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Abstract of Title: documents recording the ownership of property throughout time.
Additional Principal Payment: money paid to the lender in addition to the established payment amount used directly against the loan principal to shorten the length of the loan.
Adjustable Rate Mortgage (ARM): Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender.
Adjustment Date: the actual date that the interest rate is changed for an ARM.
Adjustment Index: the published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.
Affidavit: a signed, sworn statement made by the buyer or seller regarding the truth of information provided.
Amortization: a payment plan that enables you to reduce your debt gradually through monthly payments. The payments include principal and interest. The monthly amount is based on the schedule for the entire term or length of the loan.
Annual Mortgagor Statement: yearly statement to borrowers detailing the remaining principal and amounts paid for taxes and interest.
Annual Percentage Rate (APR): a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. The APR provides consumers with a good basis for comparing the cost of loans, including mortgage plans.
Application: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Application Fee: a fee charged by lenders to process a loan application.
Appraisal: a document from a professional that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
Appraisal Fee: fee charged by an appraiser to estimate the market value of a property.
Appraised Value: an estimation of the current market value of a property.
Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
Appreciation: an increase in property value.
Arbitration: a legal method of resolving a dispute without going to court.
As-is Condition: the purchase or sale of a property in its existing condition without repairs.
Asking Price: a seller's stated price for a property.
Assessed Value: the value that a public official has placed on any asset (used to determine taxes).
Assessments: the method of placing value on an asset for taxation purposes.
Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.
Assets: any item with measurable value.
Back End Ratio (also known as a “Debt to Income” ratio): a ratio that indicates what portion of a person's monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (including principal, interest, property taxes and insurance), auto loans, credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to assess a borrower’s ability to repay a loan.
Balance Sheet: a financial statement that shows the assets, liabilities and net worth of an individual or company.
Biweekly Payment Mortgage: a mortgage paid every two weeks instead of once a month, reducing the amount of interest to be paid on the loan.
Borrower: a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.
Bridge Loan: a short-term loan paid back relatively fast. Normally used until a long-term loan can be processed.
Building Code: based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.
Budget: a detailed record of all income earned and spent during a specific period of time.
Cap: a limit, such as one placed on an adjustable rate mortgage, on how much a interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage.
Capacity: The ability to make mortgage payments on time, dependant on assets and the amount of income each month after paying housing costs, debts and other obligations.
Capital Gain: the profit received based on the difference of the original purchase price and the total sale price.
Capital Improvements: property improvements that either will enhance the property value or will increase the useful life of the property.
Capital or Cash Reserves: an individual's savings, investments, or assets.
Cash-Out Refinance: when a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value. For example, if a home has a current value of $100,000 and an outstanding mortgage of $60,000, the owner could refinance $80,000 and have additional $20,000 in cash.
Cash Reserves: a cash amount sometimes required of the buyer to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
Casualty Protection: property insurance that covers any damage to the home and personal property either inside or outside the home.
Certificate of Occupancy: a document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, and indicating it to be in a condition suitable for occupancy.
Certificate of Title: a document provided by a qualified source, such as a title company, that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.
Charge-Off: the portion of principal and interest due on a loan that is written off when deemed to be uncollectible.
Clear Title: a property title that has no defects. Properties with clear titles are marketable for sale.
Closing: the final step in a property purchase or refinance where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.
Closing Costs: fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes.
Closing Disclosure: an industry standard document that provides you with specific details concerning your loan closing. The document discloses how much you will need to pay in fees or costs in order to obtain your mortage or purchase your home.
Cloud On The Title: any condition which affects the clear title to real property.
Co-Borrower: an additional person that is responsible for loan repayment.
Co-Signed Account: an account signed by someone in addition to the primary borrower, making both people responsible for the amount borrowed.
Co-Signer: a person that signs a credit application with another person, agreeing to be equally responsible for the repayment of the loan.
Collateral: security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral.
Collection Account: an unpaid debt referred to a collection agency to collect on the bad debt. This type of account is reported to the credit bureau and will show on the borrower's credit report.
Commission: an amount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the transaction. Traditionally the home seller pays the commission. The amount of commission is determined by the real estate professional and the seller.
Comparative Market Analysis (COMPS): a property evaluation that determines property value by comparing similar properties sold within a certain period of time.
Condominium: a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas.
Conforming loan: is a loan that does not exceed Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
Consideration: an item of value given in exchange for a promise or act.
Contingency: a clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both, buyer or seller may include contingencies in a contract, but both parties must accept the contingency.
Covenants: legally enforceable terms that govern the use of property. These terms are transferred with the property deed. Discriminatory covenants are illegal and unenforceable. Also known as a condition, restriction, deed restriction or restrictive covenant.
Credit: an agreement that a person will borrow money and repay it to the lender.
Credit Bureau: an agency that provides financial information and payment history to lenders about potential borrowers. Also known as a National Credit Repository.
Credit Counseling: education on how to improve bad credit and how to avoid having more debt than can be repaid.
Credit Grantor: the lender that provides a loan or credit.
Credit History: a record of an individual that lists all debts and the payment history for each. The report that is generated from the history is called a credit report. Lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit Report: a report generated by the credit bureau that contains the borrower's credit history for the past seven years. Lenders use this information to determine a potential borrower’s ability to repay a loan.
Credit Risk: a term used to describe the possibility of default on a loan by a borrower.
Credit Score: a score calculated by using a person's credit report to determine the likelihood of a loan being repaid on time. Scores range from about 300 to 850: a lower score meaning a person is a higher risk, while a higher score means that there is less risk.
Creditor: the lending institution providing a loan or credit.
Debtor: The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.
Debt-to-Income Ratio (also known as a “Back End” ratio): a ratio that indicates what portion of a person's monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (including principal, interest, property taxes and insurance), auto loans, credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to assess a borrower’s ability to repay a loan.
Deed: a document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner's signature. Also known as the title.
Default: the inability to make timely monthly mortgage payments or otherwise comply with mortgage terms. Once in default the lender can exercise legal rights defined in the contract to begin foreclosure proceedings.
Delinquency: failure of a borrower to make timely mortgage payments under a loan agreement.
Deposit (Earnest Money): money put down by a potential buyer to show that they are serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or it may be forfeited if the buyer pulls out of the deal. During the contingency period the money may be returned to the buyer if the contingencies are not met to the buyer's satisfaction.
Depreciation: a decrease in the value or price of a property due to changes in market conditions, wear and tear on the property, or other factors.
Discount Point: discount points are monies paid by a borrower at loan origination to reduce (or “buy down”) the interest rate.
Document Recording: after closing on a loan, certain documents are filed and made public record. Discharges for the prior mortgage holder are filed first. Then the deed is filed with the new owner's and lender’s name.
Due on Sale Clause: a provision of a loan allowing the lender to demand full repayment of the loan if the property is sold.
Encumbrance: anything that affects title to a property, such as loans, leases, easements, or restrictions.
Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.
Escape Clause: a provision in a purchase contract that allows either party to cancel part or the entire contract if the other does not respond to changes to the sale within a set period. The most common use of the escape clause is if the buyer makes the purchase offer contingent on the sale of another house.
Escrow: funds held in an account to be used by the lender to pay for home insurance and property taxes. The funds may also be held by a third party until contractual conditions are met and then paid out.
Escrow Account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, flood insurance, etc. Your lender will advise you of any specific escrow requirements.
FICO Score: FICO is an abbreviation for Fair Isaac Corporation and refers to a person's credit score based on credit history. Lenders and credit card companies use the number to decide if the person is likely to pay his or her bills. A credit score is evaluated using information from the three major credit bureaus and is usually between 300 and 850.
Fair Market Value: the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers. Also known as a Government Sponsored Enterprise (GSE).
FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
First Mortgage: the mortgage with first priority if the loan is not paid.
Fixed Expenses: payments that do not vary from month to month.
Fixed-Rate Mortgage: a mortgage with principal and interest payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Fixture: personal property permanently attached to real estate or real property that becomes a part of the real estate.
Float: the act of allowing an interest rate to fluctuate with changes in the market.
Flood Insurance: insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance.
Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.
Freddie Mac: Federal Home Loan Mortgage Corporation (FHLMC); a federally chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers. Also known as a Government Sponsored Enterprise (GSE).
Front End Ratio: a percentage comparing a borrower's total monthly cost to buy a house (mortgage principal and interest, insurance, and real estate taxes) to monthly income before deductions.
GSE: abbreviation for government sponsored enterprises: a collection of financial services corporations formed by the United States Congress to reduce interest rates for farmers and homeowners. Examples include Fannie Mae and Freddie Mac.
Ginnie Mae: Government National Mortgage Association (GNMA); a government owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as with Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.
Grantee: an individual to whom an interest in real property is conveyed.
Grantor: an individual conveying an interest in real property.
Gross Income: money earned before taxes and other deductions.
Hazard Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.
Home Equity Line of Credit: a mortgage loan allowing a borrower to obtain cash against the equity of a home, up to a predetermined amount.
Homeowner's Insurance: an insurance policy, also called hazard insurance, that combines protection against damage to a dwelling and its contents including fire, storms or other damages with protection against claims of negligence or inappropriate action that result in someone's injury or property damage. Most lenders require homeowners insurance and may escrow the cost. Flood insurance is generally not included in standard policies and must be purchased separately.
Index: the measure of interest rate changes that the lender uses to decide how much the interest rate of an ARM will change over time. No one can be sure when an index rate will go up or down. If a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.
Inflation Coverage: endorsement to a homeowner's policy that automatically adjusts the amount of insurance to compensate for inflationary rises in the home's value. This type of coverage does not adjust for increases in the home's value due to improvements.
Inquiry: a credit report request. Each time a credit application is completed or more credit is requested counts as an inquiry. A large number of inquiries on a credit report can sometimes make a credit score lower.
Interest: a fee charged for the use of borrowing money.
Interest Rate: the amount of interest charged on a monthly loan payment, expressed as a percentage.
Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.
Jumbo Loan: or non-conforming loan, is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
Late Charges: the penalty the homeowner must pay when a mortgage payment is made after the due date or any applicable grace period.
Liabilities: a person's financial obligations such as long-term / short-term debt, and other financial obligations to be paid.
Liability Insurance: insurance coverage that protects against claims alleging a property owner's negligence or action resulted in bodily injury or damage to another person. It is normally included in homeowner's insurance policies.
Lien: a legal claim against property that must be satisfied when the property is sold. A claim of money against a property, wherein the value of the property is used as security in repayment of a debt. Examples include a mechanic's lien, which might be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the title and needs to be settled before transfer of ownership. A lien release is a written report of the settlement of a lien and is recorded in the public record as evidence of payment.
Life Cap: a limit on the range interest rates can increase or decrease over the life of an adjustable-rate mortgage (ARM).
Line of Credit: an agreement by a financial institution such as a bank to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid Asset: a cash asset or an asset that is easily converted into cash.
Loan Acceleration: an acceleration clause in a loan document is a statement in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a event of default occurs.
Loan Estimate: an industry standard form that outlines important terms, conditions, and features associated with your mortgage loan. The Loan Estimate also discloses the estimated costs of the loan transaction.
Loan Origination Fee: a charge by the lender to cover the administrative costs of processing and closing the mortgage. This charge is typically paid at the closing and varies with the lender and type of loan.
Loan to Value (LTV) Ratio: a percentage calculated by dividing the amount borrowed by the purchase price or appraised value of the home to be purchased.
Lock-In: since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate for a certain period of time.
Lock-in Period: the length of time that the lender has guaranteed a specific interest rate to a borrower.
Margin: the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Market Value: the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Maturity: the date when the principal balance and accrued interest of a loan becomes due and payable.
Modification: when a lender agrees to modify the terms of a mortgage without refinancing the loan.
Mortgage: a lien on the property that secures the promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.
Mortgage Acceleration Clause: a clause allowing a lender, under certain circumstances, demand the entire balance of a loan is repaid in a lump sum. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.
Mortgage Insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Insurance purchased by the buyer to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment.
Mortgage Insurance Premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.
Mortgage Interest Deduction: the interest cost of a mortgage, which is a tax - deductible expense. The interest reduces the taxable income of taxpayers.
Mortgage Note: a legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.
Mortgage Qualifying Ratio: Used to calculate the maximum amount of funds that an individual traditionally may be able to afford.
Mortgagee: the lender in a mortgage agreement.
Mortgagor: the borrower in a mortgage agreement.
National Credit Repositories: currently, there are three companies that maintain national credit - reporting databases. These are Equifax, Experian, and Trans Union, referred to as Credit Bureaus.
Negative Amortization: negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, a borrower could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due. None of Columbia Bank mortgage loans allow for negative amortization.
No Cash Out Refinance: a refinance of an existing loan only for the amount remaining on the mortgage. The borrower does not receive any cash against the equity of the home.
No Cost Loan: there are many variations of a no cost loan. Generally, it is a loan that does not charge for items such as title insurance, escrow fees, settlement fees, appraisal, recording fees or notary fees. It may also offer no points. This lessens the need for upfront cash during the buying process; however, no cost loans generally have a higher interest rate than traditional loans.
Note: a legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period of time.
Note Rate: the interest rate stated on a mortgage note.
Notice of Default: a formal written notice to a borrower that there is a default on a loan and that legal action is possible.
Non-Conforming loan: is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
Notary Public: a person who serves as a public official and certifies the authenticity of required signatures on a document.
Original Principal Balance: the total principal owed on a mortgage prior to any payments being made.
Origination: the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.
Origination Fee: a charge by the lender to cover the administrative costs of processing and closing the mortgage. This charge is typically paid at the closing and varies with the lender and type of loan.
Owner's Policy: the insurance policy that protects the buyer from title defects.
PITI Reserves: a cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
Payment Change Date: the date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
Payment Due Date: Contract language specifying when payments are due on money borrowed. The due date is always indicated and means that the payment must be received on or before the specified date. Grace periods prior to assessing a late fee or additional interest do not eliminate the responsibility of making payments on time.
Perils: for homeowner's insurance, an event that can damage the property. Homeowner's insurance may cover the property for a wide variety of perils caused by accidents, nature, or people.
Personal Property: any property that is not real property or attached to real property. For example furniture is not attached however a new light fixture would be considered attached and part of the real property.
Planned Unit Development (PUD): a development that is planned, and constructed as one entity. Generally, there are common features in the homes or lots governed by covenants attached to the deed. Most planned developments have common land and facilities owned and managed by the owner's or neighborhood association. Homeowners usually are required to participate in the association via a payment of annual dues.
Points: a point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $95,000, one point is equivalent to $950. Lenders may allow borrowers to pay points up front to reduce (or buy down) the interest rate.
Power of Attorney: a legal document that authorizes another person to act on your behalf. A power of attorney can grant complete authority or can be limited to certain acts or certain periods of time or both.
Pre-Approval: a lender commits to lend to a potential borrower a fixed loan amount that is subject to a completed loan application, formal underwriting and approval by the lender. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Prepayment: any amount paid to reduce the principal balance of a loan before the due date or payment in full of a mortgage. This can occur with the sale of the property or the pay off the loan in full. In each case, full payment occurs before the loan has been fully amortized.
Prepayment Penalty: a provision in some loans that charge a fee to a borrower who pays off a loan before it is due.
Pre-Qualify: a lender informally determines the maximum amount an individual is eligible to borrow. This differs from a Pre-Approval and is no guaranty that a loan will ultimately be granted by the lender.
Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Principal: the amount of money borrowed or the amount of the loan that has not been paid back to the lender. This does not include the interest paid to borrow that money. The principal balance is the amount owed on a loan at any given time. It is the original loan amount minus the total repayments of principal made.
Principal, Interest, Taxes, and Insurance (PITI): the four elements of a housing payment; payments of principal and interest go directly towards repaying the mortgage loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
Private Mortgage Insurance (PMI): Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
Promissory Note: a written promise to repay a specified amount over a specified period of time.
Property Tax: a tax charged by local government and used to fund municipal services such as schools, police, or street maintenance. The amount of property tax is determined locally by a formula, usually based on a percent of assessed value of the property.
Public Record Information: Court records of events that are a matter of public interest such as credit, bankruptcy, foreclosure and tax liens.
Purchase Offer: A detailed, written document that makes an offer to purchase a property, and that may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally binding contract, sometimes called the Sales Contract.
Qualifying Ratios: guidelines utilized by lenders to determine how much money a homebuyer is qualified to borrow. Lending guidelines typically include a maximum housing expense to income ratio and a maximum monthly expense to income ratio.
Quitclaim Deed: a deed transferring ownership of a property but does not make any guarantee of clear title.
Rate Cap: a limit on an ARM on how much the interest rate or mortgage payment may change. Rate caps limit how much the interest rates can rise or fall on the adjustment dates and over the life of the loan.
Rate Lock: a commitment by a lender to a borrower guaranteeing a specific interest rate over a period of time.
Real Property: land, including all the natural resources and permanent buildings on it.
Recording: the recording in a registrar's office of an executed legal document. These include deeds, mortgages, satisfaction of a mortgage, or an extension of a mortgage making it a part of the public record.
Recording Fees: charges for recording a deed with the appropriate government agency.
Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).
Remaining Term: the original amortization term minus the number of payments that have been applied.
Second Mortgage: an additional mortgage on property. In case of a default the first mortgage must be paid before the second mortgage. Second loans are more risky for the lender and usually carry a higher interest rate.
Secured Loan: a loan backed by collateral such as property.
Security: the property that will be pledged as collateral for a loan.
Settlement: another name for closing.
Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.
Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc. Surveys are conducted by licensed surveyors and are normally required by the lender in order to confirm that the property boundaries and features such as buildings, and easements are correctly described in the legal description of the property.
Title: a legal document establishing the right of ownership and is recorded to make it part of the public record. Also known as a Deed.
Title Company: a company that specializes in examining and insuring titles to real estate.
Title Defect: an outstanding claim on a property that limits the ability to sell the property. Also referred to as a cloud on the title.
Title Insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers. Most lenders require the buyer to purchase title insurance protecting the lender against loss in the event of a title defect. This charge is included in the closing costs.
Title Search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
Trustee: a person who holds or controls property for the benefit of another.
Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.
Warranty Deed: a legal document that includes the guarantee the seller is the true owner of the property, has the right to sell the property and there are no claims against the property.
Zoning: local laws established to control the uses of land within a particular area. Zoning laws are used to separate residential land from areas of non-residential use, such as industry or businesses. Zoning ordinances include many provisions governing such things as type of structure, setbacks, lot size, and uses of a building.