Financing Glossary
- Adjustable Rate Mortgage
A loan that allows the lender to adjust the borrower's interest rate and payments at prescribed times and sometimes with prescribed limits. Lower interest rates are customary.Back to Top of Page - Amortized Loan
A loan which is paid off in equal installments during its term.Back to Top of Page - Appraisal
An estimate of real estate value, usually issued to the standards of FHA, VA, and FNMA. Recent comparable sales in the neighborhood are the most important factor in determining value.Back to Top of Page - Assumable Mortgage
Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.Back to Top of Page - Closing Costs
Expenses incurred in the closing of real estate or mortgage transaction. Purchaser's expenses normally include:- Cost of title examination
- Premiums for title policies
- Survey
- Attorney fee
- Lender's service fees
- Recording charges
Back to Top of Page - Escrow Payment
That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, hazard insurange, mortgage insurance, lease payments, and other items as they become due, known as impounds in some states.Back to Top of Page - Equity
The difference between the market value of property and the homeowner's indebtedness(mortgage).Back to Top of Page - Exchange
The trading of an equity in a piece of property for the equity of another.Back to Top of Page - Fixed Rate Mortgage
A loan that fixes the interest rate at a prescribed rate for the duration of the loan.Back to Top of Page - Freddie Mac
Nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.Back to Top of Page - Fannie Mae
Nickname for Federal National Mortgage Assiation (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.Back to Top of Page - Graduated Payment Mortgage
An FHA, VA, or Conventional loan where the borrower pays a portion of the interest due each month during the first few years of the loan. The payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life.Back to Top of Page - Investor
The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.Back to Top of Page - Lease Purchase Agreement
Buyer makes a deposit for the future purchase of a property with the right to lease the property to the interim.Back to Top of Page - Loan to Value Ratio
The ratio of the mortgage loan principal (amount borrowed) to the property's appraised value (selling price). On a $100,000 home, with a mortgage loan principal of $80,000, the loan to value ratio is 80%.Back to Top of Page - Mortgage/Deed of Trust
Pledge of real property to secure a debt by written instrument given by the mortgagor. Should be recorded in the County Recorder's Office.Back to Top of Page - Mortgage Insurance Premium (MIP)
The consideration paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance (PMI) company. This insurance protects the investor from possible loss in the event of a borower's default on a loan.Back to Top of Page - Mortgagee
The lender of money or the receiver of the mortgage document.Back to Top of Page - Mortgagor
The borrower of money or the giver of the mortgage document.Back to Top of Page - Note
A written promise to pay a certain amount of money.Back to Top of Page - Origination Fee
A fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.Back to Top of Page - Point
One percent of loan amount.Back to Top of Page - Prepayment Penalty
A fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as repayment fee or reinvestment fee.Source: Courtesy of CTX Mortgage Company
