Acceleration clause - A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Accrued interest - Interest earned but not yet paid.

Adjustable rate - An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. See Adjustable Rate Mortgages.

Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the variable rate mortgage.

Adjustment interval - On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Agent - A person authorized by another, i.e., the principal, to act for him.

Amortization - Method used to calculate repayment of principal and interest over a given period of time.

Amortization schedule - A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.

Amortize - To repay a debt through a series of periodic payments.

Annual Percentage Rate (APR) - The total yearly cost of a mortgage stated as a percentage of the loan amount; includes such items as the base interest rate; private mortgage insurance and loan origination fees (points).

Application - An initial statement of personal and financial information, which is required to approve your loan.

Application fee - Fees that are paid upon application.

Appraisal - A written report establishing the market value of the property. Appraisals must be performed by state licensed and/or certified appraisers according to Uniform Appraisal Standards.

Appreciation - An increase in the value of a property due to changes in market conditions or other causes.

Assessed value - The valuation placed upon property by a public tax assessor for the purposes of taxation.

Assessment - A local tax levied against a property for a specific purpose, such as a sewer or streetlights.

Assignment - The transfer of property rights by one person, known as the assignor, to another, known as the assignee.

Assumability - A feature of a loan, which permits you to transfer your mortgage and its specified terms to the person(s) purchasing your home. Having an assumable loan could make it easier to sell your home, since assumption of a loan usually involves lower fees and/or qualifying standards for the new borrower than a new loan.

Assumable mortgage - A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

Assumption - The transfer of the seller's existing mortgage to a buyer.

Attorney--In-Fact - A person who is authorized by power of attorney to act for another.

Audited financial statement - A report on the financial position or operations of a company that has been reviewed by an independent auditor.

Bailment - The delivery of property by one, known as the bailer, to another, known as the bailee, to be held in custody for certain purposes.

Balance sheet - The balance sheet shows the financial condition of a company at a specific point in time. The balance sheet is broken down into the major sections: Assets, liabilities and net worth.

Balloon payment - Usually a short-term fixed-rate loan that involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Bankruptcy - State of insolvency of an individual or organization - in other words, an inability to pay debts. There are two kinds of legal bankruptcy under U.S. law: involuntary, when one or more creditors petition to have a debtor judged insolvent by a court; and voluntary, when a debtor brings the petition. In both cases, the objective is an orderly and equitable settlement of obligations.

Bankruptcy trustee - The person appointed by a bankruptcy court to oversee either the running of a business in a reorganization proceeding or the sale of assets and distribution of proceeds in business liquidation.

Bill of exchange - A written order, which may be negotiable or nonnegotiable, directing one party to pay a certain sum of money to the drawer or to a third person.

Bill of sale - A written instrument by which one transfers his rights or interest in chattels and goods to another.

Binder - A preliminary agreement secured by the payment of earnest money, under which a buyer offers to purchase real estate.

Blanket mortgage - A mortgage covering at least two pieces of real estate as security for the same mortgage.

Bond - An instrument representing the right to certain payments on the underlying collateral.

Borrower (mortgagor) - One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Buy--down - When the lender and/or the homebuilder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Cap - The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Caps - Predetermined limitations on the amount that the interest rate on an adjustable rate loan may change at each adjustment, and over the life of the loan.

Caps (interest) - Consumer safeguards, which limit the amount, the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (payment) - Consumer safeguards, which limit the amount monthly payments on an adjustable rate mortgage, may change.

Cash flow - The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)

Cash out - Receiving money back when refinancing your present mortgage.

Cash reserve - A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments.

Cashierr's check - A check whose payment is guaranteed because it is drawn on the bank's account rather than the customer's account. The customer pays in advance or has the funds withdrawn in advance from its account. Cashier's checks are also called bank checks.

Ceiling - The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Certificate of eligibility - The document given to qualified veterans which entitle them to VA guaranteed loans for homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

Certificate of veteran status - The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Certified check - A check drawn on the issuer's account but for funds that have been segregated by the bank, guaranteeing payment.

Clear title - A title that is free of liens or legal questions as to ownership of property.

Closing - In real estate, the final procedure in which documents are executed and/or recorded and the sale (or loan) is completed. Also called "settlement".

Closing costs - Expenses (over and above the price of property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs".

Collateral - Assets that back a mortgage loan or security.

Commitment - A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Commitment letter - A formal offer by a lender stating the terms under which it agrees to lend money to a homebuyer.

Community property - Property acquired by husband and wife during a marriage when not acquired as separate property by either spouse. Each spouse has equal rights, including the rights of survivorship.

Condominium - A form of property ownership in which the homeowner holds title to an individual dwelling unit plus an interest in common areas of a multi-unit project.

Conforming - Loans with terms, balances and conditions set forth by the main secondary market conduits, FNMA & FHLMC. Current SFD limit is $240,000.00.

Conforming loan - Generally, a mortgage loan under the maximum dollar amount of loans FNMA and FHLMC are legally allowed to buy, $240,000 in 1999 for a one-unit property. Qualifying ratios and underwriting methods are standardized to a large degree.

Consideration - The required element in all contracts by which a legal right or promise is exchanged for the act or promise of another party. The inducement to a contract.

Construction loan - A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Construction/permanent loan - A mortgage loan combining short term financing of real estate construction with the end loan or long term financing of the completed property.

Contingency - A condition that must be met before a contract is legally binding.

Contract of sale - The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Conventional loan - A mortgage not insured by FHA or guaranteed by the VA.

Conventional mortgage - Any mortgage that is not insured or guaranteed by the federal government.

Conventionall/fixed rate mortgage - Payments and interest rates are fixed for 15, 20, 25, or 30 year loans with up to 97% financing, 3% down payment and quicker loan approval than with FHA or VA. These are usually not assumable.

Conversion option - A prearranged opportunity to modify the original terms of the repayment agreement within certain limitations.

Convertible ARM - An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Conveyance - The transfer of an interest in realty: a deed. Sometimes includes leases and mortgages.

Cooperative - A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Covenant - Most commonly in real estate, assurances set forth (expressed) in a deed by the grantor or implied by law.

Credit limit - The maximum amount that you can borrow under a home equity plan.

Credit report - A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit risk - The possibility that there may be a default by the issuer or other party in its financial obligations to the investor.

Current ratio - current assets/current debt.

Debt service - The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Debt--to-income ratio - The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See Housing Expenses-to-Income Ratio.

Debt--to-net worth ratio - Total debt / net worth.

Deed - The legal document conveying title to a property.

Deed of trust - The document used in some states instead of a mortgage; title is conveyed to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and conveyed upon payment in full.

Default - The failure to make mortgage payments on a timely basis or to otherwise comply with other requirements of a mortgage.

Deferred interest - When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization.

Delinquency - A loan in which a payment is overdue but not yet in default.

Deposit - Money given by the buyer with an offer to purchase. Shows good faith. Also called Earnest money.

Depreciation - A decline in the value of property; the opposite of appreciation.

Disbursement date - The date funds are disbursed on a loan, normally three days on most refinance transactions.

Discount - (part of "points") A cost charged by investors when purchasing loans with lower yields, i.e.: higher discount points paid by borrowers at closing result in lower note rates and vice versa.

Distribution date - The date on which payments from a security to an investor are made.

Document review - A fee charged by the lender for the review of documents necessary to fund the loan.

Down payment - Cash portion paid by a buyer from his/her own funds as opposed to that portion of the purchase price which is financed with a mortgage.

Due date - The date on which the borrower's monthly installment of principal, interest and escrows are due as stated in the note.

Due--on-sale clause - A provision in a mortgage allowing the lender to demand repayment in full if the borrower sells the property securing the mortgage.

Earnest money - A deposit made by the potential homebuyer to show that he or she is serious about buying the house.

Easement - A right of way giving persons other than the owner access to or over a property.

Effective interest rate - The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

Effective yield - The annual return on an investment that is calculated by dividing the coupon interest rate by the amount invested expressed as a percent of par.

Encumbrance - A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Equal Credit Opportunity Act (ECOA) - A federal law that prohibits lenders from denying mortgages on the basis of the borrower's race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of a property and the amount still owed on the mortgage.

Equity loan - A loan based on the borrower's equity in his or her home.

Escrow account - An account established with the lender at the time of closing, and paid into monthly by borrowers along with their principal and interest payments for the payment of real estate taxes, hazard insurance, PMI and flood insurance.

Escrow agent/escrow closing - An independent third party (title company) who acts as an agent for the borrower and the lender carrying out the instructions of each and disbursing documentation and funds to the proper parties at closing.

Escrow waiver - When a loan value is 80% or less, you may elect not to open an escrow account and pay the hazard insurance and property taxes yourself. There is usually a one-time charge by the Investor to waive an escrow account.

Escroww(s) - That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, base payment and other items as they become due. Also known as impound(s).

Fair Credit Reporting Act - A consumer protection law that sets up a procedure for correcting mistakes on one's credit record.

Fee simple - Absolute ownership of real property.

FHA (Federal Housing Administration) - A government agency with great information on home finance programs, loan limits and other interesting items.

FHA loan - More appropriately termed "FHA Insured Loan." A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.

FHA mortgage - A mortgage that is insured by the Federal Housing Administration. Also referred to as a "government" mortgage.

FHLMC (Federal Home Loan Mortgage Corporation) - A quasi-governmental agency that purchases conventional mortgage loans from insured depository institutions and HUD-approved mortgage bankers. Also called "Freddie Mac."

Firm commitment - A promise by FHA to insure a mortgage loam for a specified property and borrower. A promise from a lender to make a mortgage loan.

First mortgage - A mortgage that has first claim in the event of default.

Fixed Rate - An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

Fixed--rate mortgage - A mortgage in which the interest rate does not change during the entire term of the mortgage.

Flood insurance - A form of hazard insurance that may be required by the lender as a condition of making the loan if the property is located in a flood zone. May not cover personal property.

Floor - The minimum rate of interest payable on an adjustable-rate class or mortgage.

FNMA (Federal National Mortgage Association) - A major secondary market investor that purchases mortgage loans from mortgage bankers and other financial institutions. Also known as Fannie Mae.

Forbearance - The lender's postponement of foreclosure to give the borrower time to catch up on overdue payments.

Foreclosure - The legal process by which a mortgaged property may be sold when a mortgage is in default.

Good faith estimate - A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Graduated payment mortgage - A mortgage that starts with low monthly payments that increases at a predetermined rate. The initial monthly payments are set at an amount lower than that required for full amortization of the debt.

Gross Income - For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Growing equity mortgage (rapid payoff mortgage) - A fixed-rate, fixed-schedule loan that starts with the same payments as a level payment loan; the payments rise annually, with the entire increase being used to reduce the outstanding balance. No negative amortization occurs, and the increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years, or less.

Guarantee - To assume the liability for such debts of another in the event of his default.

Guaranty fees - A sum of money required by FNMA, FHLMC, and GNMA, a credit guarantee to mortgage-backed security.

Hazard insurance - A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.

Home Equity Line of Credit (HELOC) - A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home equity loan - A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Homeowner's insurance - An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and its contents.

Homeowner's warranty (HOW) - A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of sale.

Housing and Urban Development (HUD) - A federal agency that oversees the Federal Housing Administration.

Housing expenses-to-income ratio - The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

Impound - That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as escrows.

Impound account - A savings account for accumulating that portion of a borrowers monthly payments designated for future payments of taxes and/or insurance. Required by certain lenders or with certain types of financing. Also known as escrow account.

Indemnity - Compensation paid for damage or loss sustained or anticipated.

Index - A moving financial reference rate upon which interest rate changes are based. The lender does not control indices used on Adjustable Rate Mortgages, and their movement generally reflects that of prevailing mortgage rates. Common indices include one, three, and five year government Treasury Securities.

Installment debt - Debts with more than ten months left to repay that are not revolving charge card accounts.

Insurance - The first annual premium, plus 2 months, for fire and extended coverage insurance to cover loss of the property. Usually called Homeowners Insurance. In the event of a condominium property, coverage for personal property (contents) may also be needed.

Interest - The fee charged for borrowing money.

Interest adjustment or prepaid interest - An estimated amount of interest due at closing, usually from the date of closing to the end of the month.

Interest change date - For adjustable rate mortgages, the interest change date is each date as established in the note on which the rate of interest could change.

Interest rate - The periodic charge, expressed as a percentage, for use of credit.

Interest rate adjustment period - The point(s) in time at which the interest rate on an ARM loan automatically adjusts. Interest rate adjustment periods may range from six months to as long as ten years as stated in the terms of the note.

Interest rate cap - A provision of an ARM limiting how much interest rates may increase or decrease per adjustment period or over the life of the mortgage. See also Lifetime cap.

Interim financing - A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Investment property - Property purchased for the primary purpose of generating income or profit.

Issue date - The date as of which a security is originally formed.

Joint liability - Liability imposed upon two or more persons.

Joint tenancy - A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.

Jumbo loan - Mortgage loans over $240,000 in 1999. Terms and underwriting requirements may vary from conforming loans.

Jumbo or non-conforming - Loans which exceed the FNMA/FHLMC guidelines.

Late charge - The penalty a borrower must pay when a payment is made after the due date.

Legal description - A method of geographically identifying location of a parcel of land, which is acceptable in a court of law. An example is the Lot, Block and Subdivision information on the Real Estate Contract or Deed.

Letter of credit - A promise by a debtor's bank to pay the creditor upon presentation of specified documents.

LIBOR (London Interbank Offered Rate) - The interest rate charged among banks for short-term Eurodollar loans. A common index for adjustable-rate mortgages and securities.

Lien - A legal claim against a property that must be paid off when the property is sold.

Lifetime cap - A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Line of credit - A line of credit to builders ranging from $200,000 to $500,000 that is structured to allow for speculative homes and lot acquisitions. Builders can build any number of pre-sold units within the limit of their Guidance Line.

Liquidity - The capability of ready conversion of an asset or investment to cash.

Loan administration - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer. Also known as Loan Servicing.

Loan application fee - A lender's fee which the buyer must pay when applying for a mortgage.

Loan origination fee - A fee charged by the lender for processing a mortgage.

Loan servicing - The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan to value ratio (LTV) - A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%. Loans with an LTV over 80% may require Private Mortgage Insurance.

Loan--to-value percentage (LTV) - The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if lower) of the property.

Lock or lock in - A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you lock your loan until you close the loan and receive the funds you have borrowed (assuming that this occurs within the lock period you have chosen).

Margin - An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Market rate - The average rate charged by lenders for conventional, fixed-rate loans.

Market value - The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Mortgage - A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage banker - Originates mortgage loans, loaning you their funds and closing the loan in their name.

Mortgage broker - An individual or company that for a fee acts as an intermediary between borrowers and lenders.

Mortgage insurance premium (MIP) - The fee paid by a borrower to FHA or a private insurer for mortgage insurance.

Mortgage interest rate - The rate of interest in effect for the monthly payment due.

Mortgage loan - A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

Mortgage margin - The set percentage the lender adds to the index value to determine the interest rate of an ARM.

Mortgage note - A legal document obligating a borrower to repay a loan at stated interest rate during a specified period of time; the mortgage note is secured by a mortgage.

Mortgagee - The lender in a mortgage agreement.

Mortgagor - The borrower in a mortgage agreement.

Multiple Listing Service (MLS) - A networking system, frequently on computer, in which a number of real estate firms share information about their client's homes that are for sale.

Negative amortization - Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment, which should be paid, is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.

Net effective income - The borrower's gross income minus federal income tax.

Note - A formal document showing the existence of a debt and stating the terms of repayment.

Notice of default - A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Offer to purchase - A document that lists the price conditions, and terms under which the buyer is willing to purchase a property. Also known as purchase offer, earnest money agreement, contract of purchase, deposit receipt.

Origination fee - (part of "points") The fee charged by the lender to originate and process a mortgage loan request. Typically one percent of the loan amount.

Origination points - Points charged by the Broker for their services (i.e. commission).

Owner (seller) financing - A property purchase transaction in which the property seller provides all or part of the financing.

Ownerr's title policy - An insurance premium charged by the title company to insure the buyer that the title is free from defects up to the date the conveying instrument is recorded. Buyer is the beneficiary. (Frequently paid by the seller.)

Payment cap - A provision of some ARMs limiting the amount by which the borrower's payments may increase regardless of any interest rate increase; may result in negative amortization. See Adjustable-rate mortgage.

Payoff fee - A fee charged by the lender or collection company for payoff information on a loan which you are paying in full.

Per Diem interest - The amount of interest due each day.

Permanent loan - A long-term mortgage, usually ten years or more. Also called an "end loan."

Personal property - Items, called chattels that do not fit the definition of real property

PITI - Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Points (discount points) - Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

Power of attorney - A legal document authorizing one person to act on behalf of another.

Prepaid expenses - Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepaid interest - The amount of interest to cover the period from close of escrow until the beginning of the first payment.

Pre--payment - The unscheduled payment of all or part of the outstanding principal of a mortgage loan, including payments by the borrower as well as liquidation's from foreclosures, condemnations, or casualty.

Pre--payment penalty - A fee that may be charged to a borrower who pays off the loan before it is due.

Pre--payment risk - The possibility that the mortgages underlying the security are repaid faster or more slowly than expected.

Pre--qualification - The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.

Primary residence - The residential property physically occupied by an owner as the principal home domicile.

Principal - The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Private mortgage insurance (PMI) - Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults. Generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80 percent.

Processing fee - This fee is paid at closing. The Processor is the person who handles all paperwork requirements in getting your loan approved. He/She obtains verifications from your bank, employer, and other sources.

Profit and loss statement - Part of the financial statement that shows sales, expenses and profits for a specific period of time. Also known as Income Statement.

Purchase - To acquire for the purpose of ownership by the payment of money or its equivalent.

Purchase and sale agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Qualifying ratios - Guidelines applied by the lenders to determine how large a loan to grant a homebuyer.

Rate Lock - See Lock-in.

Real estate agent - A person licensed to negotiate and transact the sale of real estate on behalf of the owner.

Real estate sales professional - A person licensed to negotiate and transact the sale of real estate on behalf of the property owner and/or buyer.

Real Estate Settlement Procedures Act (RESPA) - A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real property - Land and everything that is permanently affixed to it.

Realtor - A collective membership mark that may be used only by real estate professionals who are members of the National Association of Realtors and subscribe to its strict code of ethics.

Receiver - A person appointed by the court to take custody over property in litigation or insolvency.

Record date - The date used to determine the owner of a security for purposes of distributing the next scheduled payment.

Recording fees - Fees charged by the County Recorder's Office for recordation of Deed, Mortgage or Deed of Trust, and, at times, additional documents requiring public notice.

Refinancing - The process of paying off one loan with the proceeds from a new loan using the same property as security.

RESPA (Real Estate Settlement Procedures Act) - A federal consumer protection law that requires lenders to give borrowers advance notice of closing costs. The law requires lenders to furnish the information after application only.

Reverse Annuity Mortgage (RAM) - A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loam is paid in full. Also called a "release of mortgage."

Satisfaction - The discharge of an obligation by paying a party what is due.

Second mortgage - A mortgage that has a lien position subordinate to the first mortgage.

Secondary mortgage market - The buying and selling of existing mortgages.

Secondary residence - A property physically occupied by an owner at least two weeks during a year, that is not a principal home domicile.

Security interest - Any interest in property acquired by contract for the purpose of securing payment or performance of an obligation.

Seller carry back - An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Servicing - All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like. (Also known as Loan Administration)

Servicing a loan - The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

Settlement date - The date of the delivery of and payment for a security.

Settlement sheet - The computations of costs payable at closing that determine the seller's net proceeds and the buyer's net payment.

Simple interest - Interest which is computed only on the principle balance.

Subordinate financing - Any mortgage or other lien that has priority lower than that of the first mortgage.

Survey - Plot or improvement map showing the legal boundaries of the property. The map must be based on an instrument survey made, dated and certified by a licensed civil engineer or registered surveyor.

Sweat equity - Equity created by a purchaser performing work on a property being purchased.

Tax impound - An amount for taxes required and collected by the lender/collection agent and held in the impound account to insure adequate funds are available to pay the taxes. The amount is based upon one month's worth (one-twelfth) of yearly taxes, varying between one and five months, depending upon the time of the year in which you close. Also called tax escrow.

Temporary buy down - An option offered by many lenders which offsets lower payments over the first one or two years of the loan by establishing a subsidy account with buyer, seller or investor funds.

Tenancy by entirety - A type of joint ownership of property that provides rights of survivorship and is available only to a husband and wife.

Tenancy in common - A type of joint ownership in a property without legal right of survivorship.

Term - Number of years over which the loan is scheduled to be repaid.

Title - A legal document evidencing a person's right to, or ownership of, a property.

Title company - A company that specializes in examining and insuring titles to real estate.

Title endorsement - An update to a title policy.

Title examination - This fee is paid at closing. This policy protects the Investor in case of future title problems arising. You will have the opportunity to purchase your own title insurance at a significant savings at the time of closing.

Title insurance - Insurance to protect the lender (Lender's Policy) and owner (equity policy) against loss arising from disputes over ownership of the property.

Title search - A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Transaction fee - A fee which may be charged each time you draw on a home equity credit line.

Transfer tax - State or local tax payable when title passes from own owner to another.

Truth--in-lending - A federal law that requires lenders to fully disclose in writing, the terms and conditions of a mortgage, including the APR and other charges.

Underwriting - The process of verifying data and approving a loan.

Underwriting fee - This fee is paid at closing. This charge is for the review of your file to insure your ability to meet your mortgage payment obligations.

VA loan - A loan that is guaranteed by the Department of Veteran's Affairs. Also referred to as a "government" mortgage.

VA mortgage funding fee - A premium of up to 2% (depending on the size of the down payment) paid on a VA-backed loan.

Variable rate - An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

Variable rate loan - A loan in which the rate of interest is tied to a specific financial index, with both the rate of interest and the monthly payments subject to change at established adjustment intervals.

VOD (Verification of Deposit) - A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VOE (Verification of Employment) - A document signed by the borrower's employer verifying his/her position and salary.

Waiver - The relinquishment of or refusal to accept some right or benefit.

Walk--through - A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.

Warranty - The representation that an article has certain properties, the breach of which subjects one to financial liability.

Wraparound mortgage - Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Yield - The rate of return on an investment over a given time, expressed as an annual percentage rate. Yield is affected by the price paid for the investment as well as the timing of the principal repayments.

Yield to maturity - The annual percentage rate of return on an investment, assuming it is held to maturity.

Zoning regulations - Established by local governments regarding the location, height, and use for any given piece of property within a specific area.