Glossary of Mortgage Terms

A  D  E  F G H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z


letter A

 

 

Acquisition costs

Costs of acquiring property other than purchase price. Examples may include attorney fees, title insurance, and lender fees.

Addendum

An agreement or list added to a contract or other document.

Additional principal payment

Paying more than the scheduled payment amount. This type of payment is typically made to reduce the remaining balance on the loan.

Adjustable-rate mortgage (ARM) 

A mortgage with an interest rate and payments that adjust at scheduled dates based on a pre-selected index.

Adjusted gross income

A person’s total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions, and expenses.

Adjustment period

The amount of time between interest rate changes on an adjustable-rate mortgage (ARM), after the initial fixed rate ends.

Amortization

The process of paying off a debt over time through regular payments with a percentage going to the principal and interest.

Amortization schedule

A mortgage payment timetable showing the amount of each payment and the remaining balance after each payment.

Annual percentage rate (APR)

The cost to borrow money expressed as a yearly percentage. For mortgage loans, it includes the interest rate plus other charges or fees. For home equity lines of credit, the APR is just the interest rate.

Appraisal

A report that states a determination of a home’s market value by a qualified independent third-party known as an appraiser.

Appraised value

An opinion of value reached by an appraiser based upon comparable recent sales of homes in the neighborhood.

Appraiser

An independent third-party qualified to estimate the value of real estate.

Approval letter

Written mortgage loan approval. Also known as a commitment letter.

Assets

Things of value owned by a person (e.g., automobiles, property, savings or retirement fund) that are used to calculate a borrower’s net worth (assets minus liabilities) and determine their ability to afford the down payment and closing costs.


 

letter B

 

 

Balloon mortgage

A mortgage loan in which a large portion of the principal is repaid in a single payment at the end of the loan term.

Balloon payment

A large one-time payment due at the end of the term that pays off your remaining loan balance.

Blanket mortgage

A type of loan used to fund the purchase of two or more pieces of real property.

Borrower

A mortgage loan applicant.

Borrower-paid mortgage insurance (BPMI)

When your down payment is less than 20% of the home’s value, the lender typically requires you to pay a monthly premium for mortgage insurance in case you fail to make your mortgage payment. As soon as the loan-to-value ratio reaches 80% of the original value, you may be able cancel the insurance.

Broker

An independent non-bank mortgage loan originator who works with the borrower/homeowner and the bank or mortgage lender.

Buydown

A financing technique where the borrower attempts to get a lower interest rate on a purchase or refinance for the first few years of the loan.



 

 

Cash-out refinancing

A refinancing transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens, allowing the borrower to obtain cash from the equity in their home.

Cash reserves

Extra money some lenders require borrowers to have available after loan closing to help ensure they can make the payments and keep the home.

Cash to close

Money the borrower will use to pay the closing costs for getting a mortgage.

Change of circumstance (COC)

A situation that requires the lender to provide a revised Loan Estimate or Closing Disclosure before closing that describes any changes in fees or other loan terms.

Closing

The last step in buying and financing a home. The closing, also known as settlement, is when all parties in a mortgage loan transaction sign the necessary documents. After signing these documents, the borrower becomes responsible for the mortgage loan.

Closing agent/settlement agent

Usually an attorney or title agency representative who oversees the loan closing and witnesses signing of the closing documents.

Closing costs

All monies paid by the borrower at the time of loan closing.

Closing Disclosure

A document that provides final details about the mortgage loan, including fees, taxes and terms.

Closing points

A fee paid directly to the lender in exchange for a discount on the interest rate charged for a mortgage loan.

Combined loan-to-value (CLTV)

A ratio that is calculated when financing a home with a first mortgage and a home equity line of credit. For example, if your first mortgage is 70% of your home’s value and your home equity line of credit is 10% of your home’s value, your CLTV ratio is 80%.

Co-borrower(s)

Additional named borrower(s) who appear on loan documents and whose income and credit history are used to qualify for the loan. Under this arrangement, all parties have an obligation to repay the loan.

Collateral

Property used to help secure a home loan that the lender can take possession of if the loan isn’t repaid by the borrower.

Commitment letter

A mortgage lender’s formal letter to a borrower that states their intention to offer the borrower a home loan. Also known as an approval letter.

Concession/contribution

A discount or incentive a seller gives to a prospective buyer to encourage him or her to purchase a property — something that “sweetens the deal.”

Condition

A loan stipulation that must be met before a mortgage loan can be closed/funded.

Conforming loan

A mortgage that meets the most current guidelines set by Fannie Mae or Freddie Mac. These mortgages are eligible for sale and delivery to these government-sponsored enterprises.

Consumer Financial Protection Bureau (CFPB)

The CFPB regulates the offering and provision of consumer financial products or services under the federal consumer financial laws and educates and empowers consumers to make better informed financial decisions.

Contingency

A condition that must be met before a contract is legally binding.

Conventional mortgage

A home loan that isn’t guaranteed or insured by the federal government.

Convertible ARM

An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Credit history

A record of a borrower’s payment behavior that shows his or her ability to repay a loan. Information may include number and types of credit accounts, how long each account has been open, amounts owed and more.

Credit limit

The maximum amount of money a customer is approved to borrow.

Credit report

A report provided by an independent agency detailing information on a person’s credit history.

Credit reporting

The process where lenders and creditors share your credit activity to one or more of the three credit reporting agencies.

Credit reporting agency

An agency that collects information about your credit accounts and uses it to produce your credit report and calculate your credit score.

Credit score

A three-digit number calculated by independent credit agencies that measures your creditworthiness based on information provided by your creditors and lenders.



letter d

 

 

Debt-to-income ratio (DTI)

A ratio derived by dividing the borrower’s total monthly obligations (including housing expenses) by his or her stable monthly income. This calculation is used to determine the mortgage amount for which a borrower qualifies. This term is used interchangeably with “total debt-to-income ratio” and “expense ratio.”

Deed

A legal document that conveys ownership of a property.

Deed of reconveyance

A document issued by a mortgage holder indicating that the borrower is released from the mortgage debt.

Deed of trust

A document that secures a debt, in which a debtor places legal ownership of real property with a trustee, to be held in trust until the debt is repaid. As the borrower repays the debt, the borrower keeps the actual title to the property and maintains full responsibility over the premises.

Default

The failure to satisfy the terms as agreed in a contract.

Delinquency

A loan payment that is past due.

Department of Veterans Affairs (VA)

A government agency that provides federal benefits to veterans and their dependents, including home financing.

Deposit

A sum payable as a first installment on the purchase of a home (see earnest money).

Depreciation

A reduction in the value of property due to physical deterioration, wear and tear, or other factors.

Disclosure

Revealing information or facts about a specific product or financial transaction.

Down payment

The amount of cash you pay toward the purchase of your home, often between 3% and 20%. The rest of the payment to the seller comes from your mortgage.

Down payment assistance program

Programs offered by a government housing authority designed to help more families become homeowners by assisting with the cost of the down payment, closing costs, or in some cases both.

Draw period

The fixed period of time during which you can access money from a home equity line of credit.



letter E

 

 

Earnest money

A deposit made to someone selling their home that represents the prospective buyer’s intention to purchase the home (see deposit).

Encumbrance

Anything that restricts a property owner’s ability to transfer title to the property or lessens its value, such as liens, restrictions, easements or encroachments.

End of term

Refers to the date the outstanding balance on a balloon home equity loan or line of credit becomes due in full (see maturity date).

Equal Credit Opportunity Act (ECOA)

This Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives more income from public assistance, or because an applicant has, in good faith, exercised any right under the Consumer Credit Protection Act.

Equity

The difference between the market value of a home and the amount owed to the lender who holds the mortgage. If you were to sell your home, equity is the money you would receive after paying off the mortgage.

Escrow

Funds a lender collects and holds in an account to pay real estate taxes, homeowners insurance, other periodic debts against the property, and mortgage insurance (if applicable), on behalf of a customer. Also known as impounds or reserves.

Escrow account

An account in which escrow money is held.

Escrow agent

A person or organization that ensures the terms of the loan transaction are carried out on behalf of all parties.

Escrow payment

The portion of a homeowner’s monthly mortgage payment that is held by a lender or servicer to pay property taxes and insurance, including mortgage insurance and hazard insurance, on your behalf.


 

letter F

 

 

Federal Home Loan Mortgage Corporation — FHLMC (Freddie Mac)

A federal corporation created by Congress that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA, or “Ginnie Mae”) bonds to raise funds to finance the purchase of mortgages. Popularly known as “Freddie Mac”.

FHA home loan

A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government loan. FHA mortgage insurance protects the lender (not the borrower) if a borrower defaults on the FHA loan. This insurance enables a lender to provide loan options and benefits often not available through conventional financing.

Federal National Mortgage Association — FNMA (Fannie Mae)

A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.

First adjusted payment

The payment due each month on an adjustable-rate mortgage after the initial fixed rate ends. Interest rate adjustments may increase or decrease the amount due.

Fixed interest rate

An interest rate that remains the same throughout the life of the loan.

Fixed-rate mortgage

A mortgage loan with an interest rate and monthly principal-and-interest payment amount that remains the same for the life of the loan.

Floating interest rate

An interest rate that fluctuates for a short period of time until a mortgage applicant locks it in.

Flood certification

A document that indicates whether or not the subject property is located within a designated flood zone.

Foreclosure

The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.


 

Letter G

 

Gift letter

A written explanation stating that money was given to a homebuyer, free and clear of any obligation to repay it, as a gift for the purchase of a house.

Gross income

Total income before any expenses are deducted.

 


 


Letter H

 

Hazard insurance

Protects a property owner against damage to a property due to certain hazards such as fire, severe storms, or other natural events.

High-ratio loan

Mortgage loan with a loan-to-value higher than 80 percent. Calculated using the loan amount divided by the lower of the sales price or appraised value.

Home equity line of credit (HELOC)

A revolving credit line that can be used for large expenses or to consolidate higher-interest rate debt. The loan is secured by the borrower’s home.

Home Mortgage Disclosure Act (HMDA)

Federal legislation that requires certain types of lenders to compile and disclose data on where and to whom their mortgage and home improvement loans are being made.

Home Valuation Code of Conduct (HVCC)

A set of federal guidelines designed to make the home appraisal process more reliable by prohibiting mortgage brokers and real estate agents from selecting or paying appraisers.

Homeowners association dues

Fees a homeowner is required to pay to a condominium or homeowners association for maintenance of common areas.

Homeowners insurance

Insurance to protect a home against damage from fire, hurricanes and other catastrophes. Usually, homeowners insurance also covers against theft and vandalism, as well as personal liability in case someone is hurt or injured on the property.

Homeowners insurance policy

A multiple-peril insurance policy available to owners of private dwellings that covers the dwelling and its contents, as well as personal liability.

Housing and Economic Recovery Act (HERA)

Federal legislation enacted in 2008 to address the subprime mortgage crisis. It was intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding.

Housing expense ratio

The ratio comparing housing expenses to before-tax income that’s used by lenders to qualify customers for a mortgage.


Letter I

 

Impounding

When the borrower puts money into an account that is specifically used to ensure payment of property taxes and insurance premiums. Also known as escrow.

Index/index rate

A published interest rate, such as the prime rate, that lenders use to establish interest rates charged on mortgages.

Interest

The amount a borrower owes a lender for the use of borrowed money.

Interest-only payments

This type of payment is applied only to the interest part of a loan and the principal balance is not reduced. Once the interest-only period ends, the payments will adjust to include principal and interest resulting in a higher monthly payment.

Interest rate

The cost a customer pays to a lender for borrowing funds over a period of time expressed as a percentage rate of the loan amount.

Interest rate cap

This applies to an ARM and limits how much the interest rate may increase per adjustment period (see Lifetime Cap).

Interest rate floor

The lowest interest rate that can be charged on an adjustable or variable interest rate loan or line of credit.

Interest rate range

The lowest to highest interest rates available for a particular loan or line of credit.

Investment property

Real estate property owned with the intent to earn income, either through rent, future resale, or both, and not intended for owner occupancy.


Letter J


Joint tenancy

A property owned by more than one person, each with equal rights and obligations.

Judgment

Final determination by a court of law regarding the rights and claims of the parties to a legal action.

Jumbo loan

Also known as a nonconforming loan. The amount of the loan exceeds standards that would make it eligible for sale to Fannie Mae and Freddie Mac. Certain geographical areas have temporary conforming loan limits higher than typical conforming limits. Lenders may charge additional fees and place certain restrictions due to the large loan amounts.



Letter K

 

 

 



Letter L


Land acquisition loan

A mortgage loan made for the purpose of purchasing unimproved land.

Late charge

The penalty a borrower must pay when a payment is made after its due date or courtesy period.

Lender-paid mortgage insurance (LPMI)

When your down payment is less than 20% of the home’s value, the lender can pay the insurance costs upfront, in which its cost is included in the interest rate. This help provide protection against financial loss. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a potential tax deduction. (Consult your tax advisor.)

Liabilities

A person’s debts, monies owed or other financial obligations.

Liability coverage

Provides coverage for expenses incurred due to property damage or bodily injury occurring on the property.

Lien

A legal right granted by the owner of the property, by a law or otherwise acquired by a creditor. A lien serves to guarantee an underlying obligation, such as the repayment of a loan. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien.

Lifetime cap

The limit on how much an interest rate can increase above the initial interest rate over the life of an ARM or variable-rate home equity line of credit.

Limited partnership

A form of business ownership with at least two partners — one who is fully liable for business debts and one who is only liable up to their initial investment.

Line of credit

An agreement between a lender and a customer that specifies the size and terms of an amount of money that can be borrowed. In a home equity line of credit, the line of credit is secured by the borrower’s home.

Loan conditions

Terms and requirements in a loan agreement, including loan amount, interest rate, and other enforceable conditions.

Loan estimate (LE)

A document that contains important details, such as estimated rate, monthly payment and closing costs for a loan. The LE must be delivered by a lender within 3 business days from the date of the mortgage application.

Loan modification

An agreement to revise the terms of a mortgage to help a borrower bring their mortgage current or reduce their mortgage payment.

Loan-to-value (LTV) ratio

A percentage that describes the size of the loan compared to the value of the property. For example, a loan amount of $150,000 for a home valued at $200,000 would have an LTV ratio of 75%.

Lock expiration date

The date on which the interest rate you’ve “locked in” expires, allowing the rate to then fluctuate.

Lock-in period

A set number of days during which the interest rate is secured and not subject to market fluctuation.

Loss payable clause

A provision in an insurance contract for payment of a claim to someone, other than the insured person, who holds an insurable interest in the insured property.


 


Letter M
Manufactured home

A type of prefabricated housing that is largely assembled in factories, built on a chassis and wheels, then transported to a site.

Margin

The set percentage the lender adds to an established index to determine the interest rate of an ARM or variable-rate home equity line of credit.

Market price

The amount a home can be bought or sold in current market conditions.

Market rate

The standard interest rate that lenders charge for conventional loans.

Market value

The amount a willing buyer would pay and a willing seller would accept, assuming each is fully informed and under no pressure to act, for property or other assets.

Maturity date

The date when a loan’s final payment or loan balance must be paid in full to the lender.

Maximum interest rate/maximum monthly payment

The highest interest rate and monthly principal-and-interest payment amount allowed.

Modular house

A type of housing built in sections in a factory and then transported to a permanent site where it is constructed on a foundation (excludes manufactured homes).

Monthly payment

The amount of principal and interest paid each month on a home loan, sometimes including real estate taxes, homeowners insurance, and, if applicable, mortgage insurance.

Mortgage banker

A company, individual or institution that originates mortgages. Mortgage bankers use their own funds, or funds borrowed from a warehouse lender, to fund mortgages.

Mortgage commitment

An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term, and amount.

Mortgage Forbearance Agreement

An agreement between the lender and a delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments.

Mortgage Insurance

A policy that protects the lender or investor if the borrower doesn’t make mortgage payments. It’s typically required when a borrower puts less than 20% down. There are different types of mortgage insurance options, including Lender-Paid Mortgage Insurance (LPMI) and Borrower-Paid Mortgage Insurance (BPMI).

Mortgage note

A written agreement to repay a sum of money at a stated interest rate for a specific term when the note is secured by a property.

Mortgage loan originator

Someone who works with a borrower to complete a mortgage loan application or to negotiate its terms.


Letter N

 

 

Nationwide Mortgage Licensing System and Registry (NMLS)

A mortgage licensing system operated by state financial regulators. Its purpose is to streamline the licensing process, improve supervision, and increase transparency in residential lending.

Negative amortization

A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.

Neighborhood Stabilization Program (NSP)

A program established by Congress designed to provide funds to assist homebuyers in purchasing foreclosed and abandoned homes in targeted areas for the purpose of stabilizing communities and property values.

New principal balance

The recalculated loan amount after a loan modification. The new principal balance may include previously unpaid interest charges or fees.

NMLS unique identifier (NMLS ID)

A number permanently assigned by the Nationwide Mortgage Licensing System and Registry that identifies a registered residential loan originator.

Non-conforming loan

A loan that doesn’t meet the guidelines established by Fannie Mae or Freddie Mac due to the loan amount, insufficient credit, underwriting guidelines, or other factors.

Note

A written acknowledgement and agreement to repay a sum of money plus interest for a specific term. When the note is secured by a property, it’s called a mortgage note.


O

 

 

Open-End mortgage

A mortgage with a provision that the outstanding loan amount may be increased upon mutual agreement of the lender and the borrower.

Owner occupancy

The borrower(s) intend to live in the home.

Origination

The entire process of working with a borrower to complete a mortgage from application, through underwriting, to final loan closing.

Origination charge

Compensation (other than discount points) that the lender receives for processing a loan application and putting the loan in place.



P

 

 

Package mortgage

A loan secured by real estate wherein the personal property and furniture are included in the purchase price of the house.

Payoff

The amount necessary to pay a loan in full.

Payoff figures

The calculation of numbers required to pay a loan in full.

Personal property

Usually considered property that can be moved from one location to another, as opposed to real property.

Power of attorney

A legal document outlining the authority to act for another person in legal or financial matters.

Preapproval

A preliminary review of credit information and other documents to determine whether a potential borrower qualifies to purchase a home.

Preliminary title report

Shows the conditions under which a title insurance company will issue a title binder or title commitment.

Prepaids

That portion of your loan closing costs which must be paid in advance to cover taxes, interest, insurance and any special assessments.

Prepayment fee or penalty

A fee that some lenders may charge if the borrower pays off the loan earlier than originally agreed in the lending contract.

Prequalification

An estimate of how much money a lender is willing to lend a prospective homebuyer based on a borrower’s current income and debt.

Primary residence

The home the borrower(s) live in day-to-day. (Not a vacation home).

Principal balance

The amount owed on a loan, not including interest, fees or taxes.

Principal payment

The portion of the monthly payment that reduces the outstanding balance of a loan.

Private mortgage insurance (PMI)

Insurance written by a private company that protects a mortgage lender against loss if the borrower defaults on the loan.

Processing

The act of ensuring that the loan application and supporting documentation is in order and ready to be reviewed by a lender.

Property usage

Describes a property owner’s use of a property, e.g., first home, second home, vacation home, or a rental property.

Purchase contract

A legal document outlining the price and terms of the sale of real property. Also known as a sales contract.



Letter Q

 

Qualifying ratios

Guidelines used by lenders to determine how much money a homebuyer is qualified to borrow. The two main qualifying ratios are debt-to-income and the housing expense ratio.

 


Letter R


Rate cap

A limit placed on the amount of interest that lenders can charge on a loan or line of credit.

Rate lock

An agreement between the borrower and lender that “locks in” the interest rate on a mortgage over a specified time period.

Real assets

Actual tangible assets such as real estate or real property.

Real estate/property taxes

Taxes assessed on real property and usually based on the property’s value.

Real Estate Owned (REO)

Describes foreclosed-upon property that is owned by a bank due to a customer not making mortgage payments over a period of time.

Real Estate Settlement Procedures Act (RESPA)

A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.

Real property

Any fixed type of property, typically land and buildings that are immovable.

Refinancing

The process of starting a new loan to pay off an existing one. The new loan typically has different (better) terms and benefits, usually lower monthly payments, lower interest rates or financial savings.

Reissue or refinance rate (for title insurance)

A reissue or refinance rate is a reduced rate for title insurance that a homeowner may be eligible for on a refinance. The reduced rate may be applicable if the property was previously insured within a certain number of years.

Repayment period

The time during which principal-and-interest payments will completely repay the outstanding balance of a loan during a certain period of time.

Rescission period

The three-day period following closing where the borrower has the right to cancel the transaction. This right was set forth by the Truth in Lending Act (TILA).

Retail

A retail lender is one who lends money to individuals. Examples of retail lenders include banks, credit unions, savings and loan institutions, and mortgage bankers.

Revolving line of credit

Funds that are always available to a customer for a specified amount of time. As borrowed funds are repaid, they can be withdrawn again.


Letter S

Satisfaction of mortgage

This lender-issued legal document verifies that a mortgage has been paid.

Second mortgage

An additional mortgage taken out on a property while the current mortgage is still in effect.

Secondary mortgage market

The market where lenders and investors buy and sell existing mortgages.

Securitization

The process of taking a liquid asset, or group of assets, and through financial engineering, transforming them into a security.

Security

The collateral used to secure the repayment of a loan.

Security interest

A claim on collateral to obtain a loan.

Seller contributions

When the seller of a home pays some or all of the buyer’s closing costs. Depending on the loan terms, the amount of costs that can be covered by the seller may be limited.

Settlement costs

Costs associated with the closing of a mortgage loan, such as origination fees, discount points, or payments for title insurance, surveys, attorney services, and taxes.

Short sale

When net proceeds from selling the property will fall short of the debts secured by liens against the property.

Site value

The worth of vacant land without improvements.

Subordinate

A loan in a second lien position. Also described as a Second Mortgage.

Survey

The measurement of boundary lines to determine the exact amount of land that a homeowner owns.


Letter T

Tax lien

A legal claim against property for unpaid taxes.

Term

The length of time when a loan or home equity line of credit must be paid in full.

Tick/BPS

A unit of measure for interest rates. A tick equals 1/32 in terms of the price. A basis point equals 0.01%.

Title

A document that shows legal ownership of a property.

Title (insurance) company

A company that performs title searches to protect a homeowner and lender against a loss that could result from a title dispute.

Title insurance

Protects an owner’s or a lender’s financial interest in real property against loss due to title defects, liens or other matters.

Title insurance policy

A legal agreement made by the insurer, usually a title insurance company, to pay the insured party for losses relating to claims against title.

Title search

Reviewing documents evidencing the history of a piece of real property to determine relevant interests in and regulations concerning that property.

Transfer tax

A transaction fee when the title of a property changes hands.



Letter U

 

Underwriter

Someone who reviews the application, documentation, and property information before making a loan decision.

Underwriting

The process of deciding whether a loan should be approved or denied. It requires the verification of a borrower’s information and assessment of their creditworthiness.

Uniform Electronic Transactions Act (UETA)

Guarantees that electronic record keeping and electronic transactions are as enforceable as documents previously requiring ink signature.

Upfront Mortgage Insurance Premium (UFMIP)

This is required for all FHA loans and it is typically financed into the mortgage loan amount or paid by the borrower at closing.



Letter V

Veterans Administration (VA) mortgage

A mortgage available to qualifying veterans and guaranteed by the VA. This type of loan offers a lower down payment than most standard mortgages and requires no mortgage insurance. VA loans are backed by the Veterans Administration.

Variable rate

An interest rate that changes periodically in relation to an index.



Letter W

 

 

W2

IRS form. A W-2 reports annual wage earner income.

Warehouse lending

A line of credit given to a loan originator to pay for a mortgage the borrower used to purchase property. The life of the loan generally extends from its origination to the time it is sold into the secondary market, either directly or through securitization.

Warranty Deed

A deed that guarantees clear title to the buyer of real property.


Letter X

 

 




Yield to maturity

The lender’s percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.

Yield spread premium (YSP)

The money or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan in exchange for lower upfront costs, generally paid in origination fees, broker fees or discount points.


Letter Z


Zoning ordinances

Local laws that establish building codes and usage regulations for properties in a specified area. This creation of districts specifies different types of property uses, such as commercial or residential.