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MORTGAGE GLOSSARY OF TERMS
Florida’s Top Rated Mortgage Lender
A+ BBB RATED I 48 loan programs
Adjustable Rate Mortgage (ARM): A
mortgage in which the interest rate is
adjusted periodically according to a
pre-selected index.
Annual Percentage Rate (APR): A
term used in the Truth-in-Lending Act
to represent the percentage
relationship of the total finance
charge to the amount of the loan. The
APR reflects the cost of your
mortgage loan as a yearly rate. It will
be higher than the interest rate stated
on the note because it includes, in
addition to the interest rate, loan
discount points, fees and mortgage
insurance.
Application: A printed form used by a
mortgage lender to record necessary
information concerning a prospective
client.
Appraisal: A report made by a
qualified person setting forth an
opinion or estimate of property value.
The term also refers to the process by
which this estimate is obtained.
Assessed Valuation: The value that a
taxing authority places on real or
personal property for the purpose of
taxation.
Assessment: A charge against a
property for the purpose of taxation.
This may take the form of a levy for a
special purpose or a tax in which the
property owner pays a share in the
cost of community improvements
according to the valuation of his or
her property.
Borrower: A person (also known as a
mortgagor) who receives funds in the
form of a loan with an obligation to
repay principal with interest.
Buydown: Money advanced by an
individual (builder, seller, etc) to
reduce monthly payments for a home
mortgage either during the entire
term or for an initial period of years.
Cash to Close: Liquid assets that are
readily available to be used to pay the
closing costs involved in a closing of a
mortgage transaction.
Closing: The consummation of a real
estate transaction. The closing
includes the delivery of a deed,
financial adjustments, the signing of
notes, and the disbursement of funds
necessary to complete the sale and
loan transaction.
Closing Costs: Money paid by the
borrower in connection with the
closing of a mortgage loan. This
generally involves an origination fee,
discount points, appraisal, credit
report, title insurance, attorney’s fees,
survey, and pre-paid items such as tax
and insurance escrow payments.
Closing Statement: A form used at
closing that gives an account of the
funds received and paid at the
closing, including the escrow deposits
for taxes, hazard insurance, and
mortgage insurance.
Co-borrower: Additional borrowers
whose income contributes to
qualifying for a loan and whose name
appears on documents with equal
legal obligations.
Collateral: Property pledged as
security for a debt, such as the real
estate pledged as security for a
mortgage.
Commitment (loan): A formal offer
by a lender stating the terms under
which it agrees to loan money to a
homebuyer.
Conforming Loan: Conventional
home mortgages eligible for sale and
delivery to either the Federal National
Mortgage Association (Fannie Mae) or
the Federal Home Loan Mortgage
Corporation (Freddie Mac). These
agencies generally purchase first
mortgages up to loan amounts
mandated by Congressional directive.
Conventional Mortgage: A mortgage
not obtained under a government
insured program (such as FHA or VA).
Deed of Trust: An instrument used in
many states in place of a mortgage.
Property is transferred to a trustee by
the borrower (trustor), in favor of the
lender (beneficiary) and reconveyed
upon payment in full.
Default: The failure to perform an
obligation as agreed in a contract.
Delinquency: A loan payment that is
overdue buy within the period
allowed before actual default is
declared.
Deposit: A sum of money given to
bind a sale of real estate. Also known
as earnest money.
Depreciation: A loss of value in real
property brought about by age,
physical deterioration, functional or
economic obsolescence.
Discount Point: Amount payable to
the lender institution by the borrower
or seller to increase the lender’s
effective yield. One point is equal to
one percent of the loan amount.
Discounted Loan: When the note
rate on a loan is less than the market
rate, the lender requires additional
points to raise the yield on the loan to
the market rate.
Earnest Money: A portion of the
down payment delivered with a a
purchase offer by the purchaser of
real estate to the seller or an escrow
agency by the purchaser of real estate
with a purchase offer as evidence of
good faith. Also known as a deposit.
Equal Credit Opportunity Act
(ECOA): A Federal law requiring
lenders and other creditors to make
credit equally available without
discrimination based on race, color,
religion, national origin, sex, age,
marital status, receipt of income from
public assistance programs or past
exercising of rights under the
Consumer Credit Protection Act.
Equity: The ownership interest, i.e.
portion of a property’s value over and
above the liens against it.
Escrow: A procedure whereby a
disinterested third party handles legal
documents and funds on behalf of a
seller and buyer.
Fair Credit Reporting Act FCRA: A
Federal law, which requires a lender
who is rejecting information. This law
also requires consumer-reporting
agencies to exercise fairness,
confidentiality, and accuracy in
preparing and disclosing credit
information.
First Mortgage: A real estate loan,
which has priority over any
subsequently recorded mortgages,
which does not change during the
loan term.
Foreclosure: A legal procedure in
which property mortgaged as security
for a loan is sold to pay the defaulting
borrower’s debt.
Gift Letter: A written explanation
signed by the individual giving the gift
stating, “this is a bona fide gift and
there is no obligation expressed or
implied to repay this sum at any time.
Gross Monthly Income: Total
monthly income earned before tax
and other deductions.
Hazard Insurance: A contract
whereby an insurer, for a premium,
undertakes to compensate the
insured for loss on a specific property
due to certain hazards (i.e. fire).
High-Ratio Loan: Mortgage loans in
excess of 80 percent of the loan
amount divided by the lower of the
sales price or appraised value.
Homeowner’s Association Dues: The
fees imposed by a condominium or
homeowners association for
maintenance of common areas.
Interest Rate: The percentage of an
amount of money which is paid fro its
use for a specified time.
Lien: A legal claim or attachment
against property as security for
payment of an obligation.
Loan to Value Ratio: The ratio
between the amount of a given
mortgage loan and the lower of sales
price or appraised value.
Monthly Payment: Usually, the
amount of PITI (principal, interest,
taxes, and insurance) paid each
month on a mortgage note.
Mortgage: The conveyance of an
interest in real property given as
security for the payment of a loan.
Mortgagee: The lender on a
mortgage transaction.
Mortgage Insurance Premium
(MIP): The consideration paid by a
borrower for mortgage insurance-
either to the FHA or to a private
mortgage insurer.
Mortgage Note: A written promise to
pay a sum of money at a stated
interest rate during a specified term.
The note contains a complete
description of the conditions under
which the loan is to be repaid and
when it is due.
Mortgagor: The borrower in a
mortgage transaction who pledges
property as security for a debt.
Non-Conforming Loan: Loans not
eligible for sale to Fannie Mae or
Freddie Mac due to various reasons
including loan amount, credit outside
normal underwriting guidelines.
Occupancy: The use of property as a
full-time residence, either by the title
holder (owner occupied) or another
party through a formal rental
agreement.
Origination Fee: The amount
charged for services performed by the
company handling the initial
application and processing of the
loan.
Percentage Point: One percent of
the loan or a measure of the interest
rate.
Principal Balance: The remaining
balance due on a debt, exclusive of
accrued interest.
PUD (Planned Unit Development): A
planned combination of diverse land
uses, such as housing, recreation, and
shipping in one contained
development.
Purchase Contract: An agreement
between a buyer and a seller of real
property setting forth the price and
terms of the sale. Also known as a
sales contract.
Survey: The measurement and
description of land by a registered
surveyor.
Title: The legal evidence of ownership
rights to real property.