Amortization. LVR. RESPA. Talking about home buying and mortgages can feel like you’re learning a new language. Our glossary makes it easier to understand the process, so you can make the best choices for you.
accrued interest
The amount of interest that’s accumulated since the origination of the loan.
additional principal payment
A payment by the borrower beyond what is owed at that time, meant to reduce the principal and, therefore, the life of the loan.
adjustable rate mortgage
Also called an ARM, this is a loan with a set interest rate for a specific period of time, at which point the interest rate can go up or down, or remain the same.
adjustment cap
The limit to how much a variable rate can change in a given adjustment period during the life of an ARM.
aging in place
Being able to comfortably and independently live in your home as you age.
amortization
How your loan decreases over time, including how much money from each payment goes towards principal, and how much towards interest.
amortization schedule
A table showing the breakdown of each of your mortgage payments, how much goes to principal, interest, taxes, and interest each month.
annual percentage rate (APR)
The yearly cost of your loan; unlike your interest rate, this figure includes all fees, like closing costs, PMI, and points.
appraisal
When a professional places a value on your home, often for the purpose of insurance, taxes, a home equity line of credit, or a sale.
appreciation
The increase in value of a property over time; the opposite of depreciation.
assessed value
The value placed on your home by your local government used to determine property taxes.
assume (as in a loan)
When a buyer takes over a seller’s mortgage, usually offering a cash payment to buy the equity in the home, as well; most mortgages are not assumable, since every mortgage is based on the borrower’s personal ability to repay it.
balloon payment
Large payment towards the principal borrowed, due at the end of a loan.
bidding war
When two or more buyers are interested in the same house and both increase their offers in an attempt to outbid the other and win the house.
biweekly payments
When you pay half of the amount of your monthly mortgage payment every two weeks instead of making one larger payment each month; because this results in an extra payment each year, you will pay off your mortgage sooner.
bridge loan
A loan used to bridge the gap between the end of one loan and the beginning of another; can be used by someone who is ready to buy a new house when their first house is under contract, but hasn’t closed.
broker
A third party, like a real estate agent or mortgage broker, who facilitates a sale but is not actually a party to that sale or loan.
capital gain
Profit resulting from the sale of an asset, including real estate.
capital gains tax
A tax levied by the IRS on profit you make from the sale of your home or another investment.
capital improvement
Any addition to your property that increases its value.
cash out
The cash left over when a property is refinanced and the amount of the new mortgage is greater than the existing mortgage.
certificate of eligibility
A VA-issued document certifying that a veteran or spouse of a veteran is eligible for a VA loan.
certificate of release
A legal document that certifies you’ve paid off the lien on your home.
certificate of value
A VA-issued document, based on the property’s appraised value, that sets the maximum value and loan amount for a VA loan.
clear title
A title showing that a property is free of liens or ownership disputes and eligible for sale or transfer
closing attorney
Required in some states, but not all, the attorney who represents your interests at a closing
closing costs
Costs to settle your loan, which can include (but aren’t limited to) credit report fees, attorney’s fees, points, preparation and fees for a title search, appraisal fees, title insurance, etc, usually paid at or just before your loan closing.
closing date
The day on which you will sign the final agreement for your mortgage; documents will also be dated and notarized. Also known as settlement date.
co-signer
Someone who signs your loan with you, and assumes equal responsibility for its repayment, but does not receive the loan proceeds; a co-signer may be required of someone who has a low credit score or other issues that might prevent them from qualifying for the loan on their own.
cohabitation agreement
A legal document between people who choose to live together (particularly before marriage). It typically outlines how you’ll split expenses and real estate.
collateral
A physical asset, like your home, that is used to secure a loan and may be seized by the lender if you fail to repay the loan.
commission
The fee, usually a percentage of the value of the home or the amount of the loan, charged by a broker or agent for their work on the transaction.
common area
Shared portions of a building, grounds, and amenities in a condominium project or planned development, to be used by all of the owners, who share the expenses for their maintenance and operation
common area assessment
Fees paid by owners in a condominium project or planned development to cover costs and expenses associated with common areas.
community property
In some states, any property acquired during a marriage is presumed to be jointly owned by both parties; current community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
comparables
Also known as “comps,” recently sold properties similar to a property being appraised for sale; comps are used to determine the value of a home and generally include homes in the same area, of similar sizes, and with similar amenities.
compound interest
Interest added to the principal of a loan; future interest is based on the new total.
condominium
A unit within a building or development where many such units are available for sale; each person owns an individual unit and holds the deed and pays property taxes on that unit, and each owner shares responsibility and use of common areas and amenities.
construction loan
A short-term loan, obtained by the builder or homeowner, to finance construction of a new home.
Consumer Financial Protection Bureau (CFPB)
The independent United States government agency that’s responsible for protecting consumers within the financial sector.
contingency
A condition added to the contract that must be satisfied before the home sale; common contingencies include appraisal, inspection, sale of buyer’s current home, and loan approval.
contract
A written agreement that outlines the price, any contingencies, and any other agreements on the sale of the house.
conventional mortgage
A property loan not guaranteed or insured by any government agency.
convertibility clause
A provision of some ARMs (called convertible ARMs) allowing the borrower to convert to a fixed rate loan at specified times during the life of the ARM.
cooperative/co-op
A building or development in which residents have shares in the cooperative corporation that owns it, and have the right to occupy a specific unit; it is different from a condo in that residents don’t own the property, but a stake in the corporation that owns it.
counteroffer
A new offer from the buyer, seller, or lender made if an offer from the other party has been rejected.
covenant
A promise on a mortgage or a deed to follow specific rules, such as how the property can be used.
credit limit
The maximum amount of money you can use from a line of credit.
credit score (FICO score)
A score provided by three national credit bureaus, Equifax, Experian, and TransUnion, ranging from 300 to 850 that helps lenders determine their risk in lending to you.
cumulative interest
The total amount of interest accrued on a loan.
curtailment
Payment reducing the principal amount of your loan.
debt to income ratio
The percentage of your monthly gross income that goes towards paying debts; also known as back end ratio.
deed
A legal document specifying who owns a property; at closing, the deed will be delivered to the buyer, transferring ownership from the seller.
default
Failure by the borrower to make payments or meet other terms of a mortgage; default can result in foreclosure.
delinquent
Describes a borrower who has failed to make timely payments on a loan.
depreciation
A decrease in the value of a property, which can be due to any number of factors, including wear and tear on the home or changes in the neighborhood.
disclosure
Information consumers get about their loans.
down payment
The amount of money you pay upfront when buying property; the amount of money that won’t be included in your mortgage.
downsize
To move from a larger home to a smaller one; some people choose to do this in retirement and use the proceeds to partially fund their retirement.
due-on-sale (or transfer) provision
Allows the lender to collect payment in full if the borrower sells the property purchased with a loan; the term “transfer” is used for second mortgages.
earnest money
An amount of money deposited by a buyer showing the buyer’s intention to complete the transaction; if the deal falls through, the buyer may not be able to reclaim the money.
earthquake insurance
Coverage for loss or damage to your home (which may include other expenses, like a hotel stay if you cannot stay in your home) during an earthquake, which is not covered by homeowner’s insurance; like flood insurance, earthquake insurance is recommended in areas like California, where such an occurrence is more likely.
easement
The right to access property held by someone other than the owner.
eminent domain
The right of the government to use private property for public use, after giving fair compensation to the owner.
encroachment
An addition that intrudes or trespasses on a neighboring property.
encumbrance
Any claim on a property by a party other than the seller or buyer; can include outstanding mortgages, unpaid property taxes, or any liens.
Energy Efficient Mortgage
An FHA insured loan you can use to make energy-efficient upgrades to your property.
Equal Credit Opportunity Act (ECOA)
A federal law requiring lenders to extend credit without discrimination based on race, color, religion, national origin, age, sex, marital status, or dependence on public assistance income.
equity
The value of your home minus any outstanding loans or liens on your home.
equity gift
A contribution, usually made by a family member, towards a down payment for a home; requires a gift letter confirming that the mount does not have to be repaid; federal tax guidelines establish the amount of allowable gifts that are not taxed.
escrow
An account held by a third party, usually with a deposit from the buyer to show good faith.
escrow agent
A licensed agent, required in some states, who will be present at your closing and will make sure all documents are in order, and that terms of the sale have been met by both parties.
Fair Housing Act
A federal law that protects people from discrimination when they’re renting, buying, or getting financing for housing. The act says you can’t be discriminated against because of race, color, national origin, religion, sex, disability, or the presence of children.
fair market value
The price a home is likely to bring on the open market, usually determined by an appraisal making use of comparables.
Fannie Mae
Federal National Mortgage Association (FNMA), a publicly traded, government-sponsored enterprise whose goal is to buy and securitize mortgages in the secondary market.
Federal Housing Administration (FHA)
An agency in the Department of Housing and Urban development that provides mortgage insurance for qualified loans.
Federal Housing Administration (FHA) loan
A mortgage loan that’s insured or guaranteed by the federal government.
Federal Housing Administration (FHA) “Kiddie Condo” loan
A type of FHA loan that lets you co-borrow with a blood relative. One of the borrowers has to keep the house as their primary residence.
fee simple
An interest in property with no restrictions or limitations.
FICO
A software company based in San Jose, California that provides scores measuring consumer credit risk.
first mortgage
The first lien on a property, the loan that gets repayment priority in a sale or foreclosure.
fixed-rate mortgage
A loan with the same interest rate over the life of the loan.
fixture
Any physical property that is permanently attached to real property, that would likely damage that property if removed, like a swimming pool.
flood certification
A document provided by a qualified source stating the flood zone designation of a property.
flood insurance
Coverage for loss or damage to your home (which may include other expenses, like a hotel stay if you cannot stay in your home) in the event of a flood, which is not covered by homeowner’s insurance; unlike earthquake insurance, which is recommended but optional, flood insurance is required in designated hazard zones.
forbearance
An agreement between a borrower and lender usually intended to delay or avoid foreclosure; a specific period of time the borrower has to catch up on delinquent payments.
forced sale
When owners of a jointly owned property cannot agree on the potential sale of the property, one can bring a partition lawsuit to force the sale, after which the proceeds will be divided among the owners.
foreclosure
The process of the bank taking back ownership of a property because the homeowner was unable to pay the mortgage.
foreclosure property
A property being sold by the lender to repay a borrower’s loan when they are unable to pay; also referred to as bank owned property.
forgivable loan/mortgage
A type of loan where the payments are forgiven before they’re due if certain conditions are met. It’s usually offered as an incentive to move to a particular city, county, or neighborhood.
Form 1098
A tax form reporting the amount of mortgage interest and points paid in a tax year.
Freddie Mac
Federal Home Loan Mortgage Corporation, a publicly traded, government-sponsored enterprise whose goal is to buy and securitize mortgages in the secondary market.
fully amortizing loan
A loan paid in installments throughout the life of the loan, with no balloon payments required.
funding fee
A one-time fee collected by the Department of Veterans Affairs when you purchase a VA loan. You can either pay the funding fee up front or pay it off as part of your monthly mortgage payment.
Ginnie Mae
Government National Mortgage Association (GNMA), established in 1968 to promote homeownership by channeling global funding into the nation’s housing markets.
good faith estimate
A list of closing costs provided to the borrower by the lender.
gross annual income
The total amount of income you receive from all sources, including salary, dividends, etc, before deductions.
hard credit inquiry
When a potential lender checks your credit; unlike a soft inquiry (from you, your employer, companies who wish to offer you goods or services, or businesses that already have you as a client), a hard inquiry can lower your credit score. There is an exception: If you are rate shopping, multiple inquiries for the same type of loan over a short period may not affect your score.
Home Affordable Refinance Program (HARP) loan
A refinance option that may be available to you if you are current on your mortgage payments, but “underwater,” owing as much or more on your home than it’s worth, or close to it. The program is scheduled to end on September 30, 2017.
home equity
The difference between how much your house is worth and how much you owe on it.
home equity conversion mortgage (HECM)
A reverse mortgage insured by the federal government.
home equity line of credit (HELOC)
Funds that may be available to you based on the equity you have in your home.
home inspection
A professional examination of a property. It’ll tell you if there’s structural damage, termite damage, or any other red flags.
home warranty
A service contract that pays for replacement or repair of items in your home that it covers; first time homeowners who aren’t using to repair expenses may particularly benefit from a home warranty.
homeowners association (HOA)
A neighborhood organization that’s responsible for maintaining common areas and enforcing community rules. Membership is typically not optional and homeowners are expected to pay a monthly fee to help pay for maintenance.
homeowners insurance
Required by mortgage lenders, this protects your home in the event of fire, many natural disasters, theft and vandalism, and many other catastrophes; it also provides liability coverage for accidents and injuries to other people in your home or on your property.
Homeowners Protection Act
A law, enacted in 1998, to protect homeowners from paying private mortgage insurance (PMI) when it is no longer required of them; according to the law, lenders have to communicate certain information about PMI to borrowers, and they must terminate PMI at a specified point.
homestead exemption
A law designed to protect the equity of a home after a spouse dies. It’s meant to prevent the forced sale of the home to provide income to pay creditors and taxes.
HUD
Housing and Urban Development. The HUD-1 form is the standard, required real estate settlement form given to borrowers with federally related mortgages at least one day before the closing of the loan.
income property
A property that garners income for the owner, like a rental or vacation home.
index
A base interest rate, determined by the market conditions, and maintained by a third party, other than the lender or borrower; combined with the margin, the index usually determines the adjusted rate you pay if you have an ARM; LIBOR (London Inter-bank Offered Rate is typically used as the index rate of a first mortgage, and prime (set by the Wall Street Journal) for a second mortgage.
interest
Money paid at a specified percentage of the principal of a loan, either for the use of the proceeds of a loan or to delay repayment.
interest accrual rate
The percentage rate used to determine monthly payments on a loan.
interest only mortgage
For a set term, you will only pay the interest on your principal, and the amount of the principal will remain unchanged.
interest rate
The percentage of the loan’s principal that you’ll pay in addition to the principal.
investment property
Property acquired to generate income, usually through the collection of rent or sale of the property when its value increases.
joint mortgage
A mortgage loan (usually for married couples) that takes both people’s credit scores, debt to income ratios, etc. into account. Both you and all the other parties are legally responsible for paying the mortgage.
joint tenancy
When two tenants of a property share equal interest, and have the same rights to the property; the death of one joint tenant transfers ownership to that tenant’s survivors; tenancy by entirety, which is only available to spouses, includes a right of survivorship, which designates the surviving spouse as total owner of the property.
jumbo mortgage
A loan for exceptionally high-value properties that are above the limits of a conventional loan.
lease-to-own/rent-to-own
A contractual agreement between you and the seller. You agree to pay an upfront fee as well as above-market rent for the length of the lease. That money can be used toward your down payment if you choose to buy at the end of the lease.
liabilities
Your debts and financial obligations.
liability insurance
Coverage that protects against claims of injury or damage to another person on your property.
lien (second/junior lien)
The right a lender may have to seize property you have used as collateral if you don’t pay the debt. A second (or junior) lien is a second loan, using the same property as collateral, when the first has not been paid in full. If you do default on the loans, the first lien holder will be paid before the junior or second lien holder.
lifetime adjustment cap
The maximum amount a variable interest rate, as in those in an ARM, can increase over the life of the loan.
liquid asset
Cash or an asset that can be easily sold and converted to cash
liquidate
To sell assets for cash.
listing agent
The agent representing the seller of a home.
listing price
The amount a homeowner is asking for their home, also known as the asking price.
loan
An amount of money a borrower can access, and usually pays back over time in installments, including principal and interest.
loan origination
The process a lender undertakes when making a loan.
loan term
The amount of time specified for repayment.
LVR (loan to value ratio)
The percentage of the value of your home you need to borrow to buy the home.
margin
A percentage rate set by the lender when you apply for a loan; this is the number they add to or subtract from the index to determine your rate.
market value
The price a home is likely to bring on the open market, usually determined by an appraisal making use of comparables.
Masters exemption
A tax exemption that allows homeowners to rent out their homes for 14 days or less each year without paying taxes on the income, named after the Masters golf tournament in Augusta, Georgia.
maturity date
The date by which your entire loan, including principal, interest, and fees, is scheduled to be repaid.
mortgage
A loan with set terms extended to a borrower to purchase real estate; the lender typically holds a lien on the property until the loan is repaid.
mortgage broker
The liaison between a buyer and a mortgage lender.
mortgage insurance
Insurance offering protection to the lender if you default on your loan; typically required by lenders if you put less than 20% down at closing.
mortgagee
The mortgage borrower
mortgager
The mortgage lender.
multi-family residence
A property with units for more than one family (duplex, triplex, etc.).
Multiple Listing Service (MLS)
A system used to disseminate information about properties for sale; real estate brokers use it to communicate that information.
National Association of Realtors
A trade association offering the designation of REALTOR® to agents and brokers who complete further education and agree to adhere to the standards and code of ethics of the association.
National Flood Insurance Program (NFIP)
A federal program providing flood insurance to homeowners in designated areas.
negative amortization
When the amount you pay on your loan each month does not cover the interest, and the principal balance rises over the life of the loan.
net proceeds
Money left over after the sale of your home, when you subtract any outstanding loan balances and fees associated with the sale from the amount of the sale.
no closing cost mortgage
A loan in which no closing costs will be paid by the borrower out of pocket at closing; those costs may be included in the principal of your loan, or the lender may charge you a higher interest rate over the life of the loan.
non-owner occupied
A property occupied by someone other than the owner, like a rental home or vacation property.
non-recourse loan
A loan secured by collateral only; in the event of default, the borrower is not personally liable, and only the collateral can be seized to recoup the loan.
option fee
An upfront fee you pay the potential seller in a lease-to-own/rent-to-own contract. The money will be held in escrow and can be put toward your down payment when it’s time to buy.
origination
The date the proceeds of your loan are disbursed to the seller.
origination fee
Money paid to your lender; the commission your broker receives for getting you a loan.
outstanding balance
The amount you still owe on your loan.
owner financing
When the seller of the property provides a loan to the buyer.
owner-occupied
The home you own and claim as your primary or principal residence.
P & I
Abbreviation for principal and interest; principal and interest make up most of your monthly mortgage payment, which also includes escrow payments for things like taxes and insurance.
payoff
The amount you would need to pay to satisfy your loan.
peer-to-peer lending
A network through which private lenders lend money to qualified borrowers, bypassing traditional sources of loans.
PITI
An abbreviation for principal, interest, taxes, and insurance, the components that make up most monthly mortgage payments.
points
Also called discount or mortgage points, fees paid to your lender in exchange for a lowered interest rate on your mortgage; each point is equal to 1% of the total amount of your mortgage.
preapproval
Often the first step in the homebuying process. A pre-approval letter says that your lender has looked at your credit, income, etc. and preliminarily said you’ll qualify for a certain amount of money. The letter is usually good for 60-90 days and isn’t a guarantee you’ll get final approval for that amount or at that rate.
preforeclosure sale
Also known as a short sale; the sale of a home in which the proceeds are less than the amount of money owed (liens) on the home, and the lenders have agreed to accept less than the amount owed to satisfy the loan.
prepaid interest
The interest that accrues on a mortgage from the date of disbursement to the beginning of the next payment period, to be collected at closing.
prepayment
Cash paid to reduce the principal balance of a mortgage before the principal is due.
prepayment penalty
Some lenders add this to your agreement to prevent you from paying your mortgage off earlier than agreed, to protect themselves from losing interest you would have paid; also known as an account termination fee.
prequalification
The process of contacting a mortgage broker before you look for a home, and giving them the information they need to offer you a loan, like your credit score, income, and any collateral you have; prequalification is not a guarantee of a loan.
primary residence
The home you reside in the majority of the time.
prime rate
A rate that is calculated daily and established as the best possible rate, offered to the most qualified borrowers; also known as the Wall Street Journal Rate.
principal
The amount of money, without interest or fees, included in your loan.
principal and interest
Principal and interest make up most of your monthly mortgage payment, which also includes escrow payments for things like taxes and insurance.
principal balance
The unpaid portion of your original loan amount; does not include interest or other fees.
principal payment
The amount of your monthly payment, which can also include interest, insurance, taxes, and escrow payments, that reduces the principal balance of your loan.
principal, interest, taxes, and insurance (PITI)
The components of your monthly mortgage payment.
Private Mortgage Insurance (PMI)
Protection for lenders if a borrower defaults on their loan; PMI is often required by lenders for buyers offering less than 20% of a home’s value as a down payment. The price is a percentage of the price of your mortgage each year.
processing fee
The amount charged to cover the administrative costs of originating a loan.
promissory note
A written promise to repay a loan.
property agreement
A legal document that discusses who owns property you and your significant other acquired before and during your relationship.
property tax
A tax on your home levied by the county where you live, and determined by a percentage of the assessed value of your home; usually included in your mortgage payment.
property valuation
An informed estimate of property value made by a qualified professional; usually required with a loan application.
property value
Also called appraisal or appraised value, a value placed on your home by a qualified professional, often for the purpose of insurance, taxes, a home equity line of credit, or a sale.
proprietary lease
A lease granted to one corporation by another. In the case of co-ops, the lease allows a shareholder in the building to occupy one of the apartments within under certain conditions.
public auction
The public sale of a home in foreclosure to the highest bidder.
purchase agreement
A written contract between the buyer and seller outlining the terms and conditions of a home sale.
purchase price
Also known as the sales price, the total amount exchanged between a buyer and seller in the purchase of a home.
qualified mortgage
A loan your lender reasonably believes you can re-pay, in that they have vetted you and know certain information, like your credit score, income, reasonable ability to pay, debt to income ratio, and credit history.
qualified personal residence trust
An irrevocable trust designed to remove the value of your primary residence or secondary residence from your taxable estate.
quitclaim deed
A legal document used to transfer part or total ownership of property to another person, usually without an exchange of money.
rate
A percentage expressing the rate of interest on your loan.
rate cap
A limit on the percentage your loan rate can change during an adjustment period or over the life of the loan.
rate lock
A guarantee from your lender that you will have a specific rate for a period of time or for the life of your loan.
real estate
A piece of land and anything attached to it, like a building or a home.
real estate agent
Someone licensed by the state where they practice who can help you find a home and negotiate the purchase of the property.
real estate broker
A real estate agent who has further education and has taken additional state licensure exams; a broker can work alone or hire other agents to work for them.
real property
Any property that’s fixed to the land. That includes buildings, but also rights--such as rights to use natural resources like timber, oil, and gas.
REALTORⓇ
A licensed agent or broker who is a member of the National Association of Realtors and has pledged to adhere to its standards and code of ethics.
recorder
Also known as Registrar of Deeds or County Clerk, the public official who keeps records of real estate and property transactions in a particular area.
recording fee
The charge, paid to the government, for recording property transactions and deeds.
refinance
Obtaining a new loan, with new terms, for your property, and using the proceeds to pay off the original loan; often done to reduce interest rates or monthly payments.
rehabilitation mortgage
Also known as a rehabilitation loan; an amount of money you borrow based on what the final value of a home will be, after you renovate or “rehabilitate” the property.
relationship discount
A rate discount extended by some lenders as a bonus of having an existing relationship with them.
relocation
Moving from one location to another, usually outside of your current city or state, often related to employment.
remaining balance
The amount of principal that has not been repaid on your mortgage.
remaining term
The number of payments remaining on your mortgage.
repayment period
The amount of time you have to repay your mortgage.
repayment plan
A plan to repay a delinquent loan.
reserve fund/reserve account
The money a homeowners association sets aside to maintain, repair, or replace common areas of the property (roofs, pools, tennis courts, etc.).
reserve study
A budget planning tool that helps the homeowners association decide how much it needs to charge in dues to fully fund its reserve fund.
reserves
The amount of money you have set aside in savings to pay your mortgage in case of an emergency (job loss, unforeseen expenses, etc); some lenders require verified reserves, usually in the amount of two monthly payments.
Residential Lead-Based Paint Hazard Reduction Act of 1992
A federal law that says anyone selling a home built before 1978 has to tell a potential homebuyer or renter if the home has lead-based paint or other lead-based paint hazards.
RESPA
Real Estate Settlement Procedures Act, is an act designed to protect the consumer in a mortgage transaction. The act is administered by the Consumer Financial Protection Bureau (CFPB) and requires that lenders disclose all terms of the loan to a borrower within a certain time frame and prevents them from charging unnecessarily large fees.
retirement community/55 and older community
A community specifically designed for people of retirement age, who are able to care for themselves. Typically these communities provide planned social activities.
reverse mortgage
When a homeowner borrows money against the value of the home; no payment of principal or interest is required until the homeowner dies or sells the home.
revolving line of credit
A line of credit with a limit; you can borrow up to that limit at any time, and can borrow it again after it’s been repaid; examples include credit cards and HELOCs.
right of first refusal
A property owner’s obligation to offer the property for sale to another party before offering it on the open market.
right of survivorship
The right of the surviving tenant to occupy a property on the occasion of the other tenant’s death in a joint tenancy.
riparian rights
The rights of a landowner whose property is on a body of water to use the water for personal use (ie using lake water for an irrigation system).
seasoned funds
Funds that have been in your bank account for a certain amount of time, often at least 60 days; lenders like to know that you aren’t borrowing at the last minute to pay your down payment.
second home
A property you own in addition to your primary residence and occupy part-time; if a second home is rented to tenants part-time to generate income, it is known instead as an investment property.
second mortgage
A second lien on your property; a second loan using your home as collateral; often a HELOC, but not always.
secondary mortgage market
Where loans are bought and sold by lenders and investors; what this means for you is that your loan may not always be serviced by the same lender, but it does not mean the purchaser has the right to change the agreed to terms of your loan.
secured loan
A loan backed by physical property as collateral; the lender has a lien on the property.
security
The property used as collateral in a secured loan; if the loan is not paid, the lender has the right to sell the property to recoup their loss.
security instrument
A deed or written agreement specifying the collateral used in a secured loan, and the lender’s rights to it.
security interest
The lender’s legal claim on the collateral used to secure a loan.
seller’s property disclosure statement/seller disclosure
Many cities, counties, and states have laws that dictate what the seller has to tell the buyer about the house before the deal goes through. The disclosure can include anything from whether or not there’s lead paint in the house to if the property’s on a flood plain. The specifics will depend on the laws where the property is located.
settlement
Also known as a closing; the completion of the sale and purchase of a property.
settlement agent
The person or entity who closes your sale; who is required to oversee a closing varies from state to state and can be an attorney, title agent, title insurer, or escrow agent.
settlement costs
All costs associated with closing your loan, which can include (but aren’t limited to) credit report fees, attorney’s fees, points, preparation and fees for a title search, appraisal fees, title insurance, etc, usually paid at or just before your loan closing.
settlement statement
Also known as a settlement sheet, a document prepared by the settlement agent outlining all fees and adjustments for everyone at the closing.
short sale
The sale of a home in which the proceeds are less than the amount of money owed (liens) on the home, and the lenders have agreed to accept less than the amount owed to satisfy the loan.
single-family residence
A detached home, as opposed to one connected to other properties physically (see also: multi-family residence).
soft credit inquiry
When you, a business who already has you as a client, or a business interested in promoting services to you checks your credit score; these inquiries, as opposed to hard credit inquiries from potential lenders, do not affect your credit score.
sourced funds
Funds, like money for a down payment, that can be traced to the source (i.e. the money didn’t just fall into your bank account from the sky).
start rate
The interest rate at the beginning of your adjustable rate mortgage (ARM).
subdivision
A larger piece of property divided into parcels for individual home.
subordinate financing
Any loan or lien on your property in addition to your first mortgage; subordinate loans will be paid after the first mortgage in the event of foreclosure.
subprime
Mortgages, often at a higher rate of interest, extended to buyers who may have credit problems or other difficulties obtaining a loan.
survey
A map of your property made by a qualified professional showing boundaries, easements, encroachments, improvements, and other physical features.
sweat equity
Labor or services you personally perform to build or rehabilitate your property.
swing loan
Also known as a bridge loan, a loan used to bridge the gap between the end of one loan and the beginning of another; can be used by someone who is ready to buy a new house when their first house is under contract, but hasn’t closed.
tax lien
A lien on your property for unpaid taxes.
tax savings
The amount of money you may save on taxes by itemizing deductions such as mortgage interest and property tax.
taxes and insurance payment
In addition to paying interest and principal, your mortgage payment includes an amount paid into escrow to cover future tax and insurance bills.
tenancy by the entirety
Available in most states, only to married couples, gives each spouse undivided ownership in the property, and the right to occupy it; right of survivorship is included.
tenancy in common
Joint tenancy without right of survivorship.
term
The amount of time it will take to pay off your loan.
termination clause
A section of your contract that says what will happen if the terms are not being met. In the case of your construction contract, it gives you and your contractor the right to end your relationship under certain circumstances.
TILA
Truth in Lending Act, a law that protects consumers, requiring lenders to disclose all relevant terms of a loan before extending an offer to the borrower.
title company
The agency that investigates a title of a property for sale and will then issue title insurance.
title insurance
Provides coverage for either the lender or owner of a property; protects the insured against loss resulting from any undiscovered claims or liens on that property.
title search
Finding documents that outline the history of a property, ensuring that there are no outstanding liens or people with claims to the property.
total approved amount
The amount of money a lender is willing to lend you; you can buy a property for less than your total approved amount if you wish.
total cash required to close
The amount of cash you will owe towards fees at the closing of your property, which can include (but aren’t limited to) credit report fees, attorney’s fees, points, preparation and fees for a title search, appraisal fees, title insurance, etc.
town home
A home that shares a wall or walls with surrounding homes.
transaction fee
The amount of money that may be charged every time you use your HELOC.
transfer fee
Money owed when a property changes ownership, either to the state, county, or city; some homeowners associations (HOAs) also charge transfer fees.
transfer of ownership
When a property changes hands, or one party is removed from a title where more than one party is listed.
transfer tax
Money owed when a property changes ownership, either to the state, county, or city.
trustee
Someone designated to control a property for the benefit of someone else.
truth in Lending Act
A federal law requiring that your potential lender disclose all terms and conditions of a loan in a standard format, so you can compare different loans.
underwriter
The person who will approve or deny you a mortgage, based on established criteria.
unsecured line of credit
Funds available for you to borrow that are not secured by collateral, usually accessed with a credit card or check.
unsecured loan
A sum of money you can borrow without offering collateral to back the loan.
upfront cost
Any fee you pay to apply for a mortgage.
VA loan
A loan made to eligible US veterans and their spouses and guaranteed by the US Department of Veterans Affairs.
vacation home
A property you own in addition to your primary residence and occupy part-time; if a vacation home is rented to tenants part-time to generate income, it can be known as an investment property.
variable rate
As opposed to a fixed rate, a percentage rate on the principal of your loan that can fluctuate.
walk-through
The final inspection before closing, to make sure the property is in the same condition as it was when the first inspection was made, and that any improvements or repairs included in the contract have been made.
warranty deed
A legal document transferring property from the seller to the buyer, and guaranteeing that the seller holds a clear title to the property.
windstorm insurance
Similar to flood and earthquake insurance, coverage for loss or damage to your home (which may include other expenses, like a hotel stay if you cannot stay in your home) during a windstorm, which is not covered by homeowner’s insurance.
year-end statement
A report outlining the details of your current loan, including how much interest was paid in the preceding year, and how much you still owe on the loan.
year-end statement
A report outlining the details of your current loan, including how much interest was paid in the preceding year, and how much you still owe on the loan.
“underwater”mortgage
When a homeowner owes more on their home than it’s worth.