Below you’ll find definitions on all things Home Loan related. And there are a lot of them! To help you find what you need, use the following alphabet to jump to the correct section.
Notice that some are red? That’s a good thing; it means there are no terms in that section that you need to know.
Adjustable Rate Mortgage (ARM) — A loan with a changing interest rate and payment amount during the loan term. The payment amount fluctuates based on an index of current borrowers in the credit market. Also called a Variable Rate Mortgage.
Amenities — A helpful or bonus feature in a house, such as central air conditioning or a hot tub.
Annual Percentage Rate (APR) — The amount of interest off the total loan that will be paid annually. A lower APR means lower monthly payments.
Appraisal — A rough estimate of the value of a house based on previous sales of similar properties in the area. Appraisals are used by banks to determine how much money to approve for a mortgage loan.
Attorney Fees — Has to be paid if a lawyer examines a contract. If a sales contract has unusual conditions, a real estate agent might consult a lawyer to ensure legality of the sale.
Balloon Mortgage — A short term mortgage with set payments for the principle and which doesn’t give interest enough time to accumulate. Full payment for the loan is required at the end of the mortgage period.
Bridge Loan — A type of mortgage loan that covers the period between buying a new home and selling a current home. This allows the closing of a new home to happen while an old home and mortgage haven’t been sold.
Broker Fees — Fees charged by a real estate or mortgage broker for their assistance in the home buying process.
By-laws — Rules that an HOA, condominium complex, or cooperative corporation require tenants to follow.
Caveat — A condition or rule in a contract that, if broken, voids the contract.
Ceiling Rate — The max interest rate a loan can acquire in an adjustable APR mortgage loan.
Closing — The transfer of ownership between the seller and buyer of a property.
Closing Costs — Expenses that are added to the final purchase to facilitate the transfer of ownership. This can include fees for title insurances, attorneys, appraisals, and taxes, as well as commissions for any involved agents.
Commission — Payment that real estate agents get for assisting with selling and/or buying a home.
Condominium — Commonly shortened to Condo. A building or set of buildings that have been broken up into individual living quarters that are for sale.
Construction Loan — A short term loan to pay for construction of a home. Is typically paid off once the home is sold.
Construction Mortgage — (See Construction Loan above)
Consumer Financial Protection Bureau (CFPB) – The federal agency responsible for conducting oversight of lenders and creditors, as well as credit reporting companies, to ensure fairness in lending standards and accuracy in credit scores and reports.
Cooling Off Period — A set period of time when a person can back out of a contract with minimal damages or loss. Typically about three days.
Counter Offer — When a buyer or seller rejects the initial offer and instead suggests an alternative deal.
Covenant — A promise or deal made in writing that both parties agree to.
Credit Score — A number that indicates how trustworthy and reliable a person is on paying off their loans. Lenders will typically run a credit check on a potential borrower as part of the mortgage application process, and will use it to set the terms of the loan.
Debt-to-Income Ratio — How much monthly total debt a person currently has, along with any monthly debt they might accrue through a mortgage, against how much monthly income they have.
Deed — A written legal document that records ownership of property, and must be updated to transfer ownership from a seller to a buyer.
Default — When a debtor fails to pay off their mortgage and determined incapable to doing so in the future.
Down Payment — An amount of money a buyer pays up front that goes towards the total cost of a house. This amount is subtracted from the principle of the loan. A typical down payment is about 20 percent of the total value of the loan, and can help secure better mortgage terms.
Down Payment Assistance — A loan meant to help a buyer cover a down payment. It can sometimes be treated as an interest-free loan or a grant to help qualified buyers qualify for a mortgage loan.
Earnest Money — A money deposit on a home that shows the seller you are serious about buying the home. If the buyer backs out of the contract, the earnest money is forfeit to the seller.
Equity — The difference between how much a home is worth and how much is owed through a loan; the owner’s paid share. For example, a house worth $100,000 and a loan of $60,000 is taken out on it, the equity is $40,000 or 40 percent. Equity increases as the principal is paid down.
Escrow — When a contract, deed, title, or money is held and kept safe by a third party.
Estate — When a person passes away, their estate is everything that they owned at the time of passing.
Estate Sale — The sale of any property or belongings of a deceased person that hasn’t been claimed by next of kin or legal recipients.
Eviction — When a resident is legally removed from a living space. Can be evicted for not paying rent, mortgage, or for failing to follow a housing contract.
Fair Housing Act of 1988 — Laws that ensure people have the right to fair living conditions regardless of their race, gender, sexual orientation, religion, or national origin. Can apply to mortgage lending and property sales as well as renting.
Federal Housing Administration (FHA) — A government organization designed to regulate home living conditions and the housing market as a whole.
FHA Insured Loan — A mortgage loan insured by the Federal Housing Administration that protects the lender if the borrower defaults on the loan.
Financing — Another term for a loan, typically borrowed to cover a singular purchase.
Fixed Rate Mortgage — A loan with set and locked interest rates and payment amounts for a certain amount of time.
Fixture — An item, such as a door frame or ceiling fan, that is permanently attached to the house.
Foreclosure — When a person fails to pay their mortgage, the lender reclaims the title to the house and forces the lendee out of the house.
Freddie Mac — A government sponsored business that buys mortgages with the intention of resale.
Good Faith Estimate — An estimate of the fees that the buyer will have to pay during the process of purchasing a home.
Government Loan — A loan that is insured by a government agency like the Federal Housing Administration (FHA), or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). This insurance protects the lender on the loan if the buyer fails to payback their loan.
Grace Period — The period of time a borrower can go without making a payment on a loan without defaulting on it. Typically a 30-day period unless a different arrangement is made with the lender.
Grant — Transfer a title for property through a deed.
HOA Fees — Fees paid on a regular basis by a homeowner to a homeowner association. Typically found in suburban neighborhoods to help keep the area attractive and to maintain property values.
Holding Period — The amount of time a property has been owned.
Home Buying Contract — A legally binding contract that stipulates what home is being purchased, how much it is going for, what kind of condition it must be in for the sale to proceed, and many other terms for the transaction to occur under.
Home Equity Line of Credit (HELOC) — A type of loan usually used to make home improvements or pay for other major expenses. It uses the house/place of residence as security and is paid off over a thirty year term.
Home Equity Loan — A loan that uses the equity of a house as the collateral. Typically used as a way for the homeowner to liquidate some of their home’s value to finance other consumer spending (See Equity).
Home Inspection — A process that ensures the home is up to current living codes and standards, and identifies any potential damages not previously disclosed. The cost of this inspection is normally paid upfront by the buyer.
Home Inspector — A certified expert that examines a house for damages, potential dangers, health code violations, and more. Typically a third party unaffiliated with the buyer, seller, or lender.
Home Mortgage Interest Deduction — Homeowners can deduct the interest they paid on their home from their yearly taxes.
Homeowner Association (HOA) — A local organization, typically found in suburban neighborhoods, that focus on keeping property values high by improving or maintaining local amenities (like playgrounds or parks) and enforcing policies to house to keep them nice.
Homeowner Insurance — Property insurance to cover any damages a house might occur over time. Typically a requirement from a lender to receive a mortgage.
HUD — An acronym for the U.S. Department of Housing and Urban Development. They are responsible for carrying out urban development plans and administers the Federal Housing Administration and enforcing other residency laws.
Income Property — A house or property bought with the intention to providing an income, through renting or leasing, to the buyer.
Insured Value — The maximum amount an insurance company will pay on a house if it is deemed a total loss.
Interest — A percentage that is accrued off of the money owed to a lender that has to be paid as part of the loan.
Interest Rate — The percentage which expresses how the interest is growing.
Investment Property — A house or property purchased as an investment, earning additional money through future resale, or by renting it out.
Lease — A written agreement to rent a property from the owner.
Lien — A claim on a property as a means to receive payment for a debt. A mortgage is an example of a lien on your house. Liens give other parties rights to the value of a house, creating an order of priority for paying debts and can prevent a sale from going through until all liens are satisfied.
Listing — A property profile used to market an apartment or condo for rent or for sale.
Loan-to-Value Ratio (LTV) — The ratio of the unpaid principal of the loan against the total worth of the collateral used to secure the loan.
Lot — A section of land, typically measured in square footage or acres.
Market Value — An estimate of the fair price of a property based on the current housing market.
Mortgage — A loan used in purchasing a house, condo, or any other type of land or property purchase.
Mortgage Banker — A financial specialist who specializes in specifically making mortgage loans.
Mortgage Broker — An intermediary who goes between a mortgage lender and the borrower.
Mortgage Insurance — Insurance designed to protect the lender if the borrower fails to pay; a financial tool different from Homeowners insurance, often paid in the absence of a sufficient down payment. Sometimes called Private Mortgage Insurance (PMI).
Notarize — Applying the signature of a specialized witness, called a Notary, for important legal documents.
Offer — An initial price to purchase a home suggested by the potential buyer.
Open Ended Mortgage — A mortgage that can be refinanced without rewriting the conditions of the loan.
Post-War Building — A building that was built after World War II.
Pre-Approved — An initial agreement for a mortgage that happens before the house inspection and title search.
Pre-War Building — A building that was built before World War II.
Primary Residence — The main place somebody lives. Some mortgage loans require that the borrower live in the house they are buying for the duration of the loan. Mortgages financing the purchases of other properties, such as investments, rentals, or vacation homes, will receive different terms.
Private Mortgage Insurance (PMI) — See Mortgage Insurance above.
Property Taxes — A tax issued to the owner of land or property.
Qualifying Ratios — Calculations used to determine whether a potential borrower qualifies for a loan. These ratios are the amount of the loan versus income and total debt currently owed against income.
Real Estate — The business of buying and selling house, property, and land.
Real Estate Broker — A middleman who works to connect and negotiate buyers and sellers.
Real Estate Owned — A property that is for sale that is owned by a real estate company.
Realtor — A person licensed to assist with the sale of land, houses and property, and who is a member of the National Association of REALTORS. Anyone licensed is a Real estate agent, but may not be a member of the Association.
Recording — The act of registering land or property to a new owner.
Referral Fee — A percentage of a commission that is paid to another real estate agent who referred a buyer or seller to them.
Refinancing — Negotiations for changing the terms or costs of a mortgage loan.
Reverse Annuity Mortgage — A type of mortgage where a person can take out a loan, in the form of monthly payments, against the equity of the house. Once the home is sold, the loan must be repaid.
Sale Price — The amount paid for a house.
Satisfaction of Mortgage — A term for when you completely pay off the mortgage loan.
Seller Contribution — Any financial contribution on the part of the seller to cover closing costs.
Short Sale — A sale of a house with outstanding debt where the accepted offer is less than what is owed.
Single Family Home — A residential building that has not been subdivided to create additional condos or apartments; a typical house.
Tax Abatement — A temporary break or reduction from property taxes.
Title — Proof of ownership of a house.
Title Insurance — Insurance against multiple other people having titles or claims to a house currently being sold. That way, a person can’t go through the entire process of buying a house and taking out a loan only to find that the person selling the house doesn’t own it or have the rights to sell it.
Townhouse — A style of house that shares one or more walls with another house.
Underwriter — A person or business that checks that everything about the borrower for a loan is legitimate and accurate. An underwriter will check things like: credit scores, employment history, tax statements, and debt ratios.
Uniform Residential Loan Application (1003) — A standard form with all of the information a lender needs to establish a risk profile for a borrower.
Vacation Home — A second purchase home for the purpose of being a home to vacation to. Isn’t a primary residence, usually meaning there will need to be a different type of mortgage required to purchase a vacation home.
Veteran Affairs Loan — A type of mortgage loan available to veterans and active members of the military. A major benefit to these style of loans is they often require zero down payment and have less restrictive requirements.
W-2 — A report from an employer to employees and the IRS that details their income from that business and the amount of taxes withheld from those wages.
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Year End Statement — A statement from a mortgage lender providing a summary of the taxes, interest and payments that happen in relation to the loan.