Mortgage Glossary
Last revised September 13, 2015
A-Credit
A consumer with the best credit rating, deserving
of the lowest prices that lenders offer. Most lenders require a FICO
score above 720 (see
Credit Issues). There is seldom any
payoff for being above the A-credit threshold (see
Does the Mortgage Market Reward Virtue?), but you pay a penalty for
being below it.
Acceleration Clause
A contractual provision that gives the lender the
right to demand repayment of the entire loan balance in the event that
the borrower violates one or more clauses in the note.
Accrued Interest
Interest that is earned but not paid, adding to the
amount owed. Same as
Negative amortization.
Adjustable Rate Mortgage (ARM)
A mortgage on which the interest rate, after an
initial period, can be changed by the lender. While ARMs in many
countries abroad allow rate changes at the lender's discretion
("discretionary ARMs"), in the US most ARMs base rate changes on a
pre-selected interest rate index over which the lender has no control.
These are "indexed ARMs". There is no discretion associated with rate
changes on indexed ARMs. For articles on ARMs, click on
Adjustable Rate Mortgages.
Adjustment Interval
On an ARM, the time between changes in the interest
rate or monthly payment. The rate adjustment interval is often displayed
in x/y format, where "x" is the period until the first adjustment, and
"y" is the adjustment period thereafter. For example, a 5/1 ARM is one
on which the initial rate holds for 5 years, after which it is adjusted
every year. The rate adjustment interval and the payment adjustment
interval are the same on a fully amortizing ARM, but may not be on a
negative amortization ARM. See
Should
You Fear Negative Amortization?
Affordability
A consumer's capacity to afford a house. Affordability is usually
expressed in terms of the maximum price the consumer could pay for a
house, and be approved for the mortgage required to pay that amount.
Read
How Much House Can You Afford? ,
How Much House Should You Buy? and
Mortgage Affordability: Should Government Require It?
Agency
The legal requirement that one party in a relationship has a fiduciary
obligation to the other. See
Mortgage Brokers: Agents or Independent Contractors? And
Should Mortgage Brokers Be Required To Be Agents?
Agreement of Sale
A contract signed by buyer and seller stating the terms and conditions
under which a property will be sold.
Alt-A
A mortgage risk categorization that falls between prime and sub-prime,
but is closer to prime. Also referred to as "A minus".
Alternative Documentation
Expedited and simpler documentation requirements designed to speed up
the loan approval process. Instead of verifying employment with the
applicant's employer and bank deposits with the applicant's bank, the
lender will accept paycheck stubs, W-2s, and the borrower's original
bank statements. Alternative documentation remains “full documentation”,
as opposed to the other documentation options. See
What Are Mortgtage Documentation Requirements?
Amortization
The repayment of principal from scheduled mortgage payments that exceed
the interest due. The scheduled
payment less the interest equals amortization. The loan balance
declines by the amount of the scheduled payment, plus the amount of any
extra payment. For a detailed explanation, see
Mortgage Amortization: How Does It Work? If the payment is less than
the interest due, the balance rises, which is
negative amortization.
Amortization schedule
A table showing the mortgage payment, broken down by interest and
amortization, the loan balance, tax and insurance payments if made by
the lender, and the balance of the tax/insurance escrow account.
Amount financed
On the Truth in Lending form, the loan amount less "prepaid finance
charges", which are lender fees paid at closing. For example, if the
loan is for $100,000 and the borrower pays the lender $4,000 in fees,
the amount financed is $96,000. A useless number. See
Another Truth in Lending Lie.
Annual percentage rate
See APR.
Application
A request for a loan that includes the information about the potential
borrower, the property and the requested loan that the solicited lender
needs to make a decision. In a narrower sense, the application refers to
a standardized application form called the "1003" which the borrower is
obliged to fill out.
Application fee
A fee that some lenders charge to accept an application. It may or may
not cover other costs such as a property appraisal or credit report, and
it may or may not be refundable if the lender declines the loan.
Appraisal
A written estimate of a property's current market value prepared by an
appraiser.
Appraiser
A professional with knowledge of real estate markets and skilled in the
practice of appraisal. When a property is appraised in connection with a
loan, the appraiser is selected by the lender, but the appraisal fee is
usually paid by the borrower.
Appraisal fee
A fee charged by an appraiser for the appraisal of a particular
property.
APR
The Annual Percentage Rate, which must be reported by lenders under
Truth in Lending regulations. It is a measure of credit cost to the
borrower that takes account of the interest rate, points, and flat
dollar charges by the lender. The charges covered by the APR also
include mortgage insurance premiums, but not other payments to third
parties, such as payments to title insurers or appraisers. The APR is
adjusted for the time value of money, so that dollars paid by the
borrower up-front carry a heavier weight than dollars paid in the
future. However, the APR is calculated on the assumption that the loan
runs to term, and is therefore potentially deceptive for borrowers with
short time horizons. Read Does the Annual Percentage Rate (APR) Help?
Other articles about the APR are cited under
Mandatory Mortgage Disclosure.
For a summary of the differences between the APR and interest cost, see
Annual Percentage Rate Versus Interest Cost.
Approval
Acceptance of the borrower's loan application. Approval means that the
borrower meets the lender's
qualification requirements and also its
underwriting requirements. In
some cases, especially where approval is provided quickly as with
automated underwriting systems, the approval may be conditional on
further verification of information provided by the borrower. See
Mortgage Concepts Home Buyers Should Know.
ARM
An adjustable rate mortgage.
Assumption
A method of selling real estate where the buyer of the property agrees
to become responsible for the repayment of an existing loan on the
property. Unless the lender also agrees, however, the seller remains
liable for the mortgage.
Assumable mortgage
A mortgage contract that allows, or does not prohibit, a creditworthy
buyer from assuming the mortgage contract of the seller. Assuming a loan
will save the buyer money if the rate on the existing loan is below the
current market rate, and closing costs are avoided as well. A loan with
a "due-on-sale" clause stipulating that the mortgage must be repaid upon
sale of the property, is not assumable. See
Are Mortgage
Assumptions a Good Deal?
Auction site
See Lead-Generation site.
Authorized user
Someone authorized by the original credit card holder to use the
holder’s card. The card-holder is responsible for the charges of the
authorized user, but the authorized user is not responsible for paying
any charges, including his own. But sometimes authorized users are
dunned for the unpaid bills of the card holder. See
Are
Authorized Users At Risk?
Automated underwriting
A computer-driven process for informing the loan applicant very quickly,
sometimes within a few minutes, whether the applicant will be approved,
or whether the application will be forwarded to an underwriter. The
quick decision is based on information provided by the applicant, which
is subject to later verification, and other information retrieved
electronically including information about the borrower's credit history
and the subject property.
Automated underwriting system
A particular computerized system for doing automated underwriting.
Mortgage insurers and some large lenders have developed such systems,
but the most widely used are Fannie Mae’s “Desktop Underwriter” and
Freddie Mac’s “Loan Prospector”.
Automated valuation model
An inexpensive computer-driven method for estimating the value
of a property. AVMs may use transaction price data covering similar
properties, tax assessment data, and/or algorithms that relate value to
property characteristics, such as number of bedrooms and lot size.
Back-end fee or commission
Mortgage broker income paid by the lender, same as yield-spread premium
and Negative points.
"Bad-faith estimate"
The practice of low-balling figures for settlement costs on the Good
Faith Estimate to make them appear more attractive to mortgage shoppers.
See
A Bad Faith Estimate: Any Recourse?
Bail-Out
Government support to a firm in trouble, which is usually limited to
protecting creditors and employees. See
What
Is a Bail-Out"?
Balance
The amount of the original loan remaining to be paid. It is equal to the
loan amount less the sum of all prior payments of principal. See
Mortgage Amortization: How Does it Work?
Balloon mortgage
A mortgage which is payable in full after a period that is shorter than
the term. In most cases, the balance is refinanced with the current or
another lender. On a 7-year balloon loan, for example, the payment is
usually calculated over a 30-year period, and the balance at the end of
the 7th year must be repaid or refinanced at that time. Balloon
mortgages are similar to ARMs in that the borrower trades off a lower
rate in the early years against the risk of a higher rate later. They
are riskier than ARMs because there is no limit on the extent of a rate
increase at the end of the balloon period. See
Balloon
Mortgages.
Balloon
The loan balance remaining at the time the loan contract calls for full
repayment.
Bimonthly mortgage
A mortgage on which the borrower pays half the monthly payment on the
first day of the month, and the other half on the 15th. See
Alternative Early Payoff Plans.
Biweekly mortgage
A mortgage on which the borrower pays half the monthly payment every two
weeks. Because this results in 26 (rather than 24) payments per year,
the biweekly mortgage amortizes before term. See
Biweekly Mortgages.
Blanket loan
A single mortgage covering several structures on one parcel of land.
Usually the structures are occupied by different family members. In a
market with very stringent appraisal rules, blanket mortgages are
difficult to obtain because comparable properties to support an
appraisal are not likely to be available.
Blemished borrowers
Borrowers with one or more of the following risk factors: they can only
make a very small or no down payment; they cannot fully document their
income and assets; their property is something other than a
single-family home; their loan is intended to raise cash or to purchase
an investment property; they have low credit scores; their income is low
relative to their expected total obligations; and their mortgage carries
an adjustable rate that will result in substantially higher payments in
a few years. See
HR 3915 Would Stick it to Blemished Borrowers.
Bridge loan
A short-term loan, usually from a bank, that "bridges" the period
between the closing date of a home purchase and the closing date of a
home sale. Unsecured bridge loans are available if the borrower has a
firm contract to sell the existing house. Secured bridge loans are
available without such a contract. Read
Buying a New House Before Selling the Old One.
Builder-financed construction
Having the builder finance the construction. Read
Should the Builder Finance Construction?
Buy-down
A permanent buy-down is the payment of points in exchange for a lower
interest rate. See Points. A temporary buy-down
concentrates the rate reduction in the early years. See
Temporary Buy-Down.
Buy-up
Paying a higher interest rate in exchange for a rebate by the lender
which reduces upfront costs. See Negative
Points.
Cap
Same as Float-down.
Cash Flow Option Loan
Same as Flexible Payment ARM.
Cash-In refi
As part of a refinance transaction, paying down the loan balance
in order to reduce the loan-to-value ratio and qualify for a lower
interest rate and/or reduced mortgage insurance premium. See
Is
Cash-in Refinancing For You?
Cash-Out refi
Refinancing for an amount in excess of the balance on the old loan plus
settlement costs. The borrower takes "cash-out" of the transaction. This
way of raising cash is usually an alternative to taking out a home
equity loan. For a discussion of the relative merits of the two
approaches, read
Debt Consolidation With a Cash-Out Refinance.Closing
On a home purchase, the process of transferring ownership from the
seller to the buyer, the disbursement of funds from the buyer and the
lender to the seller, and the execution of all the documents associated
with the sale and the loan. On a refinance, there is no transfer of
ownership, but the closing includes repayment of the old lender.
Closing costs
Same as Settlement costs.
Closing date
The date on which the closing occurs. See
Mortgage Closing Date: Does
it Matter?
CMG plan
A technique for repaying a loan early that involves using the mortgage
as a substitute for a checking account. See
The CMG Plan: Your Mortgage as a Checking Account.
Co-Borrowers
One or more persons who have signed the note, and are equally
responsible for repaying the loan. Unmarried co-borrowers who live
together are advised to agree beforehand on what happens if they split.
See
On Buying a House With a Domestic Partner.
COFI
Cost of funds index. One of many interest rate indexes used to determine
interest rate adjustments on an adjustable rate mortgage. See
What Is a Coffee Loan?
and
Which Adjustable
Rate Mortgage Index Is the Best?Collateral
Assets pledged as security for the repayment of a loan.
See
Impact of the Foreclosure Fiasco on the Collateral Value of Houses.
Conforming mortgage
A loan eligible for purchase by the two major Federal agencies that buy
mortgages, Fannie Mae and Freddie Mac. See
What Do Fannie Mae and Freddie Mac Do?Conservatorship
A legal status where a conservator is appointed to oversee a firm in
trouble in order to protect and conserve the firm's assets. Fannie Mae
and Freddie Mac were placed in conservatorships in September, 2008. See
Why Isn't Housing
Recovering? Was Placing Fannie and Freddie Into Conservatorship a
Mistake?
Construction financing
The method of financing used when a borrower contracts to have a house
built, as opposed to purchasing a completed house. See
Pitfalls in Financing Home Construction.
Contagion
Positive contagion is the tendency during a bubble period for new
players to be attracted by the profits being earned by existing players.
Negative contagion is the tendency during a financial crisis for the
loss of confidence in the ability of major players to meet their
obligations to spread rapidly among all their actual and potential
creditors See
Financial Disasters and Natural Disasters.
Contract knavery
Inserting provisions into a loan contract that severely disadvantage the
borrower, without the borrower’s knowledge, and sometimes despite oral
assurances to the contrary. Prepayment penalties are perhaps the most
frequently cited subject of such abuse. Read
What
Is Predatory Lending?
Conventional mortgage
A home mortgage that is neither FHA-insured nor VA-guaranteed.
Conversion option
The option to convert an ARM to an FRM at some point during its life.
These loans are likely to carry a higher rate or points than ARMs that
do not have the option. See
Conversion Option on an Adjustable Rate Mortgage?
Correspondent
A lender who delivers loans to a (usually larger)
wholesale lender
against prior price commitments the wholesaler has made to the
correspondent. The commitment protects the correspondent against
pipeline risk. See
What Is a Correspondent Lender?
COSI
Cost of savings index. One of many interest rate indexes used to
determine interest rate adjustments on an adjustable rate mortgage. See
Which Adjustable
Rate Mortgage Index Is the Best?
Co-signing a note
Assuming responsibility for someone else's loan in the event that that
party defaults. A risk not to be taken lightly. See The Hazards of
Co-signing, and Co-Signing a Mortgaage: How Much Help?
Credit report
A report from a credit bureau containing detailed information bearing on
credit-worthiness, including the individual's credit history. See
What Is a
Credit Report? and
Credit Reports and Credit Scores.
Credit score
A single numerical score, based on an individual's credit history, that
measures that individual's credit worthiness. Credit scores are as good
as the algorithm used to derive them. The most widely used credit score
is called FICO for Fair Issac Co. which developed it. Many of the
columns in Mortgage Credit Issues
discuss factors that affect the FICO score, including
Raise Credit Score by Paying Delinquencies? and
Do
Credit Inquiries Hurt Your Credit Credit?
Cumulative interest
The sum of all interest payments to date or over the life of the loan.
This is an incomplete measure of the cost of credit to the borrower
because it does not include up-front cash payments, and it is not
adjusted for the time value of money. See
Interest cost.
Current index value
The most recently published value of the index used to adjust the
interest rate on an indexed ARM.Current projected rate
The expected interest rate on an ARM at the next rate adjustment.
A method for developing such an estimate is explained in
Estimating the New Rate at the Next ARM Rate Adjustment.
Deadbeat
A borrower who doesn't pay. See
When Good Credit Marries Bad Credit. And
Can a
Deadbeat Pay Cash?
Debtaholic
A borrower who cannot handle debt except by complete abstinence. See
Are Credit Problems Cured by the Passage of Time?
Debt consolidation
Rolling short-term debt into a home mortgage loan, either at the time of
home purchase or later. For columns on the subject, see
Debt Consolidation.
Debt elimination
Scams designed to relieve you of your money by promising to eliminate
your mortgage debt. See
Debt Elimination - Dupes Apply Here.
Deed in lieu of foreclosure
Deeding the property over to the lender as an alternative to having the
lender foreclose on the property. See Options When Equity in Your Home
is Gone and
Mortgage Payment Problems: What If You Can't Pay?
Default
Failure of the borrower to honor the terms of the loan agreement.
Lenders (and the law) usually view borrowers delinquent 90 days or more
as in default.
Deferred interest
Same as negative amortization.
Delinquency
A mortgage payment that is more than 30 days late. For articles on
payment problems, see Payment Problems.
Don't confuse with
Late payment.
Demand clause
A clause in the note that allows the lender to demand repayment at any
time for any reason. See
What Is a Demand Clause?
Desecuritization
Reversing the securitization process by converting a security
back into individual loans. See
Desecuritization: Value There For the Taking
Direct lender
Same as lender.
Disaster Myopia
The tendency of lenders to ignore potential shocks that can cause them
major losses if a long period has elapsed since a shock has occurred.
See
Upheaval in the Sub-Prime Mortgage Market.
Discount mortgage broker
A mortgage broker who claims to be compensated entirely by the lender
rather than by the borrower. See
Are Discount Mortgage Brokers Upfront?
Discount points
Same as points.
Discretionary ARM
An adjustable rate mortgage on which the lender has the right to change
the interest rate at any time subject only to advance notice.
Discretionary ARMs are found abroad, not in the US. See
Can
You Have Peace of Mind With an ARM?
Documentation requirements
The set of lender requirements that specify how information about a loan
applicant's income and assets must be provided, and how it will be used
by the lender. See
What Are Mortgage Documentation Requirements?
Down payment
The difference between the value of the property and the loan amount,
expressed in dollars, or as a percentage of the price. For example, if
the house sells for $100,000 and the loan is for $80,000, the down
payment is $20,000 or 20%. To read articles about the down payment, see
Down Payment.
Dual apper
A borrower who submits applications through two loan providers, usually
mortgage brokers. See
Is It OK to Submit Two Mortgage Loan Applications?
Dual index mortgage
A mortgage on which the interest rate is adjustable based on an interest
rate index, and the monthly payment adjusts based on a wage and salary
index. See
Dual
Index Mortgages.
Due-on-sale clause
A provision of a loan contract that stipulates that if the property is
sold the loan balance must be repaid. This bars the seller from
transferring responsibility for an existing loan to the buyer when the
interest rate on the old loan is below the current market. A mortgage
containing a due-on-sale clause is not an
assumable mortgage.
Dysfunctional markets
Non-competitive markets in which prices are not clearly stated,
buyer/borrowers don't fully understand their options, markups on deals
that get done are excessive, and many deals in the interest of both
parties don't get done at all. See
Protecting Borrowers in Dysfunctional Markets: A Major Challenge to
CFPB.
Effective rate
A term used in two ways. In one context it refers to a measure of
interest cost to the borrower that is identical to the APR except that
it is calculated over the time horizon specified by the borrower. The
APR is calculated on the assumption that the loan runs to term, which
most loans do not. (See Does the Annual Percentage Rate (APR) Help?). In
most texts on the mathematics of finance, however, the "effective rate"
is the quoted rate adjusted for intra-year compounding. For example, a
quoted 6% mortgage rate is actually a rate of .5% per month, and if
interest received in the early months is invested for the balance of the
year at .5%, it results in a return of 6.17% over the year. The 6.17% is
called the "effective rate" and 6% is the "nominal" rate.
Equity
In connection with a home, the difference between the value of the home
and the balance of outstanding mortgage loans on the home.
Equity grabbing
A type of predatory lending where the lender intends for the borrower to
default so the lender can grab the borrower's equity. Read
What
Is Predatory Lending?
Escrow
An agreement that money or other objects of value be placed with a third
party for safe keeping, pending the performance of some promised act by
one of the parties to the agreement. It is common for home mortgage
transactions to include an escrow agreement where the borrower adds a
specified amount for taxes and hazard insurance to the regular monthly
mortgage payment. The money goes into an escrow account out of which the
lender pays the taxes and insurance when they come due. For articles on
this subject, see Escrows.
Escrow abuse
The practice of using escrow accounts inappropriately to generate more
income from hapless borrowers. See
Escrow Abuse and Manufactured Foreclosures.
Fallout
Loan applications that are withdrawn by borrowers, sometimes because
they have found a better deal. See
Why Is Locking Unique to Mortgages?
FAMEMP
A fully-amortizing mortgage with equal monthly payments.
Fannie Mae
One of two Federal agencies that purchase home loans from lenders. (The
other is Freddie Mac). Both agencies finance their purchases primarily
by packaging mortgages into pools, then issuing securities against the
pools. The securities are guaranteed by the agencies. They also raise
funds by selling notes and other liabilities. See
What Do Fannie Mae and Freddie Mac Do?
Fees
The sum of all upfront cash payments required by the lender as part of
the charge for the loan. Origination fees
and
points are expressed as a percent of the loan.
Junk fees are expressed in dollars.
FHA mortgage
A mortgage on which the lender is insured against loss by the Federal
Housing Administration, with the borrower paying the mortgage insurance
premium. The major advantage of an FHA mortgage is that the required
down payment is very low, but the maximum loan amount is also low. For
articles on FHA, see FHA Mortgages.
FICO Score
See Credit Score.
Final prices
The prices paid by the borrower, as opposed to
posted prices. The distinction is discussed in
Why Do Minorities Pay More For Mortgages?
Financial Services Authority (FSA)
In the UK, a series of sweeping changes beginning in 1997 placed most
financial regulation under a new Financial Services Authority (FSA). FSA
is an independent non-governmental body but it is answerable to the
Treasury and ultimately to the Parliament. In 2004, the FSA took over
regulation of the mortgage sector, including mortgage brokers.
Financing points
Including points in the loan amount. Read
Can Mortgage Points
Be Financed?
First mortgage
A mortgage that has a first-priority claim against the property in the
event the borrower defaults on the loan. For example, a borrower
defaults on a loan secured by a property worth $100,000 net of sale
costs. The property has a first mortgage with a balance of $90,000 and a
second mortgage with a balance of $15,000. The first mortgage lender can
collect $90,000 plus any unpaid interest and foreclosure costs. The
second mortgage lender can collect only what is left of the $100,000.
Fixed rate mortgage (FRM)
A mortgage on which the interest rate and monthly mortgage payment
remain unchanged throughout the term of the mortgage. See
Fixed Rate Mortgages.
Fixed-Markup UML
An Upfront Mortgage Lender who discloses his wholesale price and markup.
See
A New Approach to Selecting a Loan Provider.
Flexible payment ARM
Same as Option ARM.
Float
Allowing the rate and points to vary with changes in market conditions.
The borrower may elect to lock the rate and points
at any time but must do so a few days before the closing. Allowing the
rate to float exposes the borrower to market risk, and also to the risk
of being taken advantage of by the loan provider. See
Is it
Wise to Float?
Float-down
A rate lock, plus an option to reduce the rate if market interest rates
decline during the lock period. Also called a cap. A float-down costs
the borrower more than a lock because it is more costly to the lender.
Float-downs vary widely in terms of how often the borrower can exercise
(usually only once), and exactly when the borrower can exercise. See
What Is
a Float-Down? Do not confuse with
interest rate increase caps
and payment increase caps.
Foreclosure
The legal process by which a lender acquires possession of the property
securing a mortgage loan when the borrower defaults. See
Can a Mortgage Lender Profit From Foreclosure?
Forbearance agreement
An agreement by the lender not to exercise the legal right to foreclose
in exchange for an agreement by the borrower to a payment plan that will
cure the borrower’s delinquency. See
Mortgage Payment Problems: What If You Can't Pay?
Freddie Mac
One of two Federal agencies that purchase home loans from lenders. The
other is Fannie Mae.
Front-end fee
Mortgage broker income paid by the borrower, as distinguished from the
fee paid by the lender, which is "back-end".
Fully amortizing payment
The monthly mortgage payment which, if maintained unchanged through the
remaining life of the loan at the then-existing interest rate, will pay
off the loan over the remaining life. See
Mortgage Amortization: How Does It Work? On FRMs the payment is
always fully amortizing, provided the borrower has made no prepayments.
(If the borrower makes prepayments, the monthly payment is more than
fully amortizing). On GPMs, the payment in the early years is always
less than fully amortizing. On ARMs, the payment may or may not be fully
amortizing, depending on the type of ARM. See
How Does Negative Amortization on a Mortgage Work?
Fully indexed interest rate
The current index value plus the
margin on an ARM. Usually,
initial interest rates on ARMs are
below the fully indexed rate. If the index does not change from its
initial level, after the
initial rate period
ends the interest rate will rise to the
fully indexed rate after a period determined by the
interest rate increase cap. For example, if the initial rate is 4%
for 1 year, the fully indexed rate 7%, and the rate adjusts every year
subject to a 1% rate increase cap, the 7% rate will be reached at the
end of the third year. See
What Is an
Adjustable Rate Mortgage? and
What Is
the Real Price of an Adjustable Rate Mortgage?
Generic prices
Prices that assume a more or less standardized set of transaction
characteristics that generally command the lowest prices. Generic prices
are distinguished from transaction specific prices, which pertain to the
characteristics of a specific transaction. See
What Mortgage Market Niche Are You In?
Gift of equity
A sale price below market value, where the difference is a gift from the
sellers to the buyers. Such gifts are usually between family members.
Lenders will usually allow the gift to count as down payment. See
Avoiding Taxes on a Gift of Equity.
Good fairy syndrome
A belief that somewhere out there is a good fairy who will solve all our
financial (and other) problems. See
Mortgage Fraud and Belief in a Good Fairy.
Good faith estimate
The form that lists the settlement charges the borrower must pay at
closing, which the lender is obliged to provide the borrower within
three business days of receiving the loan application. See
Why Do Lenders Itemize Loan Charges? and
How to Shop Settlement Costs.
Government National Mortgage
Association (GNMA)
A Federal agency that guarantees mortgage securities that are issued
against pools of FHA and VA mortgages.
Grace period
The period after the payment due date during which the borrower can pay
without being hit for late fees. Grace periods apply only to mortgages
on which interest is calculated monthly. Simple interest mortgages do
not have a grace period because interest accrues daily. See
What Are Simple Interest Mortgages?
Graduated payment mortgage (GPM)
A mortgage on which the payment rises by a constant percent for a
specified number of periods, after which it levels out over the
remaining term and amortizes fully. For example, the payment might
increase by 7.5% every 12 months for 60 months, after which it is
constant for the remaining term at a fully amortizing level. See
What is a Graduated Payment Mortgage (GPM).
Graduation period
The interval at which the payment rises on a GPM.
Graduation rate
The percentage increase in the payment on a GPM.
Guaranteed Mortgage Price Agreement
A proposal by HUD in 2002 to allow lenders and others to offer packages
of loans and settlement services at a single price. See
HUD's Proposals For Reform.
HARP Program
The Home Affordability Refinance Program (HARP) was started by Fannie
Mae and Freddie Mac in 2010 to provide refinancing to borrowers with
loan-to-value ratios too high to be eligible for their standard
programs. The program had many shortcomings as discussed in
Why Are More Loans Not Being Refinanced?
Hazard insurance
Insurance purchased by the borrower, and required by the lender, to
protect the property against loss from fire and other hazards. Also
known as "homeowner insurance", it is the second "I" in
PITI. See
Questions About Home Owners Insurance.
HECM
Stands for Home Equity Conversion Mortgage, a reverse mortgage
program authorized by Congress in 1988. On a HECM, FHA insures the
lender against loss in the event the loan balance at termination exceeds
the value of the property, and insures the borrower that any payments
due from the lender will be made, even if the lender fails.
HECM Credit Line
The right to borrow up to a specified maximum
amount under a HECM reverse mortgage contract. If unused, the line grows
monthly at the rate on the borrower's mortgage. See
To Avoid Outliving Your Money, Take a HECM Reverse Mortgage Before
Interest Rates Rise.
Historical scenario
The assumption that the index value to which the rate on an ARM is tied
follows the same pattern as in some prior historical period. In meeting
their disclosure obligations in connection with ARMs, some lenders show
how the mortgage payment would have changed on a mortgage originated
some time in the past. That is not very useful. Showing how a mortgage
originated now would change if the index followed a historical pattern
would be useful, but nobody does it.
Homebuyer protection plan
A plan purporting to protect FHA homebuyers against property defects.
See Is FHA
Responsible For the Leaky Roof?
Homeowner's equity
See Equity.
Homeowners insurance
Insurance purchased by the borrower, and required by the lender, to
protect the property against loss from fire and other hazards. It is the
second "I" in PITI. See
Questions About Home Owners Insurance.
Home equity line of credit (HELOC)
A mortgage set up as a line of credit against which a borrower can draw
up to a maximum amount, as opposed to a loan for a fixed dollar amount.
For example, using a standard mortgage you might borrow $150,000, which
would be paid out in its entirety at closing. Using a HELOC instead, you
receive the lender’s promise to advance you up to $150,000, in an amount
and at a time of your choosing. You can draw on the line by writing a
check, using a special credit card, or in other ways. See
What Is a HELOC
and
How
Do You Shop For a HELOC?
Home Equity Conversion Mortgage (HECM)
A reverse mortgage program administered by FHA. See
Reverse Mortgages.
Home equity line
Same as HELOC.
Home equity loan
Same as second mortgage.
Home Keeper
A reverse mortgage program administered by Fannie Mae. See
Reverse Mortgages.
Home Owners Loan Corporation
A Federal Government agency established by Congress in 1933 to help
families avoid having their homes foreclosed. See
Home Owners Loan Corporation II - a Fable.
Home Valuation Code of Conduct (HVCC)
A rule issued by Fannie Mae
and Freddie Mac, effective May 1, 2009, that the agencies thenceforth
would only purchase mortgages that were supported by an “independent”
appraisal.
The rule had some very bad though
unintended side effects. See
The Appraisal Debacle.
Housing bank
A government-owned or affiliated housing lender. With minor exceptions,
government in the US has never loaned directly to consumers, but housing
banks are widespread in many developing countries. Read
Government as Mortgage Lender.
Housing bubble
A marked increase in house prices fueled partly by expectations that
prices will continue to rise. See
A
Look at Housing Bubbles.
Housing expense
The sum of mortgage payment, hazard insurance, property taxes, and
homeowner association fees. Same as PITI and
"monthly housing expense."
Housing expense ratio
The ratio of housing expense to borrower income, which is used (along
with the total expense ratio and
other factors) in qualifying borrowers. See
Qualifying for a Mortgage.
Housing investment
The amount invested in a house, equal to the sale price less the loan
amount. See
How Much House Should You Buy?
HUD1 form
The form a borrower receives at closing that details all the payments
and receipts among the parties in a real estate transaction, including
borrower, lender, home seller, mortgage broker and various other service
providers.
Hybrid ARM
An ARM on which the initial rate holds for some period, during which it
is "fixed-rate", after which it becomes adjustable rate. Generally, the
term is applied to ARMs with initial rate periods of 3 years or longer.
Impounds
Same as
Escrow.
Indexed ARM
An ARM on which the interest rate adjusts mechanically based on changes
in an interest rate index, as opposed to a "discretionary ARM" on which
the lender can change the rate at any time subject only to advance
notice. All ARMs in the US are indexed. See
Peace
of Mind With an Adjustable Rate Mortgage?
Initial interest rate
The interest rate that is fixed for some specified number of months at
the beginning of the life of a an ARM. The initial rate is sometimes
referred to as a "teaser" when it is below the
fully indexed interest rate.
See
Information to Evaluate an Adjustable Rate Mortgage.
Initial rate period
The number of months for which the initial rate holds, ranging from 1
month to 10 years. See
Information to Evaluate an Adjustable Rate Mortgage.
Interest accrual period
The period over which the interest due the lender is calculated. If the
interest accrual period on a 6 % mortgage for $100,000 is a year, as it
is on some loans in the UK and India, the interest for the year is
.06($100,000) = $6,000. If interest accrues monthly, as it does on most
mortgages in the US, the monthly interest is .06/12($100,000) = $500. If
interest accrues biweekly, as on a few programs in the US, the biweekly
interest is .06/26($100,000) = $230.77. And if interest accrues daily,
as HELOCs and some other mortgages in the US do, the daily interest is
.06/365($100,000) = $16 .44.
Interest cost
A time-adjusted measure of cost to a mortgage borrower. It is calculated
in the same way as the APR except that the APR assumes that the loan
runs to term, and is always measured before taxes. The formula is shown
in Mortgage Formulas. Interest cost is
measured over the individual borrower's time horizon, and it may be
measured after taxes at the individual borrower's tax rate. In addition,
the cost items included in interest cost may be more or less inclusive
than those included in the APR. See
Annual Percentage Rate Versus Interest Cost.
Interest due
The amount of interest, expressed in dollars, computed by multiplying
the loan balance at the end of the preceding period times the annual
interest rate divided by the interest accrual period. It is the same as
interest payment except when the
scheduled mortgage payment is less than the interest due, in which
case the difference is added to the balance and constitutes
negative amortization.
Interest-only mortgage
A mortgage on which for some period the monthly mortgage payment
consists of interest only. During that period, the loan balance remains
unchanged. See Interest Only
Mortgages.
Interest payment
The dollar amount of interest paid each month. It is the same as
interest due so long as the
scheduled mortgage payment is equal to or greater than than the
interest due. Otherwise, the interest payment is equal to the scheduled
payment.
Interest rate
The rate charged the borrower each period for the loan of money, by
custom quoted on an annual basis. A rate of 6%, for example, means a
rate of 1/2% per month. A mortgage interest rate is a rate on a loan
secured by a specific property. See Mortgage
Interest Rates.
The frequency of rate adjustments on an ARM after the
initial rate period is over. The rate
adjustment period is sometimes but not always the same as the initial
rate period. As an example, a 3/3 ARM is one in which both periods are 3
years while a 3/1 ARM has an initial rate period of 3 years after which
the rate adjusts every year. See
Information to Evaluate an Adjustable Rate Mortgage.
Interest rate ceiling
The highest interest rate possible under an
ARM contract; same as "lifetime cap." It is often expressed as a
specified number of percentage points above the
initial interest rate. See
Information to Evaluate an Adjustable Rate Mortgage.
Interest rate floor
The lowest interest rate possible under an ARM contract. Floors are less
common than ceilings. See
Information to Evaluate an Adjustable Rate Mortgage.
Interest rate increase cap
The maximum allowable increase in the interest rate on an ARM each time
the rate is adjusted. It is usually 1 or 2 percentage points, but may be
5 points if the initial rate period is 5 years or longer. See
Information to Evaluate an Adjustable Rate Mortgage.
Interest rate decrease cap
The maximum allowable decrease in the interest rate on an ARM each time
the rate is adjusted. It is usually 1 or 2 percentage points. See
Information to Evaluate an Adjustable Rate Mortgage.
The specific interest rate series to which the interest rate on an ARM
is tied, such as "Treasury Constant Maturities, 1-Year," or "Eleventh
District Cost of Funds." All the indices are published regularly in
readily available sources. For a listing and discussion of various
indices, see Adjustable Rate
Mortgage Indexes and
Which Adjustable
Rate Mortgage Index Is the Best?
Interest rate risk premium
The rate premium above the rate on the least risky or "prime" loan. See
Why the System is Vulnerable to Crisis.
Interim refinance
An ill-advised scheme to avoid a prepayment penalty by refinancing twice
instead of once. Read
The Interim Mortgage Refinance Scam.
Internet mortgages
Mortgages delivered using the internet as a major part of the
communication process between the borrower and the lender. See
Using the Internet.
Investor
In real estate, a borrower who owns or purchases a property as an
investment rather than as a residence.
Jumbo mortgage
A mortgage larger than the maximum eligible for purchase by the two
Federal agencies, Fannie Mae and Freddie Mac, $417,000 in 2008 (see
Non-conforming mortgage).
However, in that year, the agencies were given limited authority to
purchase jumbos. See
Shopping For a Jumbo Mortgage in a Distressed Market.
Junk fees
A derogatory term for lender fees expressed in dollars rather than as a
percent of the loan amount. See
What Are
Junk Fees on a Mortgage?
Kosher HECM Reverse Mortgage
A reverse mortgage shorn of the dysfunctional features that plague the
mainstream reverse mortgage market, including excessive origination fees
and price lock abuse. See
Introducing the Kosher HECM Reverse Mortgage.
Late fees
Fees that lenders are entitled to collect from borrowers who don't pay
within the grace period. Most mortgage notes
offer borrowers a 10 or 15-day grace period, with a late charge of about
5% on payments received on the 16th or later. Read
Are These
Mortgage Late Fees Kosher?
Late payment
A payment received after the grace period stipulated in the note. Most
mortgage grace periods are 10 or 15 days.
Lead-Generation site
A mortgage web site designed to provide leads (potential customers) to
lenders. Where a referral site provides information about lenders to
consumers, with consumers contacting the lenders, a lead-generation site
provides information about the consumers to the lenders, and the lenders
contact the consumers. They are sometimes called "auction sites" because
lenders post their prices directly to the consumer. See
Mortgage
Auction (or Lead Generation) Sites.
Lease-to-own purchase
A transaction in which a hopeful home buyer leases a home with an option
to buy it within a specified period. See
Lease-to-Own House Purchases.
Lender
See Mortgage lender.
Lien
The lender’s right to claim the borrower’s property in the event the
borrower defaults. If there is more than one lien, the claim of the
lender holding the first lien will be satisfied before the claim of the
lender holding the second lien, which in turn will be satisfied before
the claim of a lender holding a third lien, etc.
Loan amount
The amount the borrower promises to repay, as set forth in the mortgage
contract. It differs from the amount of cash disbursed by the lender by
the amount of points and other upfront costs included in the loan.
Loan "churning"
The process of raising cash periodically through successive cash-out
refinancings. It is a scam initiated by mortgage brokers that victimizes
wholesale lenders, with the connivance of borrowers. See
Periodic
Mortgage Refinacings: Who Gets Conned?
Loan discount fee
The term used to describe points on the
Good Faith Estimate.
Loan level price adjustments
The risk-based pricing system used by Fannie Mae, see
What Should Be Done With Fannie Mae and Freddie Mac?
Loan modification
See Mortgage modification.
Loan officer
Employees of lenders or mortgage brokers who find borrowers, sell and
counsel them, and take applications. See
Mortgage Lenders, Mortgage Brokers and Loan Officers.
Loan provider
A lender or a mortgage
broker.
The loan amount divided by the lesser of the selling price or the
appraised value. Also referred to as LTV. The LTV and down payment are
different ways of expressing the same set of facts. See
What Is the Down Payment?
Lock
An option exercised by the borrower, at the time of the loan application
or later, to "lock in" the rates and points prevailing in the market at
that time. The lender and borrower are committed to those terms,
regardless of what happens between that point and the closing date. See
Locking the Price of a Mortgage Loan, and
Mortgage Concepts Home Buyers Should Know.
Lock commitment letter
A written statement from a lender verifying that the price and other
terms of a loan have been locked. Borrowers who lock through a mortgage
broker should always demand to see the lock commitment letter. See
Did You Pay For Insurance You Didn't Get?
Lock failure
The inability or unwillingness of a lender to honor a mortgage price
that a borrower had believed was guaranteed. See
Questions About the Failure of Mortgage Locks.
Lock jumper
A borrower, usually refinancing rather than purchasing a home, who
allows a lock to expire when interest rates go down in order to lock
again at the lower rate. See
Is the Borrower Committed by a Mortgage Lock?
Lock period
The number of days for which any lock or float-down holds. Ordinarily,
the longer the period, the higher the price to the borrower.
Mandatory disclosure
The array of laws and regulations dictating the information that must be
disclosed to mortgage borrowers, and the method and timing of
disclosure. See Mandatory Mortgage
Disclosure.
Manufactured housing
A house built entirely in a factory, transported to a site and installed
there. They are usually built without knowing where they will be sited,
and are subject to a Federal building code administered by HUD. See
Manufactured Housing: a Messy Picture.
Margin
The amount added to the interest rate
index, ranging generally from 2 to 3 percentage points, to obtain
the
fully indexed interest rate
on an ARM. See
Information to Evaluate an Adjustable Rate Mortgage.
Market niche
A particular combination of loan, borrower and property characteristics
that lenders use in setting prices and underwriting requirements. These
characteristics are believed to affect the default risk or cost of the
loan. As examples, borrowers who don't intend to occupy the house they
purchase pay more than those who do, and borrowers who refinance only
the balance on their existing loan pay less than those who take "cash
out". Read
What Mortgage Market Niche Are You In?
Maturity
The period until the last payment is due. This is usually but not always
the term, which is the period used to calculate the mortgage payment.
Maximum loan amount
The largest loan size permitted on a particular loan program. For
programs where the loan is targeted for sale to Fannie Mae or Freddy
Mac, the maximum will be the largest loan eligible for purchase by these
agencies. On FHA loans, the maximums are set by the Federal Housing
Administration, and vary somewhat by geographical area. On other loans,
maximums are set by lenders.
Maximum loan to value ratio
The maximum allowable loan-to-value ratio
on the selected loan program.
Maximum lock
The longest period for which the lender will lock the rate and points on
any program. The most common maximum lock period is 60 days, but on some
programs the maximum is 90 days; only a few go beyond 90 days. See
Why Is Locking Unique to Mortgages?
Minimum down payment
The minimum allowable ratio of down payment to sale price on any
program. If the minimum is 10%, for example, it means that you must make
a down payment of at least $10,000 on a $100,000 house, or $20,000 on a
$200,000 house. For articles on down payment, see
Down Payment.
Monthly housing expense
Same as Housing expense.
Monthly debt service
Monthly payments required on credit cards, installment loans, home
equity loans, and other debts but not including payments on the loan
applied for.
Monthly total expenses
Same as Total housing expense.
A written document evidencing the lien on a property taken by a lender
as security for the repayment of a loan. The term “mortgage” or
“mortgage loan” is used loosely to refer both to the lien and the loan.
In most cases, they are defined in two separate documents: a mortgage
and a note.
Mortgage auction site
See Lead generation site.
Mortgage bank
Same as mortgage company.
Mortgage broker
An independent contractor who offers the loan products of multiple
lenders, termed wholesalers. A mortgage
broker counsels on the loans available from different wholesalers, takes
the application, and usually processes the
loan. When the file is complete, but sometimes sooner, the lender
underwrites the loan. In contrast to a
correspondent, a mortgage broker does not
fund a loan. For articles on mortgage brokers and how to deal with them,
see Mortgage Brokers.
A mortgage lender who sells all loans in the secondary market. As
distinguished from a portfolio lender,
who retains loans in its portfolio. Mortgage companies may or may not
service the loans they originate.
Mortgage lead
A packet of information about a consumer who a loan provider might be
able to convert into a borrower. You become a lead when you fill out a
questionnaire about yourself on-line in response to a sexy ad. See
Mortgage Leads: Are You One?
Mortgage formulas
Equations used to derive common measures used in the mortgage market,
such as monthly payment, balance, and APR. See
Mortgage Formulas.
Mortgage grader
A broker web site with many attractive features, and one not so
attractive. See
Mortgage Grader: A Better Type of Web Site?
Mortgage insurance
Insurance against loss provided to a mortgage lender in the event of
borrower default. In most cases, the borrower pays the premiums. For
articles on mortgage insurance, see
Mortgage Insurance.
Mortgage insurance disclosure
Read
Disclosure Rules About Mortgage Insurance.
Mortgage insurance premium
The up-front and/or periodic charges that the borrower pays for mortgage
insurance. There are different mortgage insurance plans with differing
combinations of up-front, monthly and annual premiums. The most widely
used premium plan is a monthly charge with no upfront premium. For a
sample of monthly premiums, see
Sample
Mortgage Insurance Premiums.
Mortgage insurance cancellation
Canceling a mortgage insurance policy. Read
Canceling Private
Mortgage Insurance (I), and
Canceling Private
Mortgage Insurance (II).
Mortgage lender
The party who disburses funds to the borrower at the closing table. The
lender receives the note evidencing the borrower's indebtedness and
obligation to repay, and the mortgage which is the lien on the subject
property.
Mortgage modification
A change in the terms of a loan, usually the interest rate and/or term,
in response to the borrower's inability to make the payments under the
existing contract. See
What If You Can't Pay? and
Mortgage Loan Modifications.
Mortgage payment
The monthly payment of interest and principal made by the borrower. The
formula used to calculate it is shown in Mortgage
Formulas.
Mortgage price
The interest rate, points and fees paid to the lender and/or mortgage
broker. On ARMs, the price also includes the
fully indexed rate and the
maximum rate. Read
What Is the "Price" of a Mortgage?
Mortgage program
A bundle of mortgage characteristics that lenders see fit to distinguish
as a distinct instrument. These include whether it is an FRM, ARM, or
Balloon; the term; the initial rate period on an ARM; whether it is
FHA-insured or VA-guaranteed; and if is not FHA or VA, whether it is
"conforming" (eligible for purchase by Fannie Mae or Freddie Mac) or
"non-conforming".
Mortgage referrals
Advice on where to go to get a mortgage. See
Mortgage Referrals: Who Can You Trust?
Mortgage scams
Deceptive and exploitative schemes by lenders, brokers, home sellers and
sometimes even borrowers. See Mortgage Scams.
Mortgage shopping
Trying to find the best deal on a mortgage. See
How to Shop For a Mortgage.
Mortgage spam
Offers for great mortgage deals that appear unbidden in your email. See
What Should I Do With Mortgage Spam?
Mortgage suitability
The doctrine that mortgage lenders should be held liable for providing
loans that are not suitable for the borrower. See
Mortgage Suitability.
Negative amortization
A rise in the loan balance when the mortgage payment is less than the
interest due. Sometimes called "deferred interest." It is explained
in detail in
How Does Negative Amortization on a Mortgage Work? Negative
amortization arises most frequently on ARMs. See
Should
You Fear Negative Amortization and
Is a
3.95% Adjustable Rate Mortgage a Good Deal?
Negative amortization cap
The maximum amount of negative amortization permitted on an ARM, usually
expressed as a percentage of the original loan amount (e.g., 110%).
Reaching the cap triggers an automatic increase in the payment, usually
to the fully amortizing payment
level, overriding any
payment increase cap.
Negative Homeowners Equity
The condition of owing more on the house than the house is worth. See
The Curse of Negative Equity: Is There an Escape?
Negative points
Points paid by a lender for a loan with a rate above the rate on a zero
point loan. For example, a wholesaler quotes the following prices to a
mortgage broker. 8%/0 points, 7.5%/3 points, 8.75%/-3 points. On
mortgage web sites, negative points are usually referred to as "rebates"
because they are used to reduce a borrower's settlement costs. When
negative points are retained by a mortgage broker, they are called a
"yield spread premium". Read
Can Mortgage
Points Be Negative? and
Ignore Lender Payments to My Broker? On policy issues connected to
negative points, see
HUD and Yield Spread Premiums, and
A Better Approach to YSPs?
Net branch
A facility offered by some lenders to mortgage brokers where de jure the
brokers become employees of the lender but de facto they retain their
independence as brokers. One of the advantages of this arrangement to
brokers is that they need not disclose yield spread premiums received
from lenders. See
Must Mortgage Brokers Reveal All Their Charges?
Net jumping
Using a broker's time and expertise to become informed and creditworthy,
then jumping to the internet to get the loan. See
How
About Borrowers' Tricks?
Niche
See Market niche.
Nichification
Proliferation in the number of loan, borrower and property
characteristics used by lenders to set mortgage prices and underwriting
requirements. Read
What Mortgage Market Niche Are You In?
No change scenario
On an ARM, the assumption that the value of the index to which the rate
is tied does not change from its initial level.
No-cost mortgage
A mortgage on which all settlement costs except per diem interest,
escrows, homeowners insurance and transfer taxes are paid by the lender
and/or the home seller. See
Does
"No-Cost" Mortgage Refinance Make Sense? and
No-Cost Mortgages.
NOHO
A person who lives paycheck to paycheck, and is therefore not cut
out to be a homeowner. See
Who Should Not Be a Homeowner?
Non-conforming mortgage
A mortgage that does not meet the purchase requirements of the two
Federal agencies, Fannie Mae and Freddie Mac, because it is too large or
for other reasons such as poor credit or inadequate documentation.
Non-Permanent resident alien
A non-citizen without a green card who is employed in the US. As
distinct from a permanent resident alien, who has a green card and who
lenders do not distinguish from US citizens. Non-permanent resident
aliens are subject to somewhat more restrictive qualification
requirements than US citizens.
No asset loan
A documentation requirement where the applicant's assets are not
disclosed. See
What Are Mortgage Documentation Requirements?
No Fee Mortgage Plus
A Bank of America program for home purchasers that eliminates all lender
fees except points, and all third party fees. See
No Fee Mortgage Plus.
No income loan
A documentation requirement where the applicant's income is not
disclosed. See
What Are Mortgage Documentation Requirements?
Non-warrantable condo
A condominium that does not meet meet lender requirements, see
Warrantable condos.
No-Surprise adjustable rate mortgage
An ARM with a preset graduated payment combined with variable term. See
The
No-Surprise Adjustable Rate Mortgage.
Nominal interest rate
A quoted interest rate that is not adjusted for either intra-year
compounding, or for inflation. A quoted rate of 6% on a mortgage, for
example, is nominal. Adjusted rates are called "effective" see
Effective rate.
No ratio loan
A documentation requirement where the applicant's income is disclosed
and verified but not used in qualifying the borrower. The conventional
maximum ratios of expense to income are not applied. See
What Are Mortgage Documentation Requirements?
Note
A document that evidences a debt and a promise to repay. A
mortgage loan transaction always includes both a
note evidencing the debt, and a mortgage evidencing the lien on the
property, usually in two documents.
Option ARM
An adjustable rate mortgage with flexible payment options, monthly
interest rate adjustments, and very low minimum payments in the early
years. They carry a risk of very large payments in later years. See
Option (Flexible Payment) ARMs.
Option fee
An upfront fee paid by the buyer under a lease-to-own purchase, usually
1% to 5% of the price, which is credited to the purchase price when the
option is exercised but is lost if it is not. See
Lease-to-Own House Purchases.
Origination fee
An upfront fee charged by some lenders, usually expressed as a percent
of the loan amount. It should be added to points
in determining the total fees charged by the lender that are expressed
as a percent of the loan amount. Unlike points, however, an origination
fee does not vary with the interest rate.
Overage
The difference between the price posted to its loan officers by a lender
or mortgage broker, and the price charged the borrower. See
What Is a Mortgage Overage?
Par Rate
The mortgage interest rate at zero points. In the secondary market, it
is the security rate that trades at a price of 100.
Partial prepayment
Making a payment larger than the scheduled payment as a way of paying
off the loan earlier. See Prepayment.
Paydown magic
Belief that there is a special way to pay down the balance of a home
mortgage faster, if you know the secret. See
Are Some Mortgage Prepayment Methods Better? and
Save With a Large Payment at Closing?
Payment adjustment interval
The period between payment changes on an ARM, which may or may not be
the same as the interest rate
adjustment period. Loans on which the payment adjusts less
frequently than the rate may generate
negative amortization.
Payment increase cap
The maximum percentage increase in the payment on an ARM at a payment
adjustment date. A 7.5% cap is common.
Payment decrease cap
The maximum percentage decrease in the payment on an ARM at a payment
adjustment date.
Payment period
The period over which the borrower is obliged to make payments. On most
mortgages, the payment period is a month, but on some it is biweekly.
Payment power
A program begun by Fannie Mae in 2003-4 that allows a borrower to skip
up to 2 mortgage payments in any 12 month period, and up to 10 over the
life of a loan. See Mortgage Payment Flexibility Under "Payment Power"
and How Would a Truly Flexible Mortgage Work?
Payment rate
The interest rate used to calculate the
mortgage payment, which is usually but not necessarily the
interest rate.
Payment shock
A very large increase in the payment on an ARM that may surprise the
borrower. Also used to refer to a large difference between the rent
being paid by a first-time home buyer, and the monthly housing expense
on the purchased home.
Payoff month
The month in which the loan balance is paid down to zero. It may or may
not be the term.
Per diem interest
Interest from the day of closing to the first day of the following
month. In some cases, however, the borrower can get a credit at closing
by making the first payment a month earlier. See
Mortgage Closing Date: Does
It Matter?
Periodic refinancing
An ill-advised scheme to tap into equity for cash advances through
periodic refinancings. See
Periodic
Mortgage Refinancing: Who Gets Conned?
Permanent buydown
Paying points as a way of reducing the interest
rate.
Pick a Payment ARM
Same as Flexible Payment ARM.
Piggyback mortgage
A combination of a first mortgage for 80% of property value, and a
second for 5%, 10%, 15%, or 20% of value. These combinations are
designated as 80/5/15, 80/10/10, 80/15/5, and 80/20/0, respectively.
Piggybacks are a substitute for mortgage insurance for borrowers who
cannot put 20% down. See
Piggyback Loans: Two Mortgages Cost Less than One?
Pipeline risk
The lender's risk that between the time a lock commitment is given to
the borrower and the time the loan is closed, interest rates will rise
and the lender will take a loss on selling the loan. See
Why Is Locking Unique to Mortgages?
PITI
Shorthand for principal, interest, taxes and insurance, which are the
components of the monthly housing expense.
PMI
Private mortgage insurance, as distinguished from insurance provided by
government under FHA and VA. See Mortgage
insurance.
Points
An upfront cash payment required by the lender as part of the charge for
the loan, expressed as a percent of the loan amount; e.g., "3 points"
means a charge equal to 3% of the loan balance. It is common today for
lenders to offer a wide range of rate/point combinations, especially on
fixed rate mortgages (FRMs),
including combinations with
negative points. On a negative point loan
the lender contributes cash toward meeting closing costs. Positive and
negative points are sometimes termed "discounts" and "premiums,"
respectively. See
Mortgage Points and Rebates.
Portable mortgage
A mortgage that can be moved from one property to another. These were
introduced in the US by E*TRADE Mortgage in 2003. See
Portable
Mortgages: A Useful Option?
Portfolio lender
A lender that holds the loans it originates in its portfolio rather than
selling them, as a temporary lender
does.
Posted prices
The mortgage prices delivered by lenders to loan officers and mortgage
brokers, as opposed to the final prices
paid by borrowers. The distinction is discussed in
Why Do Minorities Pay More For Mortgages?
Pre-approval
A commitment by a lender to make a mortgage loan to a specified
borrower, prior to the identification of a specific property. It is
designed to make it easier to shop for a house. Unlike a
pre-qualification, the lender checks the applicant's credit. See
Mortgage
Qualification Versus Mortgage Pre-Approval,
Mortgage Pre-Approval: What Is It Good For?
and
Mortgage Pre-Approvals In a Tight Market.
Predatory lending
A variety of unsavory lender practices designed to take advantage of
unwary borrowers. See the articles on
Predatory Mortgage Lending.
Prepayment
A payment made by the borrower over and above the
scheduled mortgage payment. If
the additional payment pays off the entire balance it is a "prepayment
in full"; otherwise, it is a "partial prepayment." For articles on
prepayment, see Mortgage Prepayment (Paying
Off Early).
Prepayment penalty
A charge imposed by the lender if the borrower pays off the loan early.
The charge is usually expressed as a percent of the loan balance at the
time of prepayment, or a specified number of months interest. Read
Mortgage Prepayment
Penalties.
Pre-qualification
Same as qualification.
Price-gouging
Charging interest rates and/or fees that are excessive relative to what
the same borrowers could have found had they shopped the market. Read
What
Is Predatory Lending? and
Is This a Good Definition of Predatory Lending?
Pricing Notch Point (PNP)
A loan amount at which any increase will increase the interest rate,
points or mortgage insurance premium. See
Shrewd Mortgage Borrowers Know Their PNPs, and
Financing Closing Costs Is Sometimes a Bad Idea.
Primary residence
The house in which the borrower will live most of the time, as distinct
from a second home or an investor property that will be rented. See
What Is a
"Primary" Residence?
Principal
The portion of the monthly payment that is used to reduce the loan
balance. See Amortization.
Principal limit
The present value of a house, given the elderly owner's right to live
there until death or voluntary move-out, under the FHA reverse mortgage
program. See
Which Reverse Mortgage Plan Do I Choose?
Private mortgage insurance
Mortgage insurance provided by private mortgage insurance companies, or
PMIs. See Mortgage Insurance.
Processing
Compiling and maintaining the file of information about a mortgage
transaction, including the credit report, appraisal, verification of
employment and assets, and so on. The processing file is handed off to
underwriting for the loan decision.
Property flipping
Successive sham home sales at progressively higher prices as part of a
scheme to defraud FHA. See
What
Is Predatory Lending?
Purchase money mortgage
A mortgage offered by a house buyer as partial payment for the house.
From the seller's point of view, it is
seller financing.
Qualification
The process of determining whether a prospective borrower has the
ability, meaning sufficient assets and income, to repay a loan.
Qualification is sometimes referred to as "pre-qualification" because it
is subject to verification of the information provided by the applicant.
Qualification is short of approval because it
does not take account of the credit history of the borrower. Qualified
borrowers may ultimately be turned down because, while they have
demonstrated the capacity to repay, a poor credit history suggests that
they may be unwilling to pay. For articles on qualification, see
Qualifying For a Mortgage.
Also see
Mortgage Concepts Home Buyers Should Know.
Qualification rate
The interest rate used in calculating the initial mortgage payment in
qualifying a borrower. The rate used in this calculation may or may not
be the initial rate on the mortgage. On ARMs, for example, the borrower
may be qualified at the fully
indexed rate rather than the
initial rate.
Qualification ratios
Requirements stipulated by the lender that the ratio of housing expense
to borrower income, and housing expense plus other debt service to
borrower income, cannot exceed specified maximums, e.g., 28% and 35%.
These may reflect the maximums specified by Fannie Mae and Freddie Mac;
they may also vary with the loan-value ratio and other factors. See
Qualifying For a Mortgage.
Qualification requirements
Standards imposed by lenders as conditions for granting loans, including
maximum ratios of housing expense and total expense to income, maximum
loan amounts, maximum loan-to-value ratios, and so on. Less
comprehensive than underwriting
requirements, which take account of the borrower's credit record.
See
Qualifying For a Mortgage.
Rate
See Interest Rate.
Rate caps
Limitations on the size of rate adjustments on an ARM, often expressed
in a/b/c fashion: "a" is the maximum rate change at the first rate
adjustment, "b" is the maximum at all subsequent adjustments, and "c" is
the maximum increase over the initial rate during the life of the
contract.
Rate/point breakeven
The period you must retain a mortgage in order for it to be profitable
to pay points to reduce the rate. See
The Break-Even Period For Paying Points on a Mortgage
Rate/point options
All the combinations of interest rate and points
that are offered on a particular loan program. On an ARM, rates and
points may also vary with the margin and
interest rate ceiling.
Rate protection
Protection for a borrower against the danger that rates will rise
between the time the borrower applies for a loan and the time the loan
closes. This protection can take the form of a "lock"
where the rate and points are frozen at their initial levels until the
loan closes; or a "float-down" where the rates
and points cannot rise from their initial levels but they can decline if
market rates decline. In either case, the protection only runs for a
specified period. If the loan is not closed within that period, the
protection expires and the borrower will either have to accept the terms
quoted by the lender on new loans at that time, or start the shopping
process anew. See Locking the Price of a Mortgage
Loan.
Rate sheets
Tables of interest rates and points that lenders distribute daily to
their loan officer employees or mortgage brokers. See
Questions About Rate Sheets.
Rebate
Same as Negative points.
Recast payment
Raising or lowering the mortgage payment to the
fully amortizing payment.
Periodic payment-increase recasts are sometimes used on ARMs in lieu of or in addition to
negative amortization caps.
Payment reduction recasts arise when borrowers have made extra payments
and need to have their payment reduced. See
What Is a
Voluntary Mortgage Recast and Why Aren't There More of Them?
Referral fees
Payments made by service providers to other parties as quid pro quo for
referring customers. For example, a title company provides something of
value to a Realtor or lender for sending a customer who requires title
insurance. See
Questions About Referral Fees.
Referral power
The ability to direct a client to a specific vendor. Referral power is
based on information and authority of the referrer, and ignorance of the
client. See
Questions About Referral Fees.
Referral site
A mortgage web site that introduces potential borrowers to participating
lenders, in some cases to multiple hundreds of them. The principal lure
to the consumer is information on generic
prices posted by the lenders. See
Are Mortgage Referral Sites on the Internet Useful?
Refinance
Paying off an old loan while simultaneously taking a new one. This may
be done to reduce borrowing costs under conditions where the borrower
can obtain a new loan at an interest rate below the rate on the existing
loan. It may be done to raise cash, as an alternative to a home equity
loan. Or it may be done to reduce the monthly payment. For articles on
refinancing, see Mortgage Refinancing.
Rent premium
An increment above the rent paid on a lease-to-own home purchase, which
is credited to the purchase price if the purchase option is exercised,
but which is lost if the option is not exercised. See
Lease-to-Own House Purchases.
Required cash
The total cash required of the home buyer to close the transaction,
including down payment, points and fixed dollar charges paid to the
lender, any portion of the mortgage insurance premium that is paid
up-front, and other settlement charges associated with the transaction
such as title insurance, taxes, etc. The total required cash is shown on
the Good Faith Estimate of Settlement
that every borrower receives.
RESPA
The Real Estate Settlement Procedures Act, a Federal consumer protection
statute first enacted in 1974. RESPA was designed to protect home
purchasers and owners shopping for settlement services by mandating
certain disclosures, and prohibiting referral fees and kickbacks.
Retail lender
A lender who offers mortgage loans directly to the public. As distinct
from a wholesale lender who operates
through
mortgage brokers and
correspondents.
Reverse mortgage
A loan to an elderly home owner on which the balance rises over time,
and which is not repaid until the owner dies, sells the house, or moves
out permanently. See Reverse Mortgages.
Right of rescission
The right of refinancing borrowers, under the Truth in Lending Act, to
cancel the deal at no cost to themselves within 3 days of closing. See
Rescinding a Mortgage Refinance.
Scenario analysis
Determining how the interest rate and payment on an ARM will change in
response to specified future changes in market interest rates, called
"scenarios". See
Choosing Between
Fixed and Adjustable Rate Mortgages.
Scheduled mortgage payment
The amount the borrower is obliged to pay each period, including
interest, principal, and mortgage insurance, under the terms of the
mortgage contract. Paying less than the scheduled amount results in
delinquency. On most mortgages, the scheduled payment is the
fully amortizing payment
throughout the life of the loan. On some mortgages, however, the
scheduled payment for the first 5 or 10 years is the interest payment
(see Interest Only Mortgages).
And on option (flexible payment) ARMs, it can be the "minimum" payment
as defined by the program (see Option
(Flexible Payment) ARMs).
Second mortgage
A loan with a second-priority claim against a property in the event that
the borrower defaults. The lender who holds the second mortgage gets
paid only after the lender holding the first mortgage is paid. For
articles on second mortgages, also known as "home equity loans," see
Second Mortgages.
Secure option ARM
An option ARM on which the initial rate holds for 5 years rather than
one month. See
A More Transparent Option ARM.
Secondary markets
Markets in which mortgages or mortgage-backed securities are bought and
sold. See Will My
Mortgage Loan Be Sold?, and
Do Secondary Mortgage Markets Help Borrowers?
Self-employed borrower
A borrower who must document income using tax returns rather than
information provided by an employer. This complicates the process
somewhat. See
Difficult For Self-employed To Qualify For a Mortgage?
Seller contribution
A contribution to a borrower's down payment or settlement costs made by
a home seller, as an alternative to a price reduction. See
Are House Seller Contributions Kosher?
and
Seller financing
Provision of a mortgage by the seller of a house, often a second
mortgage, as a condition of the sale.
Servicing
Administering loans between the time of disbursement and the time the
loan is fully paid off. This includes collecting monthly payments from
the borrower, maintaining records of loan progress, assuring payments of
taxes and insurance, and pursuing delinquent accounts. See articles on
Mortgage Servicing Problems.
Servicing agent
The party who services a loan, who may or may not be the lender who
originated it. See
Is There Recourse Against Bad Mortgage Servicing?
Servicing release premium
A payment made by the purchaser of a mortgage to the seller for the
release of the servicing on the mortgage. It has no direct relevance to
borrowers.
Servicing transfer
When one servicing agent is replaced by another. Read
When Your Mortgage Lender Goes Bankrupt.
Settlement costs
Costs that the borrower must pay at the time of closing, in addition to
the down payment. For articles on settlement costs, see
Settlement Costs.
Shared appreciation mortgage
A mortgage on which the borrower gives up a share in future price
appreciation in exchange for a lower interest rate and/or interest
deferral. Read
Is This Shared Appreciation Mortgage a Good Deal?
Shopping site
A type of multi-lender web site that offers borrowers the capacity to
shop among multiple competing lenders. See
Recent Developments in Mortgage Web Sites.
Short sale
An agreement between a mortgage borrower in distress and the lender that
allows the borrower to sell the house and remit the proceeds to the
lender. It is an alternative to foreclosure, or a deed in lieu of
foreclosure. See Options When Equity in Your Home is Gone
Silent second
A second mortgage used to deceive the first mortgage lender, or to
provide preferential (subsidized) terms to qualified home buyers. See
Silent Second Mortgages.
Simple interest mortgage
A mortgage on which interest is calculated daily based on the balance at
the time of the last payment. The daily interest charge within the month
is constant -- interest is not charged on the interest charges of prior
days. See
What Are Simple Interest Mortgages?
Simple interest biweekly mortgage
A biweekly mortgage on which the biweekly payment is applied to the
balance every two weeks, rather than held in an account as on a
conventional biweekly. See
Alternative Early Payoff Plans. Also, The Simple Interest Biweekly
Scam.
Single file mortgage insurance
A type of mortgage insurance on which the lender pays the premium and
prices it in the interest rate. See
Single File Mortgage Insurance: An Advance?
Single-lender web site
A web site of an individual lender or mortgage broker who wants users to
select a loan from them. They are easy to identify because the name of
the lender or broker will be prominently displayed on the screens.
Single-lender sites account for the majority of all mortgage web sites.
See
Single-Lender Mortgage Web Sites.
Stated assets
A documentation requirement where the borrower discloses her assets but
they are not verified by the lender. See
What Are Mortgage Documentation Requirements?
Stated income
A documentation requirement where the lender verifies the source of the
income but not the amount. See
What Are Mortgage Documentation Requirements? and
Stated Income Loans: Lie to Get a Better Rate?
Strategic default
Default by a mortgage borrower who has the capacity to
make the payments on his mortgage but elects not to because of negative
equity -- the loan balance is substantially larger than the house value.
See
Strategic Defaults: Can We Keep Them In Check?
Streamlined refinancing
Refinancing that omits some of the standard risk control measures, and
is therefore quicker and less costly.
Subordinate financing
A second mortgage on the property which is not paid off when a new loan
is taken out. The second mortgage lender must allow subordination of the
second to the new first mortgage.
Subordination policy
The policy of a second mortgage lender for allowing a borrower to
refinance the first mortgage while leaving the second in place. See
Subordination Policy of Second Mortgage Lenders
Sub-prime borrower
A borrower with poor credit, who can borrow only from sub-prime lenders
who specialize in dealing with borrowers who have poor credit. Such
borrowers pay more than prime borrowers, and are sometimes taken
advantage of. Not all borrowers who deal with sub-prime lenders,
however, are sub-prime borrowers. Some could obtain loans from
mainstream lenders if they properly shop the market. Read
Should Mortgage Borrowers With Poor Credit Shop?
Sub-prime lender
A lender who specializes in lending to sub-prime borrowers. See
What Is a Sub-Prime Mortgage Lender?
Sub-prime market
The network of sub-prime lenders, mortgage brokers, warehouse lenders
and investment bankers who make possible the delivery of loans to
sub-prime borrowers. See
Upheaval in the Sub-Prime Market.
Swing loan
Same as Bridge loan.
Tangible net benefit
The net gain to a borrower from a refinancing, which some proposed
legislation would make the responsibility of lenders. See
Are Lenders Responsible For a "Tangible Net Benefit?"
Tax service fee
A fee charged by some lenders at closing to cover the cost of paying
taxes on the borrower's property when they come due, or (if the borrower
is paying the taxes), verifying that the payment has been made.
Teaser rate
The initial interest rate on an ARM, when it is below the
fully indexed rate.
Temporary buydown
A reduction in the mortgage payment in the early years of the loan in
exchange for an upfront cash payment provided by the home buyer, the
seller, or both. See
What Is a Temporary Buydown?
Temporary lender
A lender that sells the loans it originates, as opposed to a
portfolio lender who holds them.
Tenure annuity
An option available to borrowers under a Home Equity Conversion
Mortgage to draw a fixed amount monthly for as long as they remain in
their house. See
HECMs and Fixed-Payment Annuities.
Term
The period used to calculate the monthly mortgage payment. The term is
usually but not always the same as the maturity.
On a 7-year balloon loan, for example, the maturity is 7 years but the
term in most cases is 30 years. For articles on the subject, see
Mortgage Term.
Title insurance
Insurance against loss arising from problems connected to the title to
property. See
Questions About Title Insurance.
Tontine
An investment scheme where
each participant pays a specified sum into a fund but the shares of
those who die are divided among the survivors. A tontine could be a
useful option for those taking out a HECM reverse mortgage. See
The Tontine: A 17th
Century Solution to a 21st Century Problem.
Total expense ratio
The ratio of housing expense plus current debt service payments to
borrower income, which is used (along with the
housing expense ratio and other
factors) in qualifying borrowers. See
qualification requirements.
Total housing expense
Housing expense plus Monthly debt service.
Total interest payments
The sum of all interest payments to date or over the life of the loan.
This is an incomplete measure of the cost of credit to the borrower
because it does not include up-front cash payments, and it is not
adjusted for the time value of money. See
Effective rate.
Transaction-Based Reserves
Mandatory loss reserves based on the riskiness of individual
transactions. An example is the contingency reserve requirements
applicable to private mortgage insurers. See
Preventing Excessive Risk-Taking by TBTF Firms.
Truth in Lending (TIL)
The Federal law that specifies the information that must be provided to
borrowers on different types of loans. Also, the form used to disclose
this information. See
Does Truth in Lending Help?
Underage
Fees collected from a borrower by a loan officer that are lower than the
target fees specified by the lender or mortgage broker who employs the
loan officer. See
What Is a Mortgage Overage?
Underwriting
The process of examining all the data about a borrower's property and
transaction to determine whether the mortgage applied for by the
borrower should be issued. The person who does this is called an
underwriter.
Underwriting requirements
The standards imposed by lenders in determining whether a borrower
qualifies for a loan. These standards are more comprehensive than
qualification requirements in that they include an evaluation of the
borrower’s creditworthiness.
Upfront Mortgage Broker (UMB)
A mortgage broker who charges a set fee for services provided,
established in writing at the outset of the transaction, and acts as the
borrower's agent in shopping for the best deal. For articles on UMBs,
see Upfront Mortgage Brokers.
UMBs are listed at
List of Upfront Mortgage
Brokers.
Upfront Mortgage Lender
A lender offering loans on the internet who provides mortgage shoppers
with the information they need to make an informed decision before
applying for a mortgage; and guarantees them fair treatment during the
period after they apply through to closing. See
Upfront Mortgage Lenders.
VA mortgage
A mortgage with no down payment requirement, available only to
ex-servicemen and women as well as those on active duty, on which the
lender is insured against loss by the Veterans Administration. See
Are VA Mortgage Loans a Good Deal?
Waive escrows
Authorization by the lender for the borrower to pay taxes and insurance
directly. This is in contrast to the standard procedure where the lender
adds a charge to the monthly mortgage payment that is deposited in an
escrow account, from which the lender pays the borrower’s taxes and
insurance when they are due. On some loans lenders will not waive
escrows, and on loans where waiver is permitted lenders are likely
either to charge for it in the form of a small increase in points, or
restrict it to borrowers making a large down payment. See
How Can I Avoid
Escrows on My Mortgage?
Warehouse lender
A firm that lends to temporary lenders against the collateral of closed
mortgage loans prior to the sale of the loans in the secondary market.
Warehouse lenders can call the loans if the loans "in the warehouse"
drop in value. See
Upheaval in the Sub-Prime Market.
Warrantable condos
A condominium project with features that lenders view as protections
against hazards that would threaten the value of condo units. These
features include the project being completed with most units sold rather
than rented, no one party owning more than 10% of them, adequate
insurance coverage of common structures, and an ownership association
independent of the developer.
Wholesale lender
A lender who provides loans through mortgage
brokers or
correspondents. The mortgage broker or
correspondent initiates the transaction, takes the borrower's
application, and processes the loan. As distinct from a
Retail lender.
Wholesale mortgage prices
The interest rate and points quoted by wholesale lenders to mortgage
brokers and correspondent lenders. See
Wholesale Mortgage Prices.
Workout assumption
The assumption of a mortgage, with permission of the lender, from a
borrower unable to continue making the payments. See
Mortgage Payment Problems: What If You Can't Pay?
Worst case scenario
The assumption that the interest rate on an ARM rises to the maximum
extent permitted in the note. On a one-month ARM with no rate adjustment
caps, for example, the rate would jump to the maximum rate stipulated in
the note in month 2.
Wrap-around mortgage
A mortgage on a property that already has a mortgage, where the new
lender assumes the payment obligation on the old mortgage. Wrap-around
mortgages arise when the current market rate is above the rate on the
existing mortgage, and home sellers are frequently the lender. A
due-on-sale clause prevents a
wrap-around mortgage in connection with sale of a property except by
violating the clause. See What Is a Wrap-Around Mortgage?
Yield-Spread premium.
Same as Negative points.
Yield-Spread premium abuse
The practice by mortgage brokers of pocketing a rebate from the lender
for delivering a high-rate loan, without the knowledge of the borrower.
See
Eliminating Yield Spread Premium Abuse.
Yield Curve
A graph that shows, at any given time, how the yield varies with the
period to maturity. Usually, the curve slopes upwards but occasionally
it slopes down or is flat. A flat yield curve means that yields on
long-term bonds are not much higher than those on short-term notes. See
With a Flat Yield Curve, Which Mortgages Are Best?
1 Month Option ARM
Same as Flexible Payment ARM.
3/2 Downpayment
Programs offered by some lenders under which a borrower who is able to
secure a grant or gift equal to 2% of the down
payment will only have to provide a 3% down payment from their own
funds. This can be a good deal for a cash-short borrower.
80/10/10, 80/15/5, and 80/20/0 loan plans
Combination first mortgages for 80% of sale price or value and second
mortgages for 10%, 15%, or 20%. The purpose is to avoid mortgage
insurance, which is required on first mortgages that exceed 80% of
value. See
Piggy Back Loans: Two Mortgages Cost Less than One?
12 MTA
An interest rate index that is used on some ARMs. It is the average of
the most recent 12 monthly values of the Treasury One-Year Constant
Maturity series. See
Which Adjustable
Rate Mortgage Index Is the Best?
12 MTA Pay Option ARM
Same as Flexible Payment ARM.
3.95% ARM
A monthly ARM on which the initial rate is 3.95%. See
Is a
3.95% Adjustable Rate Mortgage a Good Deal?
100% loan
A loan with no down payment. The loan amount equals the property value.
See
100% Mortgage Loans: Blessing or Curse?
125% loan
A loan for 125% of property value.
40-Year Mortgage
A mortgage with a term of 40 years. See
40-Year Loan or
Modify the 30 and 15?