A fee related to the title insurance required by the lender. A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property. For our comparison purposes, an abstract exam fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A sales contract signed by both seller and buyer that defines the terms of the sale.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
Adjustable Rate Mortgage
An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
A fee charged by a lender to cover the administrative costs of processing your loan request. For our comparison purposes, this fee is typically a lender fee.
A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home and the closing costs that you might expect to pay.
A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.
The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amortization term is 360 months.
To repay a mortgage with regular payments that cover both principal and interest.
An annual fee for a line of credit is sometimes required. If an annual fee is shown you will be billed for that amount, annually, until the loan is paid in full.
Annual Percentage Rate (APR)
To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.
The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.
An analysis performed by a qualified individual to determine the estimated value of a home.
In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.
A person qualified by education, training, and experience to estimate the value of real property and personal property.
An increase in the value of a property due to changes in market conditions and other causes. The opposite of depreciation.
To make it easier for consumers to compare mortgage loan interest rates the federal government developed a standard format, called an "Annual Percentage Rate" or APR, to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.
An ARM (adjustable rate mortgage) is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.
The valuation placed on property by a public tax assessor for purposes of taxation.
The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
A public official who establishes the value of a property for taxation purposes.
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds and so on).
A loan that does not have to be paid in full if the home is sold. Instead, the new owner can take over payments on the existing loan and pay the seller the difference between the sales price and the balance on the loan.
The transfer of the seller’s existing mortgage to the buyer. See assumable mortgage.
Balance Due at End of Loan Term
Some home equity loans may have a balance due at the end of the loan term. This means that if you make the minimum monthly payment during the life of the loan the entire balance will not be paid in full. A "balloon" payment will be due at that time.
A financial statement in a table form that shows assets, liabilities and net worth.
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.
The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.
A court proceeding in which a debtor, who owes more than his assets, can relieve the debts by transferring his assets to a trustee.
The person designated to receive the benefits resulting from certain acts.
To transfer personal property through a will or last testament. Compare with devise.
Bi-weekly Payment Mortgage
A mortgage that requires payment to reduce the debt every two weeks instead of monthly. The 26 (sometimes 27) biweekly payments are each equal to one-half of the monthly payment that would be required with a standard 30 year fixed-rate mortgage. The result is a faster loan balance reduction with substantial savings in interest.
Bill of Sale
A written instrument that transfers title to personal property.
An agreement between a buyer and seller to purchase real estate. A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
Blanket Insurance Policy
A single policy that covers more than one piece of property (or more than one person).
Sometimes called a "swing loan", a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.
A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.
Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually excludes weekends and holidays.
A process that allows a borrower to obtain a lower interest rate on a mortgage by paying discount points to a lender. A temporary buydown will reduce the interest rate paid during the first few years of the loan. A permanent buydown reduces the interest rate over the entire life of the loan.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.
The cost of an improvement made to extend the useful life of a property or to add to its value.
Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.
Cash Out Refinance
A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. This additional cash can be used by the borrower for any purpose.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan.
Certificate of Title
A statement of opinion rendered by a title company or attorney, stating that a title to real property is legally held by the current owner.
Chain of Title
A history of all documents, including conveyances and encumbrances, that affect title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Term sometimes used to describe the frequency of payment or interest rate changes in an adjustable-rate-mortgage (ARM).
City/County Tax Stamp
A tax that is required in some municipalities if a property changes hands or a new mortgage is obtained. The amount of this tax can vary with each state, city and county. For our comparison purposes, this fee is considered a tax or other unavoidable fee.
A title that is free of clouds, liens, disputed interests or legal questions as to ownership of the property.
Close of Escrow
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the closing involves the borrower and the lender. Sometimes referred to as the settlement or the close of escrow.
Closing Cost Item
A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.
The total of all the items that must be paid at closing related to your new mortgage.
Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
A person who signs a promissory note along with the primary borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. Sometimes called a co-signer.
Property pledged as security for a debt. The borrower risks losing the collateral if the debt is not repaid according to the terms of the loan contract.
The process of bringing a delinquent debt current and the filing of the necessary notices to proceed with repossession or foreclosure when necessary.
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a small percentage of the price of the property or amount borrowed. Sometimes called points.
A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a loan commitment.
In some western and southwestern states, a form of ownership under which property accumulated through joint efforts of husband and wife is presumed to be owned equally by them unless acquired as separate property of either spouse.
An abbreviated form of comparable properties. Comparables are used for comparative purposes in the appraisal process and are properties that are very similar to the property being appraised. They have been sold recently and have approximately the same size, location and features. Comparables help the appraiser determine the approximate fair market value of the subject property. Often just called “comps”.
Interest paid on the original principal balance, and on the accumulated and unpaid interest.
The taking of private property for public purpose by a government under the right of eminent domain. Also, the determination that a building is not fit for use or is dangerous and must be destroyed.
A form of real estate ownership in which each owner has title to a specific unit in a project and joint ownership in the common areas of the project.
Changing the ownership of an existing rental complex building to the condominium form of ownership.
A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as "jumbo mortgages". The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.
A short term loan that is used to finance the construction of a new home. During the term of the loan the lender makes payments to the builder as the work progresses and the borrower makes interest payments on only the funds that have been disbursed to the builder. Typically, the construction loan is refinanced into a permanent loan after the home is completed.
Consumer Reporting Agency (CRA)
A company that prepares detailed reports used by lenders to determine a potential borrower’s creditworthiness. These agencies obtain data for these reports from a credit repository as well as from other sources. More commonly referred to as credit bureaus.
A condition that must be met before a contract is legally binding. For example, a lender's commitment to provide financing to a borrower may be contingent on receipt of an acceptable appraisal.
An oral or written agreement to do or not to do a certain thing for consideration.
A mortgage that is not insured or guaranteed by a government agency.
Another person who signs your loan and assumes equal responsibility for it.
The fee associated with a lender sending documents to other parties involved in the loan, like an attorney or title company. For our comparison purposes, this fee is considered a third party fee, however some lenders may choose not to pass these costs on to the borrower.
A lender may reduce the actual amount of the closing costs by a credit in order to offer more competitive fees.
An agency that gathers and keeps your credit record.
A record of a person’s debt history, including all open and fully repaid obligations. A credit history helps a lender to determine whether a potential borrower has satisfactory history of repaying debts in a timely fashion.
Credit Life Insurance
A type of insurance, often bought by borrowers, that will pay off the debt if the borrower dies while the policy is in force.
A record of an individual's current and past debt repayment patterns. A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner. For our comparison purposes, the credit report fee is considered to be a third party fee.
Credit Risk Score
A credit score measures a consumer's credit risk relative to the rest of the U.S. population, based on the individual's credit usage history. The credit score most widely used by lenders is the FICO® score, developed by Fair, Isaac and Company. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO® scores represents lower credit risks, which typically equate to better loan terms. In general, credit scores are critical in the mortgage loan underwriting process.
Credit Scoring System
A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.
Health, life or accident insurance designed to pay the outstanding balance of a debt.
A person or business that is owed money.
Economic indicator that measures the level of outstanding consumer installment debt. Can be used in conjunction with real sales to determine whether cash or credit is fueling growth. Frequency: monthly. Source: Federal Reserve.
In a closing statement or settlement, an item that is charged to a buyer or seller. Compare with credit.
An obligation to pay another.
The written instrument that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.
A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.
A breech of the agreement with a lender such as the failure to make loan payments in a timely manner.
The failure to make payments on debts when they are due.
Funds required by a lender in advance of the processing of a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.
A decline in the value of real or personal property. The opposite of appreciation.
To pay out on the loan.
Information that must be given to consumers about their financial dealings.
Lenders will prepare some of the legal documents that you will be signing at the time of closing, such as the mortgage, note, and truth-in-lending statement. This fee covers the expenses associated with the preparation of these documents. For our comparison purposes, the document preparation charges are considered to be a lender fee.
The portion of the purchase price of a property that the borrower will be paying in cash rather than included in the mortgage amount.
Generally associated with home equity lines of credit, the draw period is the period of time that you can access funds from the line. After the draw period expires, a repayment period generally follows.
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as a binder deposit.
A right of way giving persons, other than the owner, access to or over a property.
The right of a government to seize private property for public use upon payment of its fair market value. Eminent domain is the legal basis for condemnation proceedings.
Includes the unemployment rate, non-farm payroll, average work week and overtime. The non-farm payroll is probably the most watched number. Increases in these numbers can be an indication of pending “wage inflation”.
Anything that affects the title to a property such as a mortgage, judgement, or easement.
Additions to a title insurance policy for special coverage such as surveys, environmental and state particular endorsements that are not included in the standard insurance policy. For our comparison purposes, the fees for endorsements are considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
Equal Opportunity Act (ECOA)
The federal regulations that requires lenders to make credit equally available to all without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
An owner's financial position in a property. Equity is the difference between the property's value and the amount that is owed on mortgages.
Funds paid by one party to another to hold until a specific date when the funds are released to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their principal and interest payments for the payment of real estate taxes and hazard insurance. This is also referred to as impounds. The money is held by the lender to make payments when they are due. An escrow can also refer to funds that are held by a third party to ensure the completion of repairs or improvements that must be completed on the property but that cannot be done prior to closing.
The account that funds are held in by the lender for the payment of real estate taxes and/or homeowner's insurance. Can also refer to the account that funds are held in for the completion of repairs or improvements to a property that cannot be completed prior to closing.
A periodic review of escrow accounts to determine if current monthly deposits balances will provide sufficient funds to pay property taxes, hazard insurance and other bills when they come due.
The portion of a borrower’s monthly mortgage payment that is held by the loan servicing company to pay for property taxes, hazard insurance, mortgage insurance and other items as they become due.
The nature and extent of interest that an individual has in real property (degree of ownership). Also, the combined total of all real and personal property owned by an individual at the time of their death.
A fee associated with an inspection by a title company of public records and other documents to determine the chain of ownership of a property. For our comparison purposes, exam fee is considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
Examination of Title
The report on the title of a property from the public records. Not as thorough as a full title search.
A person named in a will to administer an estate. Most Courts will appoint an administrator if no executor is named. (The feminine form is executrix)
Fair Credit Reporting Act
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.
Fair Market Value
The highest price that a willing, but not compelled, buyer would pay, and the lowest price that a willing, but not compelled, seller would accept.
FNMA (Federal National Mortgage Association) One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.
Federal Housing Administration (FHA)
An area of the U.S. Department of Housing and Urban Development (HUD) that insures low downpayment mortgages granted by some lenders. The loan must meet the established guidelines of FHA in order to qualify for the insurance.
Absolute ownership of real property; the greatest possible interest a person can have in real estate.
Fee Simple Estate
An unconditional, unlimited estate of inheritance that represents the greatest possible interest in land that can be enjoyed.
FHA Co-insured Mortgage
A mortgage for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the borrower’s default.
A mortgage insured by the Federal Housing Administration (FHA). FHA loans are also known as government mortgages.
The total dollar amount credit will cost.
A mortgage that is the first loan recorded in the public record and generally the primary loan against a property.
The monthly payment due on a mortgage loan which includes both principal and interest.
Fixed Rate Mortgage
A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common mortgage terms are 30 and 15 years. With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15 year fixed rate, but the 15 year loan allows you to repay your loan twice as fast and save more than half the total interest costs.
An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.
Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water. It is required by law that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.
The legal process in which a borrower's ownership of a property is dissolved due to default. Typically, the property is sold at a public auction and the proceeds are used to pay the loan in full.
The loss of money, or anything else of value, due to a breach of legal obligation or contract.
FHLMC (Federal Home Loan Mortgage Corporation) One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with monthly payments that are sufficient to liquidate the remaining principal balance over the amortization term.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA) or, is insured by the Federal Housing Administration (FHA). Compare with conventional mortgage.
A technical term used in deeds of conveyance of property to indicate a transfer.
The person to whom an interest in real property is conveyed.
The person conveying an interest in real property.
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as homeowner's insurance.
Home Equity Line of Credit (HELOC)
A loan secured by real property, usually in a subordinate position, that allows the borrower to receive the loan proceeds in the form of multiple advances up to a limit that represents a maximum percentage of the borrower's equity in a property.
Home Equity Loan
A loan secured by a subordinate mortgage on one's principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.
A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. A complete and satisfactory home inspection is often required by the homebuyer. Compare with appraisal.
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as hazard insurance.
A nonprofit association that manages the common areas of a condominium project or planned unit development (PUD). In a condominium development, the association has no ownership interest in the common elements. In a PUD, it holds title to the common elements of the project.
Homeowners Association Dues
Payments made to an association responsible for the maintenance of the common areas in a condominium or subdivision development.
A type of insurance policy that covers repairs to certain parts of a home for an agreed upon period of time. It is typically provided by the contractor or seller as a condition of the sale
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type and amount. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance) by the borrower’s monthly gross income. Also referred to as a front-end ratio or a top ratio.
HUD, also known as the U.S. Department of Housing and Urban Development, insures home mortgage loans made by lenders meet minimum standards for such homes.
HUD Median Income
Median family income for a particular county or metropolitan statistical area, as estimated by the Department of Housing and Urban Development (HUD).
Also referred to as the closing statement or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
Having inadequate cash to meet current obligations. Real property is considered an illiquid investment because of the time and effort required to convert it to cash.
In-file Credit Report
A computer-generated report containing credit and legal information obtained from one of the main credit bureaus.
Real estate developed and improved to produce steady income.
A published interest rate used to establish the interest rate offered on an Adjustable Rate Mortgage (ARM). Some of the most common indices are treasury bills, treasury securities, London Inter-Bank Offering Rates (LIBOR) and the Cost of Funds Index (COFI).
Individual Retirement Account
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.
Initial Interest Rate
The original, starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate.
A regularly scheduled periodic payment that a borrower agrees to make to a lender.
Borrowed money that is repaid in equal periodic payments. Cars and furniture are often paid for with installment loans.
A property title that a title insurance company agrees to insure against defects and claims.
A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.
A document stating that insurance is only temporarily in effect. Because the coverage will expire by a certain date, a permanent policy must be obtained prior to the expiration date.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
The cost of the use of money.
Interest Accrual Rate
The rate at which interest accrues on a mortgage. Usually, it is also the rate used to calculate the monthly payments.
The cost of borrowing a lender's money. Interest takes into account the risk and cost to the lender for a loan. The interest rate on a fixed rate mortgage depends on the going market rate and how many discount points you pay up-front. An adjustable rate mortgage's interest is a variable rate made up of the index and the lender's margin.
Interest Rate Buy-down Plan
An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower's interest rate or monthly payments during a specified period of a loan.
Interest Rate Ceiling
The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
Interest Rate Floor
The minimum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
A property that is not occupied by the owner.
A credit account held by two or more people so that all can use the account and all assume legal responsibility to repay.
A form of co-ownership that gives each tenant equal undivided interest and equal rights in the property, including the right of survivorship.
A decree made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
A lien on the property of a debtor resulting from a judgment.
Judgment Search Fee
A fee charged by a title company to search the public record for judgements filed against a property owner or borrower that could ultimately encumber the title of the property. For our comparison purposes, a judgement search fee is considered to be a third party fee. Some lenders will include this fee in the title insurance cost.
A loan that exceeds the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a non-conforming loan.
The penalty a borrower must pay when a payment is made after the stated due date.
A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.
A written contract between a property owner and a tenant that expresses the conditions under which the tenant may possess the real estate for a specified period of time and rent.
A legal property description that is sufficient to locate and identify the property without verbal testimony.
The bank, mortgage broker, or financial institution providing the loan funds to a borrower.
Fees that are kept by the lender to cover some of their expenses and to meet their profitability goals. Typically fees such as origination fees, discount points, processing/administration fees, underwriting fees and document preparation fees are lender fees. This is the area of fees that you should compare very closely from lender to lender before making a decision.
A person's financial obligations including both long-term and short-term debt, as well as any other amounts that are owed to others.
An insurance policy that offers protection against claims that a property owner's negligence resulted in bodily injury or property damage to another party.
Liability on an Account
Legal responsibility to repay debt.
A loan secured by real estate. An encumbrance against a property for money due. The lien can be voluntary such as a mortgage or involuntary such as a judgement.
A certificate to verify there are no claims by one person on the property of another as security for money owed.
Lifetime Interest Rate Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the term of the loan.
Lifetime Payment Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the term of the loan.
Line of Credit
An agreement by a financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
An asset that is easily converted into cash.
Borrowed money that is usually repaid with interest.
A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a commitment letter.
A universal form, created by the Consumer Financial Protection Bureau (CFPB), that is provided to the borrower within three business days after receipt of the loan application. The form contains important details about the loan, including the estimated interest rate, monthly payment and total closing costs. It will also detail any special loan features such as increases in the interest rate, the mortgage loan balance or prepayment penalties.
The process by which a mortgage lender creates a mortgage secured by real property.
The number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.
Loan to Value Ratio (LTV)
A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan to value ratio, divide the loan amount by the home's value. The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.
The number of days that the lender will guarantee the interest rate offered for a loan. In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.
A fee, usually associated with a survey or title policy to obtain a plat of the property to verify that there are not encroachments or easements that would affect a lender's desire to provide financing. For our comparison purposes, the lot drawing fee is considered to be a third party fee.
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
A homeowners' association sometimes formed in a large condominium project or planned unit development (PUD) that is made up of representatives from associations covering specific areas within the project.
The date on which the principal balance of a financial instrument becomes due and payable.
Merged Credit Report
A credit report that contains information from at least three credit repositories. Any duplicate entries are combined to provide a concise summary of your credit.
The legal document used by a borrower to pledge their property as security in order to obtain a loan. In some areas of the country, the mortgage is called a "deed of trust".
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The borrower usually pays the cost of the insurance and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as private mortgage insurance.
Mortgage Insurance Premium (MIP)
Amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company
Mortgage Life Insurance
A type of term life insurance often bought by mortgagors. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. Not to be confused with mortgage insurance.
Mortgage Registration Fee
A fee or tax charged by some state and local governments when a mortgage is obtained. For our comparison purposes, the mortgage registration fee is considered to be a tax and other unavoidable fee.
A tax charged by some state or local governments that is paid to the state when a mortgage is obtained. For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.
The person or company who provides the loan funds to the borrower.
The person who receives funds from a lender in exchange for a security interest in the property. Commonly known as the borrower.
A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
A fee charged by title companies in some states to cover the cost of searching the public record for court orders against the current owner or proposed purchaser that could affect the title of the property. For our comparison purposes, the name search fee is considered to be a third party fee.
National Association of Realtors®
An organization of Realtors®, devoted to encouraging professionalism in real estate activities
A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.
Net Cash Flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance.
Net Closing Costs
For our comparison purposes, the net closing costs are the total closing costs quoted by a lender, less any credit or rebate that is offered.
The total value of all of a person's or company's assets, minus all liabilities.
No Cash Out Refinance
A refinance loan is an amount that pays off the existing mortgage balance on the property and does not provide the borrower with any cash at closing.
A mortgage that exceeds the maximum loan amount for the most common mortgage investors. The cost of obtaining a non-conforming mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a jumbo loan.
Any assets that cannot easily be converted into cash
A fee for a licensed notary public to certify your signature on the loan documents.
The written agreement signed by the borrower at closing that contains the promise to repay the loan. The note also contains the terms of the loan, such as interest rate, payment, and term.
The interest rate stated on a mortgage note. Also called nominal rate or face interest rate
Notice of Default
Formal written notice to a borrower that a default on a loan has occurred and that legal action may be taken.
Percentage of currently rented units in a building, neighborhood, complex, or city.
The ability to obtain status details about the progress of your mortgage request at the website of the lender. This convenience allows you to learn about the status of your request anytime you'd like.
A lease which may involve a balloon payment based on the value of the property when it is returned.
Original Principal Balance
Total amount of principal owed on a loan before any payments are made.
A fee charged by a lender as a way to cover processing expenses or to increase their profitability for originating a mortgage loan. Most commonly, the origination fee is expressed as a percent of the loan amount. For our comparison purposes, the origination fee is considered to be a lender fee.
One of our goals is to provide you with apples to apples comparison of all the fees charged by our top lenders to obtain a loan. Fees listed as other fees cannot easily be compared to any standard fee type and should be evaluated and compared separate from the standard fees.
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.
A loan payment that is not great enough to cover the scheduled monthly payment on a mortgage.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM). The payment change date usually occurs in the month immediately after the adjustment date.
Periodic Payment Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase during a single adjustment period.
Periodic Rate Cap
On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase during a single adjustment period.
(P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.
Planned Unit Development (PUD)
A housing project that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual unit owners.
Plat Drawing & Conservation Fee
A fee charged by title companies in some states for obtaining a map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. This drawing is required to obtain title insurance. For our comparison purposes, the plat drawing and conservation fee is considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
A fee charged by title companies in some states to review the registration of a public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. For our comparison purposes, the plat registration fee is considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
Power of Attorney
A written legal instrument that authorizes another person to act on one's behalf. A power of attorney can grant either complete or limited authority.
Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.
Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.
Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date.
A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.
The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.
The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.
Principal & Interest
The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".
The outstanding balance of principal on a loan. Principal does not include interest or fees.
Private Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.
A fee charged by a lender to cover the administrative costs of processing a loan request. For our comparison purposes, a processing or administration fee is considered to be a lender fee.
A written promise to pay a specified sum to specified person over a specified period of time.
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.
A collection of legal documents that are filed with the local government registry so that the public will know what liens, encumbrances or judgements may affect any piece of real estate.
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Calculations performed by lenders to determine your ability to repay a loan. The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income. The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.
A deed that transfers, without warranty, whatever interest or rights a grantor may have at the time the transfer is made. Often used to remove a possible cloud on the title.
The annual rate of interest for a loan. Also called the interest rate.
Rate Change Cap
The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an adjustable rate mortgage (ARM).
Rate Improvement Mortgage
A fixed-rate mortgage (FRM) that includes a clause allowing the borrower the option to reduce the interest rate one time (without refinancing) during the first few years of the loan term.
An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.
Rate of Interest
Same as interest rate.
Real Estate Agent
A person licensed to negotiate the purchase and sale of real estate on behalf of buyers and sellers.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires mortgage lenders and brokers to give borrowers advance notice of closing costs in the form of a Good Faith Estimate.
Land and anything permanently affixed to the land, including structures, trees, minerals, and the interest, benefits and rights thereof.
A real estate broker or associate who is an active member of a local real estate board that is affiliated with the National Association of Realtors.
This fee is charged by title companies or attorneys in some states and covers the cost of removing your current lender's lien from your property title when you refinance. For our comparison purposes, a reconveyance fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
The public official who keeps records of transactions that affect real property in a specific geographic area (usually a county). Often known as a County Recorder or County Clerk.
The entering in a book of public record the details of a properly executed legal instrument that affects title to real property, thereby making it a part of the public record.
A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property. For our comparison purposes, a recording fee is considered to be a tax or other unavoidable fee.
The process of paying off any existing mortgages on a home with a new mortgage loan.
A loan granted to cover the costs of repairing or improving an existing property. Sometimes also used to acquire property with the intent to improve it.
The fee charged to release a lien to free real estate from a mortgage.
An agreement between a lender and a borrower, made to help the borrower repay delinquent installments.
The cancellation of a contract by the operation of a law or by mutual consent. In some circumstances, borrowers have the right to cancel a transaction within three business days after closing.
See Real Estate Settlement Procedures Act.
An agreement between a buyer and seller to purchase real estate. A sales contract, also known as an offer to purchase or a binder, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
A state specific form that may need to be filed, disclosing everything about the sale of the home.
Search and Exam Fee
A fee charged by a title company or attorney in some states to perform a check of the title records that verifies the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title. For our comparison purposes, a search and exam fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
Search and Survey
A fee charged by a title company in some states to perform a check of the public record to verify that the buyer is purchasing a home from the legal owner and there are no liens, overdue assessment, or other claims that would adversely affect the transfer of title. In addition, a search is performed to insure that there are no issues that a survey would show that could affect the property. For our comparison purposes, a search and survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title. For our comparison purposes, a search fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A loan that has a lien position subordinate to the first mortgage.
Secondary Mortgage Market
The buying and selling of existing mortgages, primarily residential first mortgages.
A loan that is backed by collateral.
The collateral offered to a lender in exchange for a loan. When a lender provides a mortgage, you provide your home as the security. This means that if payments are in default, the lender has the right to take title to the property.
The lender's right to take property that has been offered as security.
A company that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer may or may not be the original lender.
A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.
Settlement or Closing Fee
A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.
Also referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
Standard Payment Calculation
The process used to determine the monthly payment required to repay the remaining principal balance of a loan in fairly equal installments, over the remaining term of the loan at the current interest rate.
State Tax Stamps
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
State/Local Tax Fees
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
Any mortgage or other lien that has a lower priority than that of the first mortgage.
A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor. The survey is typically a written map of the property showing locations of buildings and boundaries. In some states a survey is required by a title company to issue a title insurance policy. For our comparison purposes, a survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A fee charged by a title company to issue an insurance policy without requiring that a full survey be completed. For our comparison purposes, a survey affidavit fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
Sometimes called a bridge loan, a swing loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
Tax Service Fee
A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due and that taxes have been paid over the life of the loan. For our comparison purposes, a tax service fee is considered to be a third party fee, however, some lenders may not charge for this service.
Tenancy in Common
Type of joint tenancy without the right of survivorship. Compare with tenancy by the entirety and with joint tenancy.
The loan term is the number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.
Third Party Fees
Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees. Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
A legal written instrument evidencing a person's lawful possession of a property.
A company that specializes in examining titles to real estate and issuing title insurance.
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title. For our comparison purposes, a title examination fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property and defects in the title that were not found in the search of the public record. For our comparison purposes, the title insurance cost is considered to be a third party fee.
A statement issued by an attorney as to the quality of title after examining an abstract of title. Also, referred to as an Attorney Opinion. For our comparison purposes, a title opinion fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
An examination of the public title records to determine the legal ownership of a property, and to ensure that there are no liens, encumbrances or other claims outstanding.
Total Closing Costs
This is the total of all the items that must be paid at closing related to your new mortgage. Since the exact charges for some of these items cannot be obtained until the time of closing, the figure may only be an estimate.
Total Debt Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance plus all other monthly debt obligation) by the borrower's monthly gross income. Also referred to as a back end ratio or a bottom ratio.
Transfer of Ownership
Any legal method by which the ownership of property changes hands.
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee. May also be referred to as an Intangible Tax.
An index used to establish interest rates for adjustable rate mortgages. It is based on the interest rate paid to private investors by the US Government to obtain funding for the national debt and other expenses. Sometimes called T-bills, they are available in denominations of 3-months, 6-months and 1-year. The 3-month and 6-month Treasury bills are auctioned every Monday, and the 1-year Treasury bills are auctioned on Tuesday. The resulting figures are released to the public the next day. This index can have either a weekly or a monthly value.
Negotiable, long-term U.S. Government debt obligation with a maturity of ten years or longer, issued in minimum denominations of $1,000.
An index that is used to determine interest rate changes for some adjustable-rate mortgage (ARM) programs. It is often based on the U.S. Treasury's daily yield curve.
An intermediate U.S. Government security with a maturity of 1 to 10 years. Denominations range from $1,000 to $1 million or more. The notes are sold by cash subscription, in exchange for outstanding or maturing government issues, or at auction.
A fiduciary who holds property in trust for another to secure performance of an obligation or act
Detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower's credit history, as well as an examination of the value and quality of the subject property.
A fee charged by some lenders to cover the cost of the lender's analysis of the risk associated with a loan. For our comparison purposes, an underwriting fee is considered to be a lender fee.
Upfront Mortgage Insurance Premium
FHA charges the borrower an Upfront Mortgage Insurance Premium (Upfront MIP) for most transactions to financially support the FHA program. This fee is a percentage of the principal loan amount and is due at closing. The full amount can be financed as part of the loan amount or paid in cash.
Having the right or privilege to use a portion of a fund, such as an individual retirement account (IRA).
The voluntary abandonment or surrender of some claim, right, or privilege.
A promise contained in a contract.
Wire Transfer Fee
A fee charged by some lenders to cover the cost of wiring the mortgage funds to the appropriate parties, such as the title company or attorney, so that they are available for closing. For our comparison purposes, a wire transfer fee is considered to be a third party fee. However, some lenders may not charge for this service.
A measurement of the rate of earnings from an investment, usually expressed as a percentage.
Yield To Maturity (YTM)
The internal rate of return on an investment. Typically takes into account all investment returns and their timing.
A geographic area reserved and defined by local ordinance for specific limited use. Zones are almost always subject to certain restrictions or conditions.
The local government's specifications for the use of property in certain areas.
A map of the local geographic area that defines current zoning designations and land use.
The acts of an authorized local government establishing building codes, and setting regulations for property usage.