Financial Terms Glossary

A mortgage whose interest rate changes periodically based on changes in a specified index.

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

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

The repayment of a mortgage loan by installments with regular payments to cover principal and interest.

The amount of time required to amortize the mortgage loan, expressed in months (e.g., 360 months for a 30-year mortgage).

The cost of a mortgage stated as a yearly rate; includes interest, mortgage insurance, and loan origination fees (points).

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

Anything of monetary value owned by a person, including real property, personal property, bank accounts, stocks, and mutual funds.

The transfer of a mortgage from one person or entity to another.

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

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

A provision in an assumable mortgage allowing a buyer to assume responsibility for the mortgage without paying the loan in full upon sale.

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

A financial statement that shows assets, liabilities, and net worth as of a specific date.

A mortgage with level monthly payments that amortize over a term but requires a lump sum payment at the end of an earlier specified term.

The final lump sum payment made at the maturity date of a balloon mortgage.

One hundredth of a percentage point (0.01%). For example, 50 basis points on a $100,000 loan equals 0.50% or $500.

A preliminary agreement, secured by an earnest money deposit, under which a buyer offers to purchase real estate.

A mortgage requiring payments every two weeks. Resulting in 26 half-payments a year, it accelerates payoff and reduces total interest.

A mortgage secured by a cooperative project or multiple properties, as opposed to loans on individual units.

A violation of any legal obligation.

A short-term loan secured by the borrower's current home to allow proceeds to be used to close on a new house before selling. Also called a "swing loan."

A person who, for a fee or commission, brings parties together and assists in negotiating contracts between them.

A mortgage where an initial lump sum payment is made to reduce monthly payments during the first few years or over the life of the loan.

A mortgage provision giving the lender the right to call the mortgage due and payable at the end of a specified period.

An ARM provision limiting how much the interest rate or mortgage payments may increase or decrease.

A permanent structure or improvement to real property that adds to its value and useful life.

A refinance transaction where the new loan amount exceeds existing debt and closing costs, providing additional cash to the borrower.

A savings account with a fixed maturity date and specified interest rate, often carrying penalties for early withdrawal.

A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

A document issued by the VA establishing the maximum property value and loan amount for a VA mortgage.

A statement by a title company or attorney affirming that title to real estate is legally held by the current owner.

The history of all documents transferring title to a parcel of real property from the earliest record to the present.

The frequency (in months) of payment or interest rate changes in an adjustable-rate mortgage (ARM).

A title free of liens, encumbrances, or legal questions regarding property ownership.

The final meeting where a property sale is finalized, mortgage documents are signed, and closing costs are paid. Also called "settlement."

A fee or amount paid at closing for a service, tax, or product, such as origination fees, taxes, and attorney fees.

The final standardized statement of all costs incurred to close on a loan or home purchase (such as a Closing Disclosure or HUD-1).

Any condition revealed by a title search that adversely affects property title, usually requiring a quitclaim deed or court action to resolve.

An asset (such as a home) pledging guarantee for loan repayment. Risk of loss occurs if loan terms are defaulted.

Efforts to bring a delinquent mortgage current and file necessary legal notices prior to foreclosure.

A transaction utilizing a first mortgage (often 80%) and a concurrent second mortgage (such as an 80/10/10) to avoid private mortgage insurance (PMI).

The total unpaid balance of all mortgages on a property divided by the property's appraised value.

A person who signs a promissory note alongside the borrower, assuming joint responsibility for repayment.

The fee charged by a real estate broker or agent for negotiating a transaction, usually calculated as a percentage of the price.

A formal offer by a lender stating the specific terms under which it agrees to lend money to a home buyer.

Portions of a building or land owned jointly in a condo or PUD (e.g., pools, corridors, parking) shared by all unit owners.

An alternative financing option allowing buyers to finance purchase and modest home repairs under a single mortgage.

A statutory form of ownership in certain states where property acquired during marriage is presumed owned jointly by both spouses.

Recently sold properties of similar size, location, and features used by appraisers to estimate fair market value.

Interest calculated on both the initial principal balance and accumulated prior interest.

Changing the legal ownership of an existing building (usually rental apartments) into individual condominium units.

A mortgage that meets underwriting guidelines and dollar limits set for purchase by Fannie Mae or Freddie Mac.

A short-term interim loan for financing construction costs, disbursed to the builder in stages as work progresses.

An organization (credit bureau) that collects and prepares credit history reports used by lenders to evaluate creditworthiness.

A condition specified in a contract that must be satisfied for the contract to remain legally binding (e.g., home inspection, financing).

A residential mortgage loan that is not directly insured or guaranteed by a federal government agency (like FHA or VA).

An adjustable-rate mortgage (ARM) that includes a clause allowing conversion to a fixed-rate mortgage under set conditions.

A housing structure where residents purchase shares in a corporation that owns the property, granting them occupancy rights to a unit.

A regional interest rate index used to determine rate adjustments for certain adjustable-rate mortgages.

A clause in a legal document or mortgage obligating or restricting a property owner, violation of which can lead to legal action.

An organization (Equifax, Experian, TransUnion) that stores and updates financial records and credit history for individuals.

The formal legal document conveying title to real property from seller to buyer.

A deed given by a defaulting borrower to a lender to satisfy mortgage debt and avoid formal foreclosure.

A document used in some states instead of a mortgage, where property title is transferred to a trustee to secure a debt.

Failure to make required mortgage payments on time or fulfill other contractual terms of a loan.

Failure to make a mortgage payment by its official due date.

A decline in property value over time caused by physical wear, market changes, or economic factors. Opposite of appreciation.

A mortgage clause allowing the lender to demand immediate full loan payoff if the property is transferred or sold.

A deposit made by a buyer upon submitting an offer to demonstrate good faith and serious intent to complete the purchase.

A legal right giving individuals or utility entities access to or across another person's property.

An appraiser's estimate of a building's physical condition, which may be higher or lower than its chronological age.

Normal annual income including stable salary, overtime, and secondary income used for loan qualification.

Electronic paperless transfer of money from one bank account directly to another.

Any claim, lien, easement, or restriction affecting or limiting absolute title to property.

A person who signs ownership interest over to another party on a legal instrument.

A federal law prohibiting credit discrimination based on race, color, religion, origin, sex, age, marital status, or public assistance.

The financial value of a homeowner's interest in property, calculated as fair market value minus outstanding mortgage balances.

Funds or documents held by a neutral third party until specified contract conditions or settlement obligations are completed.

An account maintained by a loan servicer to hold borrower funds collected monthly for property taxes and home insurance.

The periodic review of an escrow account to ensure monthly deposits match upcoming property tax and insurance bills.

The payment of real estate taxes, property insurance, or mortgage insurance made by the servicer out of escrow funds.

An individual's total ownership interest in real and personal property, particularly at the time of death.

The legal process of removing an occupant from real property.

The detailed review of public land records to verify property ownership history and legal encumbrances.

Federal law regulating consumer credit reporting agencies and establishing consumer rights to correct credit report errors.

The highest price a willing buyer would pay and the lowest price a willing seller would accept in an open market.

The Federal National Mortgage Association (FNMA)—a government-sponsored enterprise providing liquidity in the mortgage market.

The absolute, highest level of ownership interest an individual can hold in real property.

A federal agency within HUD that insures residential mortgages made by private lenders to encourage homeownership.

A mortgage insured by the Federal Housing Administration, offering flexible down payment and credit guidelines.

A fee paid to an intermediary or broker for bringing a borrower and lender together.

The primary loan against a property holding superior lien priority over secondary mortgages or trusts.

A mortgage with an interest rate that remains completely unchanged throughout the entire term of the loan.

Specialized property insurance required for homes located in federally designated special flood hazard areas.

The legal process by which a lender enforces sale of mortgaged property to satisfy unpaid debt following borrower default.

A preliminary itemized disclosure of estimated settlement charges provided by a lender to a loan applicant.

Property insurance protecting against physical damage caused by fire, storms, vandalism, and specified risks.

A revolving line of credit secured by equity in a home, functioning similarly to a credit card with flexible draw terms.

A fixed lump-sum second mortgage loan secured by established property equity, often used for major expenses.

The percentage of gross monthly income dedicated to monthly housing expenses (PITI). Also called the front-end ratio.

The U.S. Department of Housing and Urban Development, overseeing federal housing programs and fair housing laws.

A published financial benchmark (e.g., SOFR, Treasury rates) used to calculate interest rate adjustments on ARMs.

An account maintained by a lender to collect and disburse property taxes and insurance on behalf of a borrower (also called escrow).

A mortgage option where payments cover only accruing interest for an initial set period, temporarily delaying principal payoff.

A non-conforming home loan that exceeds conforming purchase limits established for Fannie Mae and Freddie Mac.

A legal claim or encumbrance recorded against property to secure payment of a monetary debt or obligation.

The bank, credit union, or mortgage financial institution providing funds for a loan transaction.

A provision in an ARM setting the absolute maximum interest rate that can be charged over the lifetime of the loan.

The ratio of the unpaid mortgage amount divided by the property's appraised value or purchase price.

The specific time frame (e.g., 30, 45, or 60 days) during which a lender guarantees an agreed interest rate.

The fixed percentage added to an index benchmark by a lender to determine an ARM interest rate at adjustment.

The final scheduled date on which a loan principal balance or financial instrument becomes due and payable in full.

A legal instrument pledging property to a lender as security for the payment of a loan debt.

Insurance protecting a lender against financial loss caused by borrower default, typically required when down payment is under 20%.

The entity or lender that receives the mortgage pledge and advances loan funds.

The borrower who pledges property as security for a loan debt.

Occurs when monthly payments do not cover accruing interest, causing the unpaid loan balance to increase rather than decrease.

A loan that does not meet standard underwriting guidelines or purchase limits set by Fannie Mae or Freddie Mac.

A fee charged by a lender to cover administrative expenses associated with evaluating, processing, and making a loan.

A transaction where the property seller extends financing directly to the buyer to purchase the home.

The maximum limit an ARM interest rate can increase or decrease during a single adjustment period.

Principal, Interest, Taxes, and Insurance—the four core components of a total monthly housing payment.

A housing development where individuals own distinct lots/units alongside shared ownership in common areas and amenities.

Upfront charges paid to a lender at closing, where one point equals 1% of the total mortgage loan amount.

Expenses paid in advance at settlement, such as initial hazard insurance premiums or prorated property taxes.

A fee charged by certain lenders if a borrower pays off a portion or all of a loan ahead of schedule.

The remaining original capital balance owed on a mortgage loan, excluding accruing interest.

Insurance issued by private companies protecting conventional lenders when borrower down payments are below 20%.

Calculations comparing borrower housing costs and total debt obligations against gross monthly income to evaluate loan eligibility.

Contractual limits restricting how much an ARM interest rate can adjust during specific periods or over the loan life.

A written agreement where a lender guarantees a specified interest rate to a borrower for a set timeframe.

Paying off an existing mortgage loan with proceeds from a new loan secured by the same property.

A detailed, verified credit report combining financial data from multiple national credit repositories.

An agreement where the seller provides secondary financing directly to the buyer to help complete the property purchase.

The act of agreeing to keep an existing second mortgage or HELOC in secondary lien position when refinancing a first mortgage.

A professional drawing showing exact boundary lines, property dimensions, easements, and building locations on a parcel of land.

Co-ownership of property by two or more individuals without right of survivorship, allowing flexible, unequal interest shares.

An insurance policy protecting buyers or lenders against financial loss resulting from historical title defects or unrecorded liens.

An examination of public land records to confirm legal property ownership and identify outstanding liens or encumbrances.

The percentage of gross monthly income required to cover all recurring monthly debt payments, including housing (back-end ratio).

An interest rate that fluctuates periodically over time based on market indexes or underlying economic indicators.