, ensuring that the taxes and insurance charges are paid promptly, and sending an annual report on the mortgage and the escrow accounts. (See also Escrow Account.)
Short Sale
A short sale is when a home is sold for less than what's owed on the mortgage. It's usually arranged between the mortgage company and a homeowner who's behind on payments to help the homeowner avoid foreclosure.
Soft Credit Pull
A soft credit pull is a review of your credit report that doesn't affect your credit score. Mortgage lenders may use soft pulls to pre-approve a loan, but they usually require a hard credit pull for the final approval.
T
Title
Having rights to the title of a home means you legally own it. When you buy a house, the seller's title is transferred to you, showing that you're the rightful owner. Lenders perform a title search during the mortgage process to make sure there are no issues, like liens or ownership disputes, that could stop the sale.
Title Insurance
Title insurance protects you from losing your home or money due to problems with the title of the home, like someone else claiming ownership. Title insurance policies are usually obtained for both the buyer and the lender.
Total Expense Ratio
The total expense ratio compares all your monthly debt payments, like your mortgage, taxes, insurance, car loans, and other loans, to your monthly income before taxes.
Truth-In-Lending Act (TILA)
The Truth-In-Lending Act (TILA) is a federal law that makes lenders explain all the costs of borrowing money, like the annual percentage rate (APR) or other fees, so you know exactly what you're getting into.
Two- To Four-Family Property
The 2- to 4-family property is a type of property that is owned under one deed but has enough space for 2 to 4 households to live in separate units.
U
Underwriting
Underwriting is the process where lenders decide whether to approve or deny a loan based on factors like the property you want to buy, your credit, and your ability to pay back the loan.
Uniform Residential Loan Application
The Uniform Residential Loan Application is the standard form your lender will ask you to fill out when you apply for a mortgage. It asks for details about your income, assets, debts, and the property you want to buy.
V
VA Mortgage
A VA mortgage is a special type of mortgage guaranteed by the Department of Veterans Affairs (VA), which helps eligible veterans, service members, and their families buy homes.
Verification Of Deposit (VOD)
A verification of deposit (VOD) is a document from your bank or financial institution confirming your account balance and history.
Verification Of Employment (VOE)
A verification of employment (VOE) is a document from your employer confirming your start date, job title, salary, and probability of continued employment.
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Walk-Through Inspection
The walk-through inspection is a final check of the property before you buy it to make sure any contingencies in the purchase agreement have been completed, all fixtures are in place, and important systems like electricity, plumbing, and heating work properly.
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