Do you want to learn more about mortgage technical terms?
Navigating the technical jargon of home loans and mortgage refinancing can often feel overwhelming.
Below is a comprehensive A-Z glossary of the most frequently used terms and phrases.
A limit on how much the interest rate or monthly payment on an adjustable-rate mortgage can increase during an adjustment period or over the life of the loan.
Cash-Out Refinance
A type of mortgage refinance in which the borrower takes out a new, larger mortgage to access cash from the equity in their home.
Closing
The final step in a real estate transaction where all documents are signed, and the ownership of the property is transferred from the seller to the buyer.
Closing Costs
Fees associated with completing a real estate transaction, including lender fees, title insurance, attorney fees, and more.
Conforming Loan
A loan that meets the guidelines set by Fannie Mae and Freddie Mac, including size limits and underwriting standards.
Construction Loan
A short-term loan used to finance the construction of a new home or renovation project, typically converted to a permanent mortgage after completion.
Contingency
A condition included in a real estate contract that must be met for the transaction to proceed. Common contingencies include inspections, financing, and appraisal.
Conventional Loan
A mortgage loan that is not insured or guaranteed by a government agency like the FHA, VA, or USDA. Conventional loans can be conforming or non-conforming.
Convertible ARM
An adjustable-rate mortgage that gives the borrower the option to convert to a fixed-rate mortgage during a specified period.
Credit
The borrower’s ability to obtain goods or services before payment, based on the trust that payment will be made in the future.
Credit Report
A detailed report of an individual’s credit history, used by lenders to evaluate a borrower’s creditworthiness.
Credit Score
A numerical representation of a borrower’s creditworthiness, calculated based on their credit history, payment behavior, and debt levels.
Current Interest Rate
The rate charged by lenders for mortgage loans at a specific point in time, based on market conditions.
Capital Gain
The profit made when an asset is sold for a price higher than its original purchase cost.
CalHFA (California Housing Finance Agency)
An agency that provides information and assistance to low-to-moderate-income borrowers regarding down payments, closing costs, and other loan terms.
California VA Loan
A no-down-payment mortgage option available to veterans living in California.
Capped Loan
A loan where the interest rate is limited to a certain maximum for a set period, though it can decrease, unlike fixed-rate loans.
Caveat
A formal notice registered in a land or court system to prevent a specific action, like the transfer of property, without notifying the person who filed the caveat.
Certificate of Title
A legal document outlining the ownership details of a property, including any claims or encumbrances. Not all regions issue certificates of title.
Commission
A fee paid to a real estate agent by the seller for selling a property, or to a broker or third party for arranging a loan on behalf of a client.
A ratio used by lenders to measure a borrower’s ability to manage monthly debt payments. It is calculated by dividing total monthly debt payments by gross monthly income.
Deed
A legal document that transfers ownership of a property from one party to another.
Deed-in-Lieu of Foreclosure
A situation where a borrower voluntarily transfers the ownership of their property to the lender to avoid foreclosure.
Default
Failure to meet the legal obligations of a loan, such as not making mortgage payments on time.
Delinquency
When a borrower fails to make a loan payment on time, typically leading to default if not corrected.
Discount Points
Optional fees paid at closing to lower the mortgage interest rate. Each point costs 1% of the loan amount and typically reduces the interest rate by a small percentage.
Down Payment
The amount of money a buyer must pay upfront when purchasing a home, typically expressed as a percentage of the purchase price.
Daily Interest
Interest that is calculated on a daily basis, fluctuating based on the account's balance each day.
Debit
An entry made in an account to record the withdrawal of funds from that account.
Debtor
A person or entity that owes money to another party.
Deposit
An initial payment made when exchanging contracts, typically between 5% and 10% of the property's purchase price. In some cases, a deposit bond may be used instead, if acceptable to the seller.
Deposit Bond
A guarantee used in place of a cash deposit between contract signing and settlement. It covers up to 10% of the purchase price, with the full amount payable at settlement.
Disbursements
Costs that your solicitor or conveyancer pays to other organizations on your behalf, such as search fees, stamp duty, or land taxes. These are itemized in the invoice you receive.
Deed of Trust
A legal agreement between the lender and borrower where a third party, known as the trustee, holds the property's title until the borrower repays the mortgage in full. It serves as a security instrument in some states instead of a mortgage.
A deposit made by a buyer to demonstrate their seriousness about purchasing a property. This deposit is typically held in escrow and is applied toward the down payment or closing costs if the transaction is completed.
Easement
A legal right to use another person’s property for a specific purpose, such as utilities or access to a road.
Equity
The difference between the current market value of a property and the amount still owed on the mortgage, representing the homeowner's ownership stake.
Escrow
An arrangement where a third party holds funds or documents on behalf of the buyer and seller until all conditions of a transaction are met.
Escrow Account
An account where the lender holds funds for property taxes, homeowners insurance, and mortgage insurance. These are paid on the homeowner’s behalf when due.
Electronic Funds Transfer (EFT)
The transfer of money between accounts electronically, typically through online banking systems.
Encumbrance
A legal claim or liability attached to a property, such as a mortgage or lien.
Establishment Fees
Charges that a lender may apply for setting up a loan, though they are not always required.
Exchange of Contracts
The formal stage in a property sale when the buyer and seller exchange signed documents, marking the beginning of the settlement process.
(Federal National Mortgage Association) A government-sponsored enterprise that buys and guarantees mortgages from lenders, helping to provide liquidity and promote affordable housing in the mortgage market.
FHA Loan
(Federal Housing Administration Loan) A government-backed mortgage program that allows homebuyers, especially those with lower credit scores or smaller down payments, to qualify for home loans with favorable terms.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire term of the loan, providing predictable monthly payments over the life of the loan.
Foreclosure
A legal process in which a lender takes ownership of a property when the borrower fails to make mortgage payments, leading to the sale of the property to repay the outstanding debt.
Forbearance
A temporary suspension or reduction of mortgage payments, typically granted by the lender to help a borrower experiencing financial hardship.
Freddie Mac
(Federal Home Loan Mortgage Corporation) A government-sponsored enterprise that purchases and guarantees mortgages from lenders, similar to Fannie Mae, to support the availability of affordable housing loans.
Funding Fee
A one-time fee charged to borrowers using VA loans, which helps offset the costs of the loan program to taxpayers. It can be paid upfront or rolled into the loan.
Fixed Interest Rate
An interest rate on a loan that does not change for a set period, allowing the borrower to have consistent monthly payments during that time.
Float
The option for a borrower to delay locking in an interest rate on a mortgage until a later time, allowing them to take advantage of potentially lower rates.
First Mortgage
The primary loan on a property that takes priority over any other loans or claims, such as a second mortgage or home equity loan.
Fixed Payment
A loan payment that remains the same throughout the term of the loan, making it easier for borrowers to budget their payments.
Finance Charge
The total cost of borrowing, including interest and other fees, typically expressed as a dollar amount or percentage.
Flexible Payment Mortgage
A type of mortgage that allows the borrower to choose from several payment options each month, such as interest-only or fully amortizing payments.
Full Documentation Loan
A mortgage in which the borrower provides full financial documentation, including income, assets, and debts, to verify their ability to repay the loan.
Fully Amortizing Loan
A loan in which the borrower’s monthly payments cover both interest and principal, ensuring the loan is fully paid off by the end of the term.
Fair Market Value (FMV)
The price a property would sell for on the open market, assuming a willing buyer and seller. It reflects the property's value based on current market conditions.
Federal Housing Administration (FHA)
A U.S. government agency under the Department of Housing and Urban Development that insures FHA loans. These loans have less stringent requirements, making it easier for homebuyers, especially those with lower credit scores or smaller down payments, to qualify.
Floating Rate
Also known as an adjustable-rate mortgage (ARM), this type of loan has an interest rate that changes periodically based on market conditions. The rate fluctuates over time, often starting with a fixed rate for a short period before adjusting.
A document provided by a lender outlining the estimated costs of obtaining a mortgage, including loan terms, interest rates, and closing costs. (Now replaced by the Loan Estimate in most transactions.)
Gift Letter
A letter provided to the lender by a borrower stating that funds received from a friend or relative for the down payment or closing costs are a gift and do not need to be repaid.
Graduated Payment Mortgage (GPM)
A mortgage with low initial payments that gradually increase over time, typically used by borrowers who expect their income to rise.
Gross Income
A borrower’s total income before taxes or other deductions, used by lenders to calculate the debt-to-income ratio.
Guaranteed Mortgage
A mortgage that is guaranteed by a third party, such as the FHA, VA, or USDA, reducing the risk for lenders and allowing for more favorable terms for borrowers.
Gearing
The proportion of your own capital to borrowed funds used in an investment.
Guarantee
A commitment made under the conditions of a contract.
Guarantor
An individual or organization that assures the lender that the borrower’s obligations will be met. If the borrower defaults, the guarantor is responsible for fulfilling the financial commitment and may seek repayment from the borrower for any payments made on their behalf.
The value of a homeowner’s interest in their property, calculated as the difference between the home’s market value and the outstanding mortgage balance.
Home Equity Line of Credit (HELOC)
A revolving line of credit secured by a homeowner’s equity in their property, allowing them to borrow funds as needed.
Home Inspection
A professional assessment of a property’s condition, including its structure, systems, and components, to identify potential issues before purchasing.
Homeowners Association (HOA)
An organization in a residential community that enforces rules and regulations, often collecting fees from homeowners for property maintenance and shared amenities.
Homeowners Insurance
A type of insurance policy that covers damages to a home and its contents, as well as liability for accidents occurring on the property. Lenders require it for all mortgages.
HUD (Department of Housing and Urban Development)
A U.S. government agency that oversees housing policies and programs, including FHA loans and public housing initiatives.
HUD-1 Settlement Statement
A document used in real estate transactions that itemizes all charges and credits to both the buyer and seller. (Replaced by the Closing Disclosure in most residential transactions.)
Holding Deposit
A refundable sum paid by the buyer to show their intention to proceed with the purchase of a property.
An account set up by the lender to collect and pay property taxes and insurance premiums on behalf of the borrower as part of their mortgage payment.
Index
A benchmark interest rate used to calculate adjustable-rate mortgage (ARM) interest rate changes. Common indices include the LIBOR, Treasury rates, and the Cost of Funds Index (COFI).
Interest
The cost of borrowing money, usually expressed as a percentage of the loan amount, that is paid to the lender over time.
Interest-Only Mortgage
A type of mortgage where the borrower pays only interest for a set period, after which they must begin paying both principal and interest.
Investment Property
Real estate purchased with the intent to generate rental income, capital appreciation, or both, as opposed to being used as a primary residence.
Inclusions
Items within the household, such as fixtures and fittings (e.g., light fixtures), that are part of the property sale.
Income Statement
A financial document that details the income and expenses over a specific period, typically covering one year.
Internal Rate of Return (IRR)
A calculation used to evaluate an investment’s profitability, accounting for the time value of money by indicating the interest rate at which the present value of future cash flows equals the initial investment cost.
Inventory
A detailed list of items, such as furniture or other movable objects, that are included with the property.
A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. Jumbo loans are often used to finance high-value properties and typically require stricter qualification criteria.
Judgment Lien
A lien placed on a property by a court ruling, typically as a result of unpaid debts or legal claims. This lien must be satisfied before the property can be sold or refinanced.
Joint Tenancy
A form of property ownership where two or more people own a property together, with equal shares and the right of survivorship. If one owner dies, their share automatically passes to the surviving owner(s).
An interest rate set by a central bank, such as the Federal Reserve, which influences other interest rates in the economy, including mortgage rates. Changes to the key rate can impact the cost of borrowing and the overall housing market.
Kickback
A prohibited payment or incentive given to a third party (such as a real estate agent or broker) in exchange for referrals or directing business to a particular service provider. The Real Estate Settlement Procedures Act (RESPA) bans kickbacks in mortgage transactions.
Knowledge-Based Authentication (KBA)
A method used by lenders or financial institutions to verify a borrower’s identity by asking questions based on personal knowledge, often used during online transactions for added security.
A contract between a buyer and a seller in which the buyer agrees to pay the purchase price of a property in installments while the seller retains title to the property until the full amount is paid.
Lease Option
An agreement where a tenant has the option to purchase the rented property at a predetermined price within a specified period. A portion of the rent paid may go toward the purchase price.
Lender
A financial institution, individual, or organization that provides funds to a borrower for a mortgage loan, which is repaid over time with interest.
Lender’s Title Insurance
A type of insurance policy that protects the lender’s interest in a property in the event of title defects or legal challenges to the property’s ownership.
Liabilities
Financial obligations or debts owed by an individual, such as credit card balances, car loans, or student loans. Liabilities are considered by lenders when evaluating a borrower’s ability to repay a mortgage.
Lien
A legal claim against a property for unpaid debts, such as a mortgage or unpaid taxes, which must be resolved before the property can be sold or refinanced.
Loan Estimate (LE)
A form provided by lenders that outlines the key terms and estimated costs of a mortgage loan, including interest rates, monthly payments, and closing costs. It is given to the borrower within three business days of applying for a loan.
Loan Officer
A representative of a lending institution who assists borrowers in applying for loans, reviews financial information, and helps secure approval for a mortgage.
Loan Origination Fee
A fee charged by a lender to cover the administrative costs of processing a mortgage loan application, typically expressed as a percentage of the loan amount.
Loan-to-Value Ratio (LTV)
A ratio that compares the loan amount to the appraised value or purchase price of a property. Lenders use LTV to assess the risk of a mortgage; a higher LTV means a higher risk for the lender.
Lock-In Period
A set period during which a borrower’s interest rate is guaranteed by the lender. Lock-in periods protect the borrower from interest rate increases while the loan is being processed.
Lease
A contract in which one party (the lessee) is given the right to use another party's property (the lessor) for a specific duration under agreed-upon terms and conditions.
Life Assurance
A type of insurance policy that provides coverage on an individual's life.
Line of Credit
A flexible lending arrangement that allows a borrower to access funds up to a set credit limit as needed.
Loan Pre-Approval
An initial approval of a loan before the borrower makes an offer on a property, contingent on the borrower meeting the lender’s criteria and a satisfactory property valuation.
Loan Security Duty
A stamp duty applied to documentation related to the security of a loan.
Loan Term
The period during which a loan agreement is active, after which the loan must be fully repaid or renegotiated for a new term.
Loan to Valuation Ratio (LVR)
A percentage that represents the ratio between the loan amount and the appraised value of the property being used as collateral. A higher LVR indicates a greater risk to the lender.
Loan Modification
A process where the lender alters the original terms of a mortgage to make payments more manageable for the borrower. This change can include adjusting the interest rate, extending the loan term, or reducing the principal amount. It is commonly used to help borrowers avoid foreclosure.
Loss Mitigation
A set of strategies used by lenders to help borrowers who are struggling to make mortgage payments. The goal is to minimize the lender's loss while helping the borrower avoid foreclosure. Options may include loan modifications, short sales, or forbearance agreements.
The percentage added to an index rate to calculate the interest rate for an adjustable-rate mortgage (ARM). The margin remains constant over the life of the loan.
Maturity Date
The date on which the final payment of a mortgage loan is due, and the loan is fully paid off.
Mortgage
A legal agreement in which a borrower receives funds from a lender to purchase real estate, and the property serves as collateral for the loan.
Mortgage-Backed Security (MBS)
A type of investment that is secured by a pool of mortgage loans. Investors in MBS receive payments based on the mortgage payments from the underlying loans.
Mortgage Broker
A licensed individual or firm that acts as an intermediary between borrowers and lenders to help secure a mortgage loan.
Mortgage Insurance (MI)
Insurance that protects the lender in case the borrower defaults on the loan. Mortgage insurance is typically required for borrowers with less than 20% down payment.
Mortgage Note
A legal document that outlines the terms of a mortgage loan, including the repayment schedule, interest rate, and penalties for late payments or default.
Mortgage Rate
The interest rate charged on a mortgage loan. Mortgage rates can be fixed or adjustable and are influenced by market conditions and the borrower’s credit profile.
Mortgage Servicer
A company that manages the day-to-day operations of a mortgage loan, including collecting payments, managing escrow accounts, and handling customer inquiries.
Mandatory Comparison Rate
An interest rate that factors in both the advertised interest rate and any associated fees or charges. It is meant to help consumers determine the actual cost of a loan and compare it with similar options.
Maturity
The date when a loan or investment must be fully repaid.
Max Term
The longest period allowed for the repayment of a home loan or a specific portion of that loan.
Maximum Loan Amount
The highest sum of money that can be borrowed from a lender.
Min Fixed Amount
The smallest amount that can be borrowed at a fixed interest rate.
Min Lump Sum
Payment The minimum amount that can be paid back in a single large payment.
Min Redraw Amount
The minimum amount that can be withdrawn from a loan in one transaction.
Monthly Fees
Charges applied each month to help cover the lender’s administrative costs for managing the loan.
Mortgage Term
The agreed period over which a mortgage will be repaid, typically up to a maximum of 30 years.
Mortgagee
Mortgagee The entity that lends money, secured by a mortgage.
Mortgagor
The individual borrowing funds under a mortgage agreement.
A property where the owner does not live. These properties are often used as investments and may have higher interest rates than owner-occupied ones.
Negative Amortization
A situation where the loan balance increases over time because the borrower’s payments are not large enough to cover the interest due, causing the unpaid interest to be added to the principal balance.
Non-Conforming Loan
A mortgage that does not meet the guidelines set by Fannie Mae or Freddie Mac, typically because the loan amount exceeds the conforming loan limits.
Note
A legal document that details the terms of a loan, including the amount borrowed, interest rate, and repayment schedule. It serves as a borrower’s promise to repay the loan.
No-Documentation Loan
A type of loan that does not require the borrower to provide extensive documentation, such as income or asset verification. These loans typically come with higher interest rates to offset the increased risk to the lender.
A fee charged by a lender for processing a new mortgage loan application, typically a percentage of the loan amount.
Owner Financing
A situation in which the seller of a property provides financing directly to the buyer, allowing the buyer to make payments to the seller rather than a traditional lender.
Overage
The difference between the interest rate quoted to the borrower and the interest rate offered by the lender. Mortgage brokers may receive additional compensation if the borrower agrees to a higher rate.
Option ARM
A type of adjustable-rate mortgage that allows borrowers to choose from multiple payment options, including interest-only payments, fully amortized payments, or minimum payments that may lead to negative amortization.
Occupancy
Refers to the use of a property by the borrower. Lenders often distinguish between primary residences, second homes, and investment properties, which can affect loan terms and interest rates.
Off The Plan
Purchasing a property based solely on the architectural plans, without seeing the completed building.
Offer to Purchase
Typically a written agreement outlining the terms under which the buyer agrees to purchase a property. Once accepted by the seller, it becomes a legally binding contract, subject to the specified conditions.
Offset Account
A bank account that does not earn interest, where the balance is applied to reduce the interest payable on a linked home loan.
Overdraft
A credit arrangement with a bank where the account holder can withdraw more than the available balance, up to a set limit, with interest charged on the outstanding balance.
Owner Financing
A situation where the seller provides financing directly to the buyer instead of the buyer securing a traditional loan through a lender.
Owner-Occupied
A property in which the owner resides as their primary residence. In some cases, the owner may live on the property while renting part of it to tenants.
A limit on how much the monthly payment on an adjustable-rate mortgage (ARM) can increase during each adjustment period, regardless of changes in the interest rate.
PITI (Principal, Interest, Taxes, and Insurance)
The components of a monthly mortgage payment, including repayment of the loan amount (principal), interest charges, property taxes, and homeowners insurance.
Point
A fee equal to 1% of the loan amount, often paid by the borrower at closing to reduce the interest rate on the mortgage. This is also referred to as "buying down the rate."
Pre-Approval
A lender’s commitment to offer a mortgage loan to a borrower, pending full underwriting approval, based on preliminary financial information such as income, credit score, and debt.
Prepayment Penalty
A fee charged by a lender if the borrower pays off the mortgage loan before the agreed-upon term, which compensates the lender for lost interest.
Principal
The original loan amount borrowed or the remaining balance of a mortgage, excluding interest.
Private Mortgage Insurance (PMI)
Insurance required for conventional loans when the borrower’s down payment is less than 20%. PMI protects the lender in case of default and can be canceled once the borrower reaches 20% equity in the home.
Processing Fee
A fee charged by the lender to cover the administrative costs of processing a mortgage loan application.
Property Appraisal
A professional assessment of the value of a property, often required by lenders before approving a mortgage loan to ensure the property’s value supports the loan amount.
Property Tax
A tax levied by local governments on real estate based on the value of the property, which is typically collected as part of the monthly mortgage payment through an escrow account.
Purchase Agreement
A legally binding contract between a buyer and seller outlining the terms of a real estate transaction, including the price, contingencies, and closing date.
Plan
A detailed drawing that outlines the internal layout, dimensions, and positioning of a house on its plot of land.
Portability
A loan feature that allows the mortgage to be transferred from one property to another without the need for refinancing, potentially saving on setup fees and loan security duties.
Payoff Amount
The total amount required to fully pay off a mortgage, including the outstanding balance, accrued interest, and any applicable fees.
Pre-qualification
An estimate from a lender on how much they may be willing to lend, based on a preliminary review of a borrower's financial information. Unlike preapproval, it doesn’t involve a detailed verification of assets and income.
Prime Rate
The lowest interest rate that banks offer to their most creditworthy customers. This rate serves as a benchmark for other interest rates, including mortgages.
An agreement between a borrower and a lender to lock in a specific interest rate for a set period while the mortgage application is processed. This protects the borrower from rate increases.
Real Estate Agent
A licensed professional who assists buyers and sellers in real estate transactions by providing market expertise, negotiating deals, and handling paperwork.
Real Estate Settlement Procedures Act (RESPA)
A federal law that ensures consumers receive disclosures about the nature and costs of the real estate settlement process. It also prohibits kickbacks and unearned fees in mortgage transactions.
Refinancing
The process of replacing an existing mortgage with a new loan, often to obtain a lower interest rate, change the loan term, or access home equity.
Reverse Mortgage
A type of loan available to homeowners aged 62 or older that allows them to convert a portion of their home’s equity into cash without selling the property or making monthly mortgage payments. The loan is repaid when the homeowner sells the home, moves out, or passes away.
Right of Rescission
A borrower’s right under the Truth in Lending Act to cancel a home equity loan or line of credit within three business days of closing without penalty.
Reserve Price
The minimum price set by the seller for an auction. If the bidding reaches this amount, the seller is obligated to sell the property.
Right of Way
A specific type of easement that grants the legal right to travel across someone else's land, but it does not allow the removal of any materials or products from the land.
Repayment Period
The length of time a borrower has to repay a loan, such as 15 or 30 years for a mortgage. In the context of a home equity line of credit (HELOC), it’s the period when the borrower must start repaying the borrowed amount.
Right Of First Refusal (ROFR)
A legal clause that gives a party the first opportunity to purchase a property before the owner sells it to another buyer. It’s often included in lease agreements or contracts.
A loan taken out against a property that already has a primary mortgage. A second mortgage is subordinate to the first mortgage and typically has a higher interest rate.
Settlement
The process of finalizing a real estate transaction, where the buyer and seller sign legal documents to transfer ownership of the property, and funds are exchanged.
Short Sale
A sale of a property in which the proceeds from the sale are less than the balance owed on the mortgage. Lenders must agree to accept less than the total amount due to complete the transaction.
Subprime Mortgage
A mortgage offered to borrowers with less-than-perfect credit or financial profiles. These loans typically come with higher interest rates and less favorable terms due to the increased risk.
Survey
A professional assessment of a property’s boundaries, which identifies its size, location, and any encroachments or easements. Surveys are often required by lenders during the homebuying process.
Securities
An asset pledged as collateral to ensure the lender's loan is repaid in full.
Security
A lender’s legal claim on a borrower’s property or assets, which acts as collateral to guarantee loan repayment.
Settlement Date
The day on which the legal transfer of property ownership occurs from the seller to the buyer, typically when the purchase price is finalized and the buyer takes possession of the property.
Signatory
An individual with the legal authority to access an account or sign documents, binding them to the terms outlined in the agreement.
Secured Overnight Financing Rate (SOFR)
An interest rate set by the U.S. Treasury that replaces the London Interbank Offered Rate (LIBOR) as the standard for overnight borrowing between banks.
Seller Concessions
Costs associated with closing a home sale that the seller agrees to cover, such as appraisal fees or title insurance, as part of negotiations with the buyer.
Seller Financing
A method of real estate financing where the seller provides the loan to the buyer directly, allowing the buyer to make payments to the seller instead of a traditional lender.
The legal arrangement by which a tenant occupies a property owned by another party under specific terms and conditions, often involving the payment of rent.
Title
A legal document that proves ownership of a property, detailing the rights associated with the property and any encumbrances or claims against it.
Title Search
A search conducted to verify the ownership of a property and to identify any existing claims, encumbrances, or restrictions on the title.
Trust Account
An account in which funds are held in trust by a third party, often used by real estate agents to hold deposits or other funds on behalf of buyers and sellers during property transactions.
Trustee
A person or institution that holds or manages property, assets, or funds on behalf of another, according to legal or fiduciary obligations.
Title Insurance
A policy that protects lenders and homeowners against legal disputes or claims arising from defects in the title to the property, such as unpaid liens or ownership issues.
Truth in Lending Act (TILA)
A federal law that requires lenders to disclose key terms and costs of a mortgage loan in a clear and standardized way, helping borrowers make informed decisions.
Townhouse
A type of residential property that shares at least one wall with adjacent homes. Typically a two-story structure, it is often registered under a strata title.
Transfer
A legal document filed with the Land Titles Office to officially record the change of property ownership, which is then reflected on the Certificate of Title.
The process by which a lender evaluates a borrower’s financial profile, including income, assets, credit, and the property value, to determine if they meet the criteria for a mortgage loan.
Uniform Residential Loan Application (URLA)
A standard mortgage application form used by lenders to collect the financial and personal information necessary to process a home loan.
USDA Loan
A government-backed mortgage program offered by the U.S. Department of Agriculture that helps low-to-moderate-income borrowers purchase homes in eligible rural areas, often with no down payment required.
Unsecured Loan
A loan that is not backed by collateral. Unlike a mortgage, an unsecured loan does not use the home as security, which typically results in higher interest rates due to the increased risk for the lender.
Upfront Costs
The initial expenses associated with purchasing a home, including the down payment, closing costs, and other fees that must be paid at the beginning of the transaction.
A mortgage loan program offered by the U.S. Department of Veterans Affairs that provides eligible veterans, active-duty service members, and certain surviving spouses with favorable loan terms, including no down payment and no private mortgage insurance (PMI).
Variable Rate Mortgage
A type of mortgage in which the interest rate can fluctuate based on market conditions. The interest rate is typically tied to an index, and the borrower’s payments may increase or decrease over time.
Verification of Employment (VOE)
A document that a lender uses to verify the borrower’s employment status, income, and job stability as part of the mortgage application process.
Valuation
A report prepared for the lender that provides a professional assessment of the property's market value and condition.
Variable Interest Rate
An interest rate that fluctuates in response to changes in the broader market interest rates.
Vendor
The individual or entity selling a property.
Vendor Statement
A document provided by the seller to the buyer, outlining the key details and conditions of the property being sold.
The voluntary relinquishment of a known right, such as a borrower’s option to waive certain contingencies in a contract or a lender waiving specific fees.
Walk-Through
A final inspection of a property by the buyer just before closing to ensure that it is in the agreed-upon condition and that any required repairs have been made.
Warehouse Lending
A type of short-term financing used by mortgage lenders to fund loans until they can be sold to investors. The lender uses this credit line, often referred to as a “warehouse line,” until the mortgage is transferred to the secondary market.
Wraparound Mortgage
A type of financing where the seller provides a loan to the buyer that "wraps around" the existing mortgage. The buyer makes payments to the seller, who continues to make payments on the original mortgage.
The return on an investment, typically expressed as a percentage. In the mortgage industry, yield refers to the return a lender receives on a loan, including interest payments and other earnings.
Yield Spread Premium (YSP)
A payment made by a lender to a mortgage broker for originating a loan with an interest rate higher than the lender’s par rate. YSP is often used to cover closing costs for the borrower.
Local laws and regulations that dictate how property in specific geographic areas can be used. Zoning can affect building standards, land use, and property values.
