MORTGAGE GLOSSARY

Abandonment - The voluntary surrender of property, owned or leased, without naming a succes-
sor as owner or tenant.

Absentee Owner - An owner who does not personally manage or reside at property owned.

Absolute Auction - An auction in which the subject property is sold to the highest bidder regard-
less of the amount of the winning bid.

Absorption Rate - An estimate of the expected annual sales or new occupancy of a particular
type of land use.

Abstract Exam - 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.

Acceleration Clause - A provision in a mortgage that gives the lender the right to demand pay-
ment of the entire principal balance if a monthly payment is missed.

Acceptance - A party’s consent to enter into a contract and be bound by the terms of the offer.

Accepted Contract - 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. Gener-
ally, 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.

Adjusted Basis - The original cost of a property, plus the value of any capital expenditures for
improvements to the property, minus any depreciation taken.

Adjustment Date - The date on which the interest rate changes for an adjustable-rate mortgage
(ARM).

Adjustment Period - The period that elapses between the adjustment dates for an adjustable rate
mortgage (ARM).
Administrative Fee - 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.

Administrator - A person appointed by a probate court to administer the estate of a person who
died intestate.

Affordability Analysis - 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.

Amenity - A feature of real property that enhances its attractiveness and increases the occupant’s
or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities
include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Man-
made amenities include swimming pools, tennis courts, community buildings and other recreation-
al facilities.

Amortization - A loan repayment plan, which enables the borrower to reduce his debt gradually
through monthly payments of principal and interest.

Amortization Schedule - 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 bal-
ance after each payment is made.

Amortization Term - The amount of time required to amortize the mortgage loan. The amortiza-
tion is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amor-
tization term is 360 months.

Amortize - To repay a mortgage with regular payments that cover both principal and interest.

Annual Fee - 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 Mortgagor Statement - A report sent to the mortgagor each year. The report shows how
much was paid in taxes and interest during the year, as well as the remaining mortgage loan bal-
ance at the end of the year.

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 month-
ly payments are based on the periodic interest rate, not the APR.

Annuity - A specified income paid yearly or at other regular intervals, often on a guaranteed dollar
basis.

Application - 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.

Appraisal - An analysis performed by a qualified individual to determine the estimated value of a

home.

Appraisal Fee - In order to verify that the value of your home supports the loan amount you re-
quest, an appraisal will be ordered by the lender. The appraisal is generally performed by a profes-
sional who is familiar with home values in the area and may or may not require an interior inspec-
tion 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.

Appraised Value - An opinion of a property’s fair market value, based on an appraiser’s knowl-
edge, experience and analysis of the property.

Appraiser - A person qualified by education, training, and experience to estimate the value of real
property and personal property.

Appreciation - An increase in the value of a property due to changes in market conditions and
other causes. The opposite of depreciation.

APR - To make it easier for consumers to compare mortgage loan interest rates the federal gov-
ernment 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.

ARM - An ARM (adjustable rate mortgage) is a loan type that allows the lender to adjust the inter-
est 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.

Assessed Value - The valuation placed on property by a public tax assessor for purposes of taxa-
tion.

Assessment - 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.

Assessment Rolls - The public record of taxable property.

Assessor - A public official who establishes the value of a property for taxation purposes.

Asset - Anything of monetary value that is owned by a person. Assets include real property, person-
al property, and enforceable claims against others (including bank accounts, stocks, mutual funds
and so on).

Assignment - The transfer of a mortgage from one person to another.

Assumable Mortgage - 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.
Assumption - The transfer of the seller’s existing mortgage to the buyer. See assumable mortgage

Assumption Clause - A provision in an assumable mortgage that allows a buyer to assume respon-
sibility for the mortgage from the seller. The loan does not need to be paid in full by the original
borrower upon sale or transfer of the property.

Assumption Fee - The fee paid to a lender (usually by the purchaser of real property) resulting
from the assumption of an existing mortgage.

Attorney Opinion - Commonly referred to as a “title opinion”. This fee is related to the title
insurance required by the lender. It is a document issued by an attorney listing any liens or en-
cumbrances that could affect the property that are a matter of public record. For our comparison
purposes, the attorney opinion fee is considered to be a third party fee and may be included in the
title insurance or closing fee by some lenders.

Attorney Witness - Related to the settlement/closing fee. This fee is standard in some states and
is the closing attorney’s fee for witnessing the signing of the closing documents. For our compari-
son purposes, an attorney witness fee is considered to be a third party fee and may be included in
the title insurance or closing fee by some lenders.

Attorney-in-Fact - One who holds a power of attorney from another to execute documents on
behalf of the grantor of the power.

Backfill - The replacement of excavated dirt into a hole, crevice or against a structure such as a
foundation.

Backup Contract - A contract to buy property that becomes effective if a prior contract fails to be
agreed upon.

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.

Balance Sheet - A financial statement in a table form that shows assets, liabilities and net worth.

Balloon Mortgage - 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.

Balloon Payment - The final payment that is made at the maturity date of a balloon mortgage and
pays the loan in full.

Bankrupt - A person, company, or corporation that, through formal court proceeding, is relieved
from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.

Bankruptcy - A court proceeding in which a debtor, who owes more than his assets, can relieve
the debts by transferring his assets to a trustee.

Before Tax Income - Income before deducting taxes.

Beneficiary - The person designated to receive the benefits resulting from certain acts.
Bequeath - To transfer personal property through a will or last testament. Compare with devise.

Betterment - An improvement that increases property value as opposed to repairs or replacements

that simply maintain value.

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.

Billing Error - Any mistake in your monthly statement as defined by the Fair Credit Billing Act.

Binder - 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.

Binder Deposit - 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 binder deposit is deducted from the purchase price at
closing and is not an additional cost. Sometimes referred to as earnest money.

Blanket Insurance Policy - A single policy that covers more than one piece of property (or more
than one person).

Blanket Mortgage - A single mortgage that is secured by more than one parcel of real estate.
Bona fide - In good faith without fraud.

Bond - An interest-bearing certificate that serves as evidence of a debt with a maturity date. Typi-
cally, bonds represent obligations of a government or business corporation. A real estate bond is a
written obligation, usually secured by a mortgage or deed of trust.

Breach of Contract - A violation of the terms of any legal obligation or agreement.

Bridge Loan - 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.

Broker - A state-licensed agent who, for a commission or a fee, represents property owners in real
estate transactions.

Budget - A detailed plan of income and expenses estimated over a specified period of time. Bud-
gets provide guidelines for managing costs and profits.

Budget Category - A category of income or expense data that you can use in a budget.

Building Code - Regulations established by local governments that control design, construction
and materials used in construction. Building codes are usually based on standardized health and
safety guidelines.
Business Days - 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.

Buy-down Account - An account in which money is held so that it can be applied to the monthly
mortgage payments, as each payment comes due, during the period that an interest rate buy-down
plan is in effect.

Buydown - A process that allows a borrower to obtain a lower interest rate on a mortgage by pay-
ing 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.

Credit Report Fee - Funds required by a lender in advance of processing a loan request. Gener-
ally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be
refundable.

California Ranch - A one-story, post-World War II style, ground-hugging house with a low,
pitched roof.

Call Option - A provision in a home loan that gives the mortgagee the right to call the mortgage
due and payable at the end of a specified time period for any reason.

Cancellation Clause - A contract provision that gives the right to terminate obligations upon the
occurrence of specified events.

Cap - Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest
rate or payment can increase or decrease.

Capital - 1) The net worth of a business defined by the amount by which its assets exceed its lia-
bilities. 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.

Capital Expenditures - The cost of an improvement made to extend the useful life of a property or
to add to its value.

Capital Improvement - 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 Deposit Index - A rarely used index that is used to determine interest rate changes
for certain adjustable-rate mortgages (ARM) plans.

Certificate of Eligibility - A document issued by the federal government certifying a veteran’s

eligibility for a Department of Veterans Affairs (VA) loan.

Certificate of Reasonable Value (CRV) - A document issued by the Department of Veterans Af-
fairs (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.

Change Frequency - Term sometimes used to describe the frequency of payment or interest rate
changes in an adjustable-rate-mortgage (ARM).

Chattel - Anything tangible and owned, other than real estate. The same as personal property.

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.

Civilian Employment - Economic indicator that reports the number of new civilian jobs created
and the percentage of civilians in the job market who are unemployed. One of the most anticipat-
ed and closely watched economic indicators. Frequency: monthly. Source: Labor Department.

Clear Title - A title that is free of clouds, liens, disputed interests or legal questions as to owner-
ship 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 bor-
rower and the lender. Sometimes referred to as the settlement or closing.

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. Some-
times 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 Settle-
ment Statement.

Closing Costs - The total of all the items that must be paid at closing related to your new mort-
gage.

Closing Statement - Also referred to as the HUD-1 or the settlement statement, this is the docu-
ment that provides line by line detail of the financial details related to a specific real estate trans-
action such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid
by the borrower for refinances.

Cloud on Title - Any conditions such as encumbrances, liens or claims revealed by a title search
that adversely affect the title to real estate. Clouds on a title often cannot be removed, except by a
quitclaim deed release, or court action. Compare with clear title.

Co-maker - A person who signs a promissory note along with the primary borrower. A co-mak-
er’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.

Coinsurance - A sharing of hazard insurance risk between the insurer and the insured, or others.
A coinsurance clause states to what extent a loss will be covered based on the percentage of value
insured.

Collateral - 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.

Collection - The process of bringing a delinquent debt current and the filing of the necessary no-
tices to proceed with repossession or foreclosure when necessary.

Commission - The fee charged by a broker or agent for negotiating a real estate or loan transac-
tion. A commission is generally a small percentage of the price of the property or amount bor-
rowed. Sometimes called points.

Commitment Letter - A written offer from a lender to provide financing to a borrower. The com-
mitment letter states the terms under which the lender agrees to provide financing to the borrower.
Also called a loan commitment.

Common Area Assessments - Charges against individual unit owners in a condominium complex,
or planned unit development (PUD), for additional funds to repair, maintain, or improve the com-
mon areas of the project.

Common Areas - Those areas of a property (usually a planned unit development or condominium
project) that are used by all owners or tenants. Common areas may include swimming pools, ten-
nis courts, and other recreational facilities, as well as common corridors of buildings and parking
areas.

Common Law - The body of law based on general custom in England and used to a certain extent
in the United States. Common law sometimes prevails unless superseded by other law.

Community Home Buyer’s Program - An income-based community lending model, under which
mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low or mod-
erate income family’s buying power and to decrease the total amount of cash needed to purchase
a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer
education sessions.

Community Land Trust Mortgage Loan - An alternative financing option that enables low to
moderate income homebuyers to purchase housing that has been improved by a nonprofit Commu-
nity Land Trust and to lease the land on which the property stands.

Community Property - 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.

Comparables - An abbreviated form of comparable properties. Comparables are used for com-
parative 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”.

Compound Interest - Interest paid on the original principal balance, and on the accumulated and
unpaid interest.

Condemnation - 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.

Condominium - 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.

Condominium Conversion - Changing the ownership of an existing rental complex building to

the condominium form of ownership.

Condominium Hotel - A condominium complex that has registration desks, short-term occupancy,
room service and daily cleaning services. Such properties are often operated as commercial hotels
even though the units may be individually owned.

Conforming Loan - 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 conform-
ing mortgage.

Construction Loan - 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.

Construction Spending - Economic indicator that measures the total amount of spending in the
U.S. on all types of construction. The residential construction component is useful for predicting
future national new home sales and mortgage origination volume. Frequency: monthly. Source:
Commerce Department.

Consumer Confidence - A monthly survey of 5,000 households designed to measure Americans’

optimism about their current situation and the future. Frequency: monthly. Source: Conference
Board.

Consumer Price Index (CPI) - Measures the change in the cost of living for most American fami-
lies. Widely followed as an indicator of inflation of retail purchases. Frequency: monthly. Source:
Federal Reserve.

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 bu-
reaus.

Consumer Sentiment - An index designed to measure consumer optimism. Includes a prelimi-

nary report at mid-month and final report near month-end. Frequency: semimonthly. Source:
University of Michigan.

Contingency - 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 ac-
ceptable appraisal.

Contract - An oral or written agreement to do or not to do a certain thing for consideration.

Conventional Mortgage - A mortgage that is not insured or guaranteed by a government agency.

Convertibility Clause - A provision in some adjustable-rate-mortgages (ARM’s) that allows the

borrower to change the ARM to a fixed-rate-mortgage at a specified period within the term of the
loan.

Convertible ARM - An adjustable rate mortgage (ARM) that allows a borrower to convert their
mortgage to a fixed rate loan for the remainder of the loan term if certain conditions are met.

Cooperative Project - A residential or mixed-use building wherein a corporation holds title to

the property, sells shares of stock, representing the value of a single apartment, to individuals who
then receive a lease, or similar agreement, as evidence of title.

Cooperative (Co-op) - A type of real estate ownership in which residents of a multi-unit property
own shares of the corporation that owns the property. The ownership of these shares gives the
owner the right to occupy a unit in the building.

Cooperative Corporation - A corporation that holds the title to a cooperative project and grants
occupancy rights to shareholders through leases or similar rental agreements.

Cosigner - Another person who signs your loan and assumes equal responsibility for it.

Cost of Funds Index (COFI) - An index that may be used to determine the interest rate changes
of an adjustable rate mortgage (ARM). The Cost of Funds Index, or COFI as it is commonly
called, is the weighted average of interest rates that Federal Home Loan banks have paid to their
customers recently. Usually, the COFI for the 11th district of Federal Home Loan Banks is used
and covers banks in California, Nevada, and Arizona. The index value is announced on the last
working day of the month following the month listed.

Courier/Mailing Fee - 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.

Covenant - A promise written into deeds, mortgages and other financial instruments that obli-
gates or restricts the borrower. The violation of some covenants can result in foreclosure.
Credit - A lender may reduce the actual amount of the closing costs by a credit in order to offer
more competitive fees.

Credit Bureau - An agency that gathers and keeps your credit record.

Credit Grade - A value given to an individual to reflect their current and past debt repayment pat-
terns. A grade of “A” is considered to be the best.

Credit History - A record of a person’s debt history, including all open and fully repaid obliga-
tions. 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.

Credit Report - 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 Repository - An institution that collects, maintains, stores and sells financial and publicly
recorded information about the payment records of individuals applying for credit.

Credit Scoring System - A statistical system used to rate credit applicants according to various
characteristics relevant to creditworthiness.

Credit-Related Insurance - Health, life or accident insurance designed to pay the outstanding
balance of a debt.

Creditor - A person or business that is owed money.

Customer Credit - Economic indicator that measures the level of outstanding consumer install-
ment debt. Can be used in conjunction with real sales to determine whether cash or credit is fuel-
ing growth. Frequency: monthly. Source: Federal Reserve.

Damages - The amount recoverable by a person who has been injured in any manner through the
act or default of another.

Debenture - An unsecured bond or note.

Debit - In a closing statement or settlement, an item that is charged to a buyer or seller. Compare
with credit.

Debit Card (EFT) - A plastic card which looks similar to a credit card, that consumers may use to
make purchases, withdrawals, or other types of electronic fund transfers.

Debt - An obligation to pay another.

Deed - 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.
Deed of Trust - This document, referred to as a mortgage in some states, pledges a property to a
lender or trustee as security for the repayment of a debt.

Deed Stamp - A tax that is required in some municipalities if a property changes hands. 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.

Deed-in-Lieu - 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.

Default - A breech of the agreement with a lender such as the failure to make loan payments in a
timely manner.

Delinquency - The failure to make payments on debts when they are due.

Delivery Fee - A fee charged generally by the title company or attorney for the delivery of docu-
ments to your lender. For our comparison purposes, the delivery fee is considered to be a third
party fee.

Department of Veterans Affairs (VA) - An agency of the federal government that provides ser-
vices and guarantees residential mortgages made to eligible veterans of the military services

Deposit - 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.

Depreciation - A decline in the value of real or personal property. The opposite of appreciation.

Devise - A gift of real property by will or last testament.

Disburse - To pay out on the loan.

Disclosures - Information that must be given to consumers about their financial dealings.

Discount Points - Fees that are collected by the lender in exchange for a lower interest rate. Each
discount point is 1% of the loan amount. For our comparison purposes, a discount point is con-
sidered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate,
you must compare the up front cost of the points to the monthly savings that result from obtaining
the lower rate. Sometimes referred to as “points”.

Discount Rate - The interest rate that the Federal Reserve charges member banks for loans, using
government securities or eligible paper as collateral. This provides a floor on interest rates, since
banks set their loan rates a notch above the discount rate.

Document Preparation - 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.

Documentary Stamp - A tax levied by some local or state governments at the time the deeds and
mortgages are entered into public record. For our comparison purposes, documentary stamps are
considered to be a tax and other unavoidable fee.

Dower - The rights of a widow in the property of her husband upon his death.

Down Payment - The portion of the purchase price of a property that the borrower will be paying
in cash rather than included in the mortgage amount.

Draw Period - 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.

Due-on-Sale Clause - A provision in a mortgage that allows the lender to demand repayment in
full, if the borrower sells the property that serves as security for the loan.

Durable Goods Orders - Economic indicator that measures new orders placed with domestic
manufacturers for immediate and future delivery of factory hard-goods. Monthly percent changes
reflect the rate of change of such orders. Levels of, and changes in, Durable Goods Orders are
widely followed as an indicator of factory sector momentum. Frequency: Monthly Source: Com-
merce Department

Earnest Money - 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.

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

Easement by Prescription - The continued use of another person’s property for a special purpose
that can develop into permanent use if certain conditions are met.

Economic Base - The industry within a certain geographic area that provides employment opportu-
nities which are essential to support the community.

Effective Age - An appraiser’s opinion of the physical condition of a structure. The actual age of a
building may be longer or shorter than its effective age.

Effective Gross Income - Normal annual income, which may include overtime and bonuses, that is
regular, consistent and guaranteed. A person’s salary is usually the prime source, but other income
may qualify if it is significant, documented and stable.

Elderly Applicant - As defined in the Equal Credit Opportunity Act, a person 62 or older.

Electronic Fund Transfer (EFT) Systems - A variety of systems and technologies for transferring
funds electronically rather than by check.

Eminent Domain - The right of a government to seize private property for public use upon pay-
ment of its fair market value. Eminent domain is the legal basis for condemnation proceedings.
Employment Report - 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”.

Encroachment - A property improvement or obstruction that physically intrudes upon the property
of another.

Encumbrance - Anything that affects the title to a property such as a mortgage, judgement, or ease-
ment.

Endorsements - Additions to a title insurance policy for special coverage such as surveys, environ-
mental 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.

Endorser - A person who signs ownership interest over to another party.

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.

Equity - 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.

Escrow - Funds paid by one party to another to hold until a specific date when the funds are re-
leased to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays
to the lender along with their monthly 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.

Escrow Account - 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.

Escrow Analysis - 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.

Escrow Payment - 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.

Estate - The nature and extent of interest that an individual has in real property (degree of owner-
ship). Also, the combined total of all real and personal property owned by an individual at the time
of their death.

Eviction - The legal expulsion of an occupant from real property. Usually exercised by a lessor
against a lessee to recover possession of property.

Exam Fee - A fee associated with an inspection by a title company of public records and other docu-
ments 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 insur-
ance.

Examination of Title - The report on the title of a property from the public records. Not as thorough
as a full title search.

Exclusive Listing - A written contract that gives a licensed real estate agent the exclusive right to
sell property for a specific time, but reserving the owner’s right to sell the property without the pay-
ment of a commission.

Executor - A person named in a will to administer an estate. Most Courts will appoint an administra-
tor if no executor is named. (The feminine form is executrix)

Existing Home Sales - Reports the number of existing homes sold, expressed on an annual basis.
Can be combined with New Home Sales to determine the total volume of home sales, a strong indi-
cator of future national mortgage origination volume. Frequency: monthly. Source: National Asso-
ciation of Realtors.

Face Interest Rate - The percentage interest rate that is shown on the actual loan note or document.

Factory Orders - Economic indicator that measures the total volume of orders placed with U.S. fac-
tories. Also includes inventory and order backlog components, which can offer insight into inflation
and growth in the manufacturing sector. Frequency: monthly. Source: Commerce Department.

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 Rent - The amount that a property would command if it were currently available to
rent or lease.

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.

Fannie Mae - FNMA (Federal National Mortgage Association) One of the congressionally char-
tered, publicly owned companies that is the largest source of home mortgage funds.

Federal Funds Rate - Interest rate charged by banks, with excess reserves at a Federal Reserve
district bank, to banks needing overnight loans to meet reserve requirements. The federal funds rate
is the most sensitive indicator of the direction of interest rates, since it is set daily by the market, un-
like the prime rate and the discount rate, which are periodically changed by banks and by the Federal
Reserve Board, respectively.

Federal Housing Administration (FHA) - An area of the U.S. Department of Housing and Urban
Development (HUD) that insures low down payment mortgages granted by some lenders. The loan
must meet the established guidelines of FHA in order to qualify for the insurance.
Federal Open Market Committee (FOMC) - Policy committee in the Federal Reserve System that
sets short-term monetary policy objectives for the Fed. The committee is made up of the seven gov-
ernors of the Federal Reserve Board, plus five of the 12 presidents of the Federal Reserve Banks.

Fee Simple - 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.

FHA Mortgage - A mortgage insured by the Federal Housing Administration (FHA). FHA loans are
also known as government mortgages.

Finance Charge - The total dollar amount credit will cost.

Finders Fee - A fee paid to a mortgage broker for finding a mortgage for a potential borrower.

Firm Commitment - A lending institution’s agreement to give a loan to a specific borrower on a

specific property.

First Mortgage - A mortgage that is the first loan recorded in the public record and generally the
primary loan against a property.

Fixed Installment - 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.

Fixtures - Personal property or improvements that become real property when attached to the land
or building in a permanent manner.

Float - A term that describes the interest rate for a loan that has not yet been guaranteed by a lender.
If the lender has not yet guaranteed or locked the interest rate, it is floating and could change prior to
closing.

Flood Certification - 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 consid-
ered to be a third party fee, though you may find that all lenders do not pass this fee on to the bor-
rower.

Flood Insurance - 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.

Foreclosure - 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.

Forfeiture - The loss of money, or anything else of value, due to a breach of legal obligation or
contract.

Freddie Mac - 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 suf-
ficient to liquidate the remaining principal balance over the amortization term.

Gain - An increase in monetary or property value.

Gap Loan - Short-term financing, usually to cover a gap in time between a person’s purchase of a
home and that person’s later receipt of funds, usually from the sale of their previous home. Some-
times called a bridge loan or swing loan.

Garden Apartment - An apartment housing complex where the tenants have free access to a lawn
or garden area.

Gated Community - A private, fenced-in housing development, sometimes employing security

guards.

Good Faith Estimate - A written estimate of the closing costs the borrower will have to pay at
closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to pro-
vide this disclosure to the borrower within three days of receiving a loan application.

Government Mortgage - 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.

Government National Mortgage Association (GNMA) - A government-owned corporation

within the U.S. Department of Housing and Urban Development (HUD). Created in 1968, GNMA
assumed responsibility for the special assistance loan program formerly administered by FNMA.
Commonly called Ginnie Mae.

Grant - A technical term used in deeds of conveyance of property to indicate a transfer.

Grantee - The person to whom an interest in real property is conveyed.

Grantor - The person conveying an interest in real property.

Gross Domestic Product (GDP) - Measures aggregate economic activity available, encompassing
every sector of the economy. Quarterly percent changes (at an annualized rate) in GDP reflect the
growth rate of total economic output. GDP growth is widely followed as the primary indicator of
the strength of economic activity. Frequency: quarterly. Source: Commerce Department.

Ground Rent - The amount of money that is paid for the use of land when title to a property is
held as a lease hold estate rather than a fee simple estate.

Group Home - A residential building designed for unrelated, persons with special needs. These
homes provide long-term shelter and support services that are residential in nature.

Growing Equity Mortgage (GEM) - A fixed-rate mortgage that involves scheduled payment
increases over a specified period of time. The increase amount of the monthly payment is applied
directly to the remaining principal balance.

Guarantee Mortgage - A home loan that is guaranteed by a third party.

Habendum Clause - The “to have and to hold” clause that defines the amount of the estate grant-
ed in the deed.

Hangout - The principal balance of a loan remaining when the term of the loan is beyond the term
of a lease.

Hazard Insurance - 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 insur-
ance.

Home Equity Conversion Mortgage (HECM) - A special type of mortgage that enables seniors
to convert the equity in their homes

Home Equity Line of Credit (HELOC) - A loan secured by real property, usually in a subordi-
nate position, that allows the borrower to receive the loan proceeds in the form of multiple advanc-
es 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.

Home Inspection - A complete and detailed inspection that examines and evaluates the mechani-
cal and structural condition of a property. A complete and satisfactory home inspection is often
required by the homebuyer. Compare with appraisal.

Homeowner’s Insurance - 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 insur-
ance.

Homeowner’s Warranty - 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.

Homeowners Association - A nonprofit association that manages the common areas of a condo-
minium project or planned unit development (PUD). In a condominium development, the associa-
tion 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 mainte-
nance of the common areas in a condominium or subdivision development.

Housing Ratio - 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.

Housing Starts - Economic indicator that measures the number of residential units on which con-
struction is begun each month. Monthly percent changes reflect the rate of change of such activity.
The level of housing starts is widely followed as an indicator of residential construction activity.
Frequency: monthly. Source: Commerce Department.

HUD - 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).

HUD-1 Statement - 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.

Illiquidity - 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.

Implied Agency - Form of agency that occurs when the words and actions of the parties indicate
that there is an agency relationship.

Implied Contract - A contract created by actions, but not necessarily written or spoken.

Impound Account - A fund set aside for future needs, such as an escrow or reserve account.

Impounds - An impound refers to the funds a mortgagor pays to the lender along with their
monthly principal and interest payments for the payment of real estates taxes and hazard insurance.
This is also referred to as an escrow account. The money is held by the lender to make payments
when they are due.

In-file Credit Report - A computer-generated report containing credit and legal information ob-
tained from one of the main credit bureaus.

Income Property - Real estate developed and improved to produce steady income.

Index - 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, Lon-
don Inter-Bank Offering Rates (LIBOR) and the Cost of Funds Index (COFI).

Index of Leading Indicators - An index of eleven indicators designed to forecast the strength of
the economy six to nine months in the future. Frequency: monthly. Source: Commerce Department.

Individual Retirement Account - A retirement account that allows individuals to make tax-de-
ferred contributions to a personal retirement fund. Individuals can place IRA funds in bank ac-
counts or in other forms of investment such as stocks, bonds, or mutual funds.

Industrial Production - A fixed-weight measure of physical output of the nation’s factories, mines
and utilities. Monthly percent changes in the index reflect the rate of change in output. Changes in
industrial production are widely followed as a major indicator of strength in the manufacturing sec-
tor. Frequency: monthly. Source: Federal Reserve.

Inflation - An increase in the amount of money or credit available relative to the amount of goods
or services available. Inflation causes an increase in the general price level of goods and services.
Over prolonged periods, inflation can reduce the purchasing power of a dollar, making it worth less.

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

Installment - A regularly scheduled periodic payment that a borrower agrees to make to a lender.
Installment Loan - Borrowed money that is repaid in equal periodic payments. Cars and furniture
are often paid for with installment loans.

Insurable Title - A property title that a title insurance company agrees to insure against defects and
claims.

Insurance - 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.

Insurance Binder - 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.

Insured Mortgage - 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.

Interest - 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.

Interest Rate - 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 inter-
est 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 speci-
fied in the mortgage loan note.

Investment Property - A property that is not occupied by the owner.

Jeopardy - An element of risk or danger.

Joint Account - A credit account held by two or more people so that all can use the account and all
assume legal responsibility to repay.

Joint and Several Liability - A situation whereby a creditor can demand full repayment from any
and all borrowers. Each borrower is liable for the full debt, not just the prorated share.

Joint Tenancy - A form of co-ownership that gives each tenant equal undivided interest and equal
rights in the property, including the right of survivorship.

Joint Venture - An agreement between two or more parties who invest in a property or business.

Judgement Search Fee - A fee charged by a title company to search the public record for judge-
ments 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.

Judgment - 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 credi-
tor.

Judgment Lien - A lien on the property of a debtor resulting from a judgment.

Judicial Foreclosure - Type of foreclosure proceeding used in some mortgage states that is han-
dled like a civil lawsuit and conducted entirely under the direction of a court.

Jumbo Mortgage - 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.

Keogh Plan - A tax-deferred pension account designated for employees of unincorporated busi-
nesses or for persons who are self-employed.

Kicker - A payment sometimes required by a mortgage loan in addition to normal principal and
interest.

Laches - Undue delay or negligence in asserting one’s legal rights.

Land Banking - The business of buying land that is not currently needed for use.

Land Contract - A property installment selling agreement whereby the purchaser may occupy
and use the land, but no deed is given by the seller until a specified part of the sales price has been
paid.

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

Late Payment - A payment made later than agreed upon in a credit contract and on which addi-
tional charges may be imposed.

Lease - 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.

Lease-Purchase Mortgage Loan - A creative financing option that allows homebuyers to lease a
home with an option to buy. Each month’s rent payment consists of principal, interest, taxes and
insurance, plus an extra amount that is deposited into a savings account created for a down pay-
ment.

Leasehold Estate - A way of holding title to a property wherein the mortgagor does not actually
own the property, but instead has a long-term recorded lease on it.

Legal Description - A legal property description that is sufficient to locate and identify the prop-
erty without verbal testimony.

Lender - The bank, mortgage broker, or financial institution providing the loan funds to a bor-
rower.

Lender Fees - 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/administra-
tion 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.

Lessee - A person or company that signs a lease to get temporary use of property.

Lessor - A person or company that provides temporary use of property usually in return for peri-
odic payment.

Liabilities - A person’s financial obligations including both long-term and short-term debt, as well
as any other amounts that are owed to others.

Liability Insurance - 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.

Lien - 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.
Lien Certificate - A certificate to verify there are no claims by one person on the property of an-
other 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 pay-
ments 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.

Liquid Asset - An asset that is easily converted into cash.

Loan - Borrowed money that is usually repaid with interest.

Loan Commitment - A written offer from a lender to provide financing to a borrower. The com-
mitment letter states the terms under which the lender agrees to provide financing to the borrower.
Also called a commitment letter.

Loan Origination - The process by which a mortgage lender creates a mortgage secured by real
property.

Loan Term - 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.

Lock - 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.

Lock Period - 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.

Lock-In - 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.

Lot Drawing - A fee, usually associated with a survey or title policy to obtain a plat of the prop-
erty 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.
MACRS - Modified Accelerated Cost Recovery System.

Maintenance - Activities required to compensate for wear and tear on a property.

Management Fee - The fee charged for professional property management. Usually set at a fixed
percentage of total rental income generated by the managed property.

Mansion Tax - A tax charged by some state or local governments at the time of transfer of real
estate title from one owner to another particularly for high valued properties. For our comparison
purposes, this fee is considered to be a tax or other unavoidable fee.

Margin - The number of percentage points a lender adds to the index value to calculate the ARM
interest rate at each adjustment period.

Master Association - A homeowners’ association sometimes formed in a large condominium proj-

ect or planned unit development (PUD) that is made up of representatives from associations cover-
ing specific areas within the project.

Maturity - The date on which the principal balance of a financial instrument becomes due and
payable.

Maximum Financing - Usually, a loan amount that is within 5 percent of the highest loan-to-value
(LTV) percentage allowed for a specific product.

Merged Credit Report - A credit report that contains information from at least three credit reposi-
tories. Any duplicate entries are combined to provide a concise summary of a your credit.

Military Classification - Military Classification refers to whether the veteran served and qualifies
for VA home loan benefits as Active Duty, Reserve Service or National Guard Member.

Monetary Policy - Actions by the Federal Reserve System to influence the cost and availability of
credit, with the goals of promoting economic growth, full employment, price stability and balanced
trade with other countries.

Money Market Account - A type of savings account that provides bank depositors with many of
the advantages of a money market fund. Certain regulatory restrictions may apply to the withdraw-
al of funds.

Money Market Fund - A mutual fund that allows individuals to participate in managed invest-
ments in short-term debt securities, such as certificates of deposit and United States Treasury bills.

Mortgage - 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”.

Mortgage Banker - A company that originates mortgages for resale in the secondary mortgage
market.

Mortgage Insurance - 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.

Mortgage Tax - 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.

Mortgagee - The person or company who provides the loan funds to the borrower.

Mortgagor - The person who receives funds from a lender in exchange for a security interest in the
property. Commonly known as the borrower.

Multifamily Mortgage - A residential mortgage on a dwelling that is designed to house more than
four families, such as an apartment complex.

Name Search - 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 Purchasing Management (NAPM) Survey - This prices-paid index

gives insight into inflation in the manufacturing sector. A reading above 50% generally indicates
that the manufacturing sector is expanding, and below 50% signifies contraction. Frequency:
monthly. Source: National Association of Purchasing Management.

National Association of Realtors® - An organization of Realtors®, devoted to encouraging pro-

fessionalism in real estate activities

National Tenant - A lessee with a presence and established reputation in most of the United States.
These tenants are typically well-known and usually have better credit than local tenants

Negative Amortization - 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.

Net Worth - The total value of all of a person’s or company’s assets, minus all liabilities.

New Home Sales - Reports the number of new single-family homes sold, expressed on an annual
basis. Can be combined with Existing Home Sales to determine the total volume of home sales,
a strong predictor of future national mortgage origination volume. Frequency: monthly. Source:
Commerce Department.

No Cash Out Refinance - A refinance loan is an amount that pays off the existing mortgage bal-
ance on the property and does not provide the borrower with any cash at closing.

Non-Conforming Loan - A mortgage that exceeds the maximum loan amount for the most com-
mon 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.

Non-liquid Assets - Any assets that cannot easily be converted into cash.

Notary Fee - A fee for a licensed notary public to certify your signature on the loan documents.

Note - 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.

Note Rate - 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.

On-line Approval - An instant approval provided by some on-line lenders as soon as you complete
the on-line application. An on-line approval saves you time.

On-line Rate Locks - The ability to lock in an interest rate directly from the website of a lender.
The on-line rate lock capability means you don’t have to make telephone contact during business
hours when you are ready to lock in your interest rate.

On-line Status - 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.

Obligee - A person or company whose favor an obligation is entered into.

Obligor - A person or company who has engaged to perform some obligation.

Occupancy Rate - Percentage of currently rented units in a building, neighborhood, complex, or

city.
Offer - A buyer’s expression of willingness to purchase a property at the seller’s specified price.

Offer to Purchase - An agreement between a buyer and seller to purchase real estate. An offer to
purchase, also known as a binder 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.

Open-End Lease - A lease which may involve a balloon payment based on the value of the prop-
erty when it is returned.

Original Principal Balance - Total amount of principal owed on a loan before any payments are
made.

Origination Fee - 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.

Other Fees - 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.

Owner Financing - A real property purchase transaction in which the seller provides the financing.

P&I - The monthly principal and interest payment required when repaying a mortgage in accor-
dance with its terms.

Package Mortgage - A mortgage agreement in which the principal amount loaned is increased
because personal property as well as real property serve as security.

Pad Site - A single freestanding retail site, often adjacent to a mall or larger shopping center.
Paper - Credit given, evidenced by a written obligation with property as collateral.

Partial Payment - A loan payment that is not great enough to cover the scheduled monthly pay-
ment on a mortgage.

Payment Change Date - The date when a new monthly payment amount takes effect on an ad-
justable-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 pay-
ments can increase during a single adjustment period.

Periodic Rate Cap - On an adjustable-rate mortgage (ARM), a limit on the amount that the inter-
est rate can increase during a single adjustment period.

Personal Income - Economic indicator that measures the total income of all Americans from all
sources, and is reported both before and after taxes. Also reports personal spending and personal
savings. The level of spending can be used as an indicator of consumer optimism. Frequency:
monthly. Source: Commerce Department.

Personal Property - Any and all property that is not real property.

PITI - (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 obtain-
ing 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.

Plat Registration - 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.

Points - Fees that are collected by the lender in exchange for a lower interest rate. Commonly
called discount points, each point is equal to 1% of the loan amount. For our comparison pur-
poses, a discount point is considered to be a lender fee. To determine if it is wise to pay discount
points to obtain a lower rate, you must compare the up front cost of the points to the monthly sav-
ings that result from obtaining the lower rate.

Power of Attorney - A written legal instrument that authorizes another person to act on one’s be-
half. A power of attorney can grant either complete or limited authority.

Pre-Foreclosure Sale - A process in which the lender allows a borrower to avoid foreclosure by
selling the property for less than the amount that may be owed to the lender.

Pre-Qualification - Procedure to determine how much money a potential homebuyer will be eli-
gible to borrow prior to actually applying for a loan.

Prepaids - 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.
Prepayment - Any amount that is paid to reduce the principal balance, not interest, of a loan before
the due date.

Prepayment Penalty - A monetary penalty charged by a lender if all or part of a loan is paid off
before it is due.

Prime Rate - 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.
Principal - 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 monthly payment required to repay a mortgage in accordance with its
terms. Sometimes referred to as “P&I”.

Principal Balance - 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.

Processing/Administration Fee - 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 con-
sidered to be a lender fee.

Producer Price Index (PPI) - Measures the average level of prices of a fixed basket of goods re-
ceived in primary markets by producers. Monthly percent changes reflect the rate of change in such
prices. Changes in the PPI are widely followed as an indicator of commodity inflation. Frequency:
monthly. Source: Labor Department.

Productivity - An economic indicator that measures the output per hour of work for non-farm
business production. Can be used in conjunction with the rate of change in GAP to determine
whether economic growth is likely to be inflationary. A separate component measures unit labor
costs, an important indicator of future inflation. Frequency: quarterly. Source: Labor Department.

Promissory Note - A written promise to pay a specified sum to specified person over a specified
period of time.

Property Taxes - Taxes based on the assessed value of the home, paid by the homeowner for com-
munity services such as schools, public works, and other costs of local government. Sometimes
paid as a part of the monthly mortgage payment.

Public Auction - A gathering at a pre-announced public location to sell property to satisfy a mort-
gage that is in default.

Public Record - 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.

Purchase Agreement - A written contract signed by the buyer and seller stating the terms and con-
ditions under which a property will be sold.

Quadrangle - A square-shaped land area, 24 miles on each side. Frequently used in the government
rectangular survey method of land description.
Qualified Veteran - To officially determine if you are a qualified veteran, you or Unity One Credit
Union must request a Certificate of Eligibility (COE) from the VA. This certificate indicates that
the VA has determined you are eligible for a VA home loan and shows the amount of available
entitlement or guaranty. To obtain a certificate of eligibility, complete the “Request for a Certificate
of Eligibility for VA Home Loan Benefits Form” (VA Form 26-1880) and submit it to the VA. This
form, as well as additional information about VA home loan eligibility requirements, are available
on the VA website (www.homeloans.va.gov).

Qualifying Ratios - 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.

Qualifying Thrift Lender - A lender who specializes in home mortgage finance under the rules
established by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

Quantity Survey - A method used by appraisers to estimate how much it would cost to reproduce
an improvement.

Quitclaim Deed - 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.

Radon - A naturally appearing radioactive gas found in some buildings, that, in sufficient concen-
trations, may cause health problems.

RAM - Reverse annuity mortgage.

Rate - 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.

Rate Lock - An agreement by a lender to guarantee the interest rate offered for a mortgage pro-
vided 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.
Real Property - Land and anything permanently affixed to the land, including structures, trees,
minerals, and the interest, benefits and rights thereof.

Realtor® - 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.

Reconveyance Fee - This fee is charged by title companies or attorneys in some states and cov-
ers 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.

Recordation Exam - A fee charged by the title company in some states to review documents, to
assure they meet the state standards prior to being recorded. For our comparison purposes, a recor-
dation exam is considered to be a third party fee and may be included in the title insurance fee by
some lenders.

Recorder - The public official who keeps records of transactions that affect real property in a spe-
cific geographic area (usually a county). Often known as a County Recorder or County Clerk.

Recording - The entering in a book of public record the details of a properly executed legal instru-
ment that affects title to real property, thereby making it a part of the public record.

Recording Fees - 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.

Refinance - The process of paying off any existing mortgages on a home with a new mortgage
loan.

Rehabilitation Mortgage - 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.

Release Fee - The fee charged to release a lien to free real estate from a mortgage.

Remaining Balance - The amount of principal owed on a loan that has not yet been fully repaid.

Remaining Term - The number of payments left to be made on a loan before it is fully amortized
(paid in full).

Rent Loss Insurance - An insurance policy that protects a landlord against loss of rent or value
due to natural casualties that renders the premises unsuitable for use, and therefore excuses the ten-
ant from paying rent.

Repayment Plan - An agreement between a lender and a borrower, made to help the borrower
repay delinquent installments.

Replacement Reserve - An amount set aside from net operating income for replacement of short-
lived common property in cooperative housing projects such as condominiums.
Rescission - 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.

RESPA - See Real Estate Settlement Procedures Act.

Retail Sales - Measures the total receipts of retail stores. Monthly percent changes reflect the
rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of con-
sumer spending. Frequency: monthly. Source: Commerce Department.

Retirement Plan 401(k) & 403(b) - Employer-sponsored investment plans that allows indi-
viduals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are
provided by private corporations. 403(b) plans are provided by non-profit organizations.

Retirement Plan 401(k) & 403(b) Loans - Some administrators of 401(k) and 403(b) plans al-
low for loans against the funds you have accumulated in these plans.

Reverse Mortgage - See Home Equity Conversion Mortgage (HECM).

Revolving Credit - A credit agreement (typically a credit card) that allows a customer to borrow
against a pre-approved credit line when purchasing goods and services. The borrower is only
billed for the amount that is actually borrowed plus any interest due.

RHS - See Rural Housing Service.

Right of First Refusal - A contract provision that requires a property owner to give another
party the first opportunity to purchase or lease the property before it is offered to others.

Right of Ingress or Regress - The right to enter or leave specific property or premises.

Right of Survivorship - In joint tenancy, the right of surviving joint tenants to acquire the inter-
est of a deceased joint tenant.

Rural Housing Service (RHS) - An agency within the United States Department of Agriculture
that provides financing to farmers and other qualified borrowers buying property in rural areas,
who are unable to obtain loans elsewhere.

S&L - Savings and Loan Association.

Safe Harbor - A set of rules and regulations that will guarantee compliance with the law, if fol-
lowed.

Safe Rate - An interest rate provided by low-risk investments such as high grade bonds or se-
cured first mortgages.

Sale-Leaseback - A technique in which a seller deeds property to a buyer, who simultaneously

leases the property back to the seller.

Sales Contract - An agreement between a buyer and seller to purchase real estate. A sales con-
tract, 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.

Sales Disclosure - A state specific form that may need to be filed, disclosing everything about the
sale of the home.

Salesperson - A person who is licensed to make real estate transactions while under the supervi-
sion of a broker licensed by the state.

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 trans-
fer 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 ad-
dition, 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.

Search Fee - 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 trans-
fer 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.

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

Secondary Mortgage Market - The buying and selling of existing mortgages, primarily residen-
tial first mortgages.

Secured Loan - A loan that is backed by collateral.

Security - 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.

Security Interest - The lender’s right to take property that has been offered as security.

Seller Take-Back - An arrangement in which the owner of a property provides financing.

Servicer - 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.

Settlement - 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.

Settlement Statement - 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 remain-
ing 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 consid-
ered 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 con-
sidered to be a tax or other unavoidable fee.

Step Mortgage - A type of adjustable-rate mortgage (ARM) that allows for the interest rate to
increase according to a specified schedule. At the end of the specified period, the rate and pay-
ments will remain constant for the remainder of the loan. Sometimes called a step-rate mortgage.

Subdivision - A housing development that is created by dividing a large parcel of land into
many individual lots for sale.

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

Survey - 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.

Survey Affidavit - A fee charged by a title company to issue an insurance policy without re-
quiring 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.

Sweat Equity - Contribution to the construction of a property in the form of labor or services,
instead of cash.

Swing Loan - 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 cur-
rent residence will not be sold prior to the purchase of a new home.
Tacking - Adding on to a certain period of time.

Takeout Financing - A firm commitment to provide permanent long-term financing after a con-
struction project is completed.

Taking - The acquisition of a piece of land, usually through condemnation.

Tangible Property - Real estate and other property of value which can be seen and touched.

Tax Base - The total value of property, income, or other taxable assets subject to taxation.

Tax Certificate - 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.

Taxes and Other Unavoidable Fees - Fees that we consider to be taxes and other unavoidable
fees include State/Local Taxes and recording fees. These fees will most likely have to be paid re-
gardless of the lender you choose. If you see a tax or recording fee in the fee comparison table that
is listed by some of the sites and not others, don’t assume that you won’t have to pay it. It prob-
ably means that the lender who doesn’t list the fee hasn’t done the research necessary to provide
accurate closing cost information nationwide. Contact one of the sites directly for more informa-
tion or talk to your real estate agent or attorney for guidance.

Tenancy by the Entirety - Type of joint tenancy that provides the right of survivorship and is
available only to a husband and wife. Compare with tenancy in common.

Tenancy in Common - Type of joint tenancy without the right of survivorship. Compare with
tenancy by the entirety and with joint tenancy.

Term - 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 insur-
ance 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.

Title - A legal written instrument evidencing a person’s lawful possession of a property.

Title Company - A company that specializes in examining titles to real estate and issuing title
insurance.

Title Examination - 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.

Title Insurance - 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.

Title Opinion - 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.

Title Search - 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 bor-
rower 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.

Trade Equity - Equity that results from a buyer giving an existing property as trade for all, or part
of, the down payment on the subject property.

Transfer of Ownership - Any legal method by which the ownership of property changes hands.

Transfer Tax - A tax charged by some state or local governments at the time of transfer of real es-
tate 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.

Treasury Bills - 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.

Treasury Bond - Negotiable, long-term U.S. Government debt obligation with a maturity of ten
years or longer, issued in minimum denominations of $1,000.

Treasury Index - 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.

Treasury Note - An intermediate U.S. Government security with a maturity of 1 to 10 years. De-
nominations 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.

Treasury Securities - An index used to establish interest rates for adjustable rate mortgages. It
is based on the yields of actively traded 1-year, 3-year, or 5-year Treasury Securities adjusted to
constant maturities. The Treasury Security indices are calculated by the U.S. Treasury and reported
by the Federal Reserve Board. These indices have either a weekly or a monthly value. The weekly
indices are released on Monday afternoon for the previous week. Monthly values for these indices
are generally available on the first Monday of the following month.

Trustee - A fiduciary who holds property in trust for another to secure performance of an obliga-
tion or act.

Truth in Lending Act - Also known as Regulation Z, this federal regulation requires a lender to
provide borrowers with a disclosure estimating the costs of the loan including your total finance
charge and the Annual Percentage Rate (APR) within three business days of the application for a
loan. This act is designed to provide consumers with a standard method of comparing the financ-
ing costs from lender to lender.

Two-step Mortgage - A type of adjustable-rate mortgage (ARM) that has one interest rate for the
first few years (typically 5 or 7), and a different rate for the remainder of the amortization term.

UCC - Uniform Commercial Code.

Underlying Mortgage - Generally refers to the first mortgage when there is a wraparound mort-
gage.

Underwriting - 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.

Underwriting Fee - 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.

Undivided Interest - An ownership right to use and occupy property that is shared among more
than one owner. No single co-owner may have exclusive rights or possession to any part of the
property.
Uniform Commercial Code (UCC) - Group of laws that are applicable to commercial transac-
tions. Only a few of the laws have relevance to real estate transactions.

Unsecured Loan - A loan that is not backed by collateral.

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.

VA Funding Fee - The Department of Veteran’s Affairs (VA) charges a Funding Fee to most vet-
erans who obtain a VA mortgage loan to help sustain the VA home loan program. Only veterans re-
ceiving VA disability are exempt from paying this fee. The VA Funding Fee is a percentage of the
principal loan amount and is due at closing. The amount of the VA Funding Fee varies depending
on specifics of the transaction. The full amount can usually be financed as part of the loan amount
or paid in cash.

VA Loan - A mortgage for veterans and service persons. The loan is guaranteed by the Depart-
ment of Veterans Affairs (VA) and requires low or no down payment.

Vacancy Rate - The percentage of all units or space that is not leased, not rented or is unoccupied.

Vacant Land - Land that is not currently being used.

Vacate - To move out of a premises.

Vacation Home - A home used by the owners only occasionally or seasonally, primarily for recre-
ational purposes.

Valid - A document or contract that has legally binding force.

Vested - Having the right or privilege to use a portion of a fund, such as an individual retirement
account (IRA).

Waiver - The voluntary abandonment or surrender of some claim, right, or privilege.

Warehousing - The packaging together of many mortgages for the purpose of selling them in the
secondary market, usually by a mortgage banker who has originated the loans.

Warranty - A promise contained in a contract.

Water Table - Usually defined as the upper-most level at which underground water is normally
encountered in a particular area.

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 clos-
ing. For our comparison purposes, a wire transfer fee is considered to be a third party fee. How-
ever, some lenders may not charge for this service.

Wraparound Loan - A loan that includes the remaining balance on an underlying first loan. In-
stead of having separate first and second mortgages, a wraparound loan has both.

Yield - A measurement of the rate of earnings from an investment, usually expressed as a percent-
age.

Yield To Maturity (YTM) - The internal rate of return on an investment. Typically takes into ac-
count all investment returns and their timing.

Zone - A geographic area reserved and defined by local ordinance for specific limited use. Zones
are almost always subject to certain restrictions or conditions.

Zoning - The local government’s specifications for the use of property in certain areas.

Zoning Map - A map of the local geographic area that defines current zoning designations and
land use.

Zoning Ordinances - The acts of an authorized local government establishing building codes,
and setting regulations for property usage.

Information provided by Unity One Credit Union and CU Members Mortgage. For informational purposes only.