a
acceleration clause: A provision in a mortgage that gives the lender the right to demand payment of the entire principal
balanceif a monthly payment is missed.
acceptance: An offeree's consent to enter into a contract and be bound by the terms of the offer.
additional principal payment: A payment by a borrower of more than the scheduled principal amount due in order to
reduce theremaining balance on the loan.
adjustable-rate mortgage (ARM): A mortgage that permits the lender to adjust the mortgage's interest rate periodically
on thebasis of changes in a specified index. Interest rates may move up or down, as market conditions change.
adjusted basis: The original cost of a property plus the value of any capital expenditures for improvements to the
property minusany depreciation taken.
adjustment date: The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
adjustment period: The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
administrator: A person appointed by a probate court to administer the estate of a person who died intestate.
affordability analysis: A detailed analysis of your ability to afford the purchase of a home. An affordability analysis
takes into consideration your income, liabilities and available funds, along with the type of mortgage you plan to use, the
area where you want to purchase a home and the closing costs that you might expect to pay.
amenity: A feature of real property that enhances its attractiveness and increases the occupant?s or user?s satisfaction
although the feature is not essential to the property?s use. Natural amenities include a pleasant or desirable location near
water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings
and other recreational facilities.
amortization: The gradual repayment of a mortgage loan by installments.
amortization schedule: A timetable for payment of a mortgage loan. An amortization schedule shows the amount of
each payment applied to interest and principal and shows the remaining balance after each payment is made.
amortization term: The amount of time required to amortize the mortgage loan. The amortization term is expressed
as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
amortize: To repay a mortgage with regular payments that cover both principal and interest.
annual mortgagor statement: A report sent to the mortgagor (the borrower) each year. The report shows how much was
paid in
taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
annual percentage rate (APR): The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage
insurance
and loan origination fee (points).
annuity: An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
application: A form used to apply for a mortgage loan and to record pertinent information concerning a prospective
mortgagor and the proposed security. Lenders use the information on the loan application to evaluate whether or not they can
give the loan, and if so, the amount of money they can lend.
appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with
home inspection.
appraised value: An opinion of a property's fair market value, based on an appraiser's knowledge, experience and
analysis of the property.
appraiser: A person qualified by education, training and experience to estimate the value of real property and personal
property.
appreciation: An increase in the value of a property due to changes in market conditions or other causes. The opposite
of depreciation.
assessed value: The valuation placed on property by a public tax assessor for purposes of taxation.
assessment: The process of placing a value on property for the strict purpose of taxation. May also refer to a levy
against property for a special purpose, such as a sewer assessment. assessment rolls: The public record of taxable property.
assessor: A public official who establishes the value of a property for taxation purposes.
asset: Anything of monetary value that is owned by a person. Assets include real property, personal property and
enforceable claims against others (including bank accounts, stocks, mutual funds and so on).
assignment: The transfer of a mortgage from one person to another.
assumable mortgage: A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
assumption: The transfer of the seller?s existing mortgage to the buyer. See assumable mortgage.
assumption clause: A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage
from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
assumption fee: The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption
of an existing mortgage.
attorney-in-fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of
the power.
b
balance sheet: A financial statement that shows assets, liabilities and net worth as of a specific date.
balloon mortgage: A mortgage that has level monthly payments that will amortize it over a stated term but that provides
for a lump sum payment to be due at the end of an earlier specified term. The principal and interest on the loan are amortized
over a longer period than the actual term of the mortgage.
balloon payment: The final lump sum payment that is made at the maturity date of a balloon mortgage.
bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts
after the surrender of all assets to a court-appointed trustee.
bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the
debts by transferring his or her assets to a trustee.
before-tax income: Income before taxes are deducted.
beneficiary: The person designated to receive the income from a trust, estate or a deed of trust.
bequeath: To transfer personal property through a will.
betterment: An improvement that increases property value as distinguished from repairs or replacements that simply
maintain value.
bill of sale: A written document that transfers title to personal property.
binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers
to purchase real estate.
biweekly payment mortgage: A mortgage that requires payments to reduce the debt every two weeks (instead of the
standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment
that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower?s
bank account. The result for the borrower is a substantial savings in interest.
blanket insurance policy: A single policy that covers more than one piece of property (or more than one person).
blanket mortgage: The mortgage that is secured by a cooperative project, as opposed to the share loans on individual
units within the project.
bona fide: In good faith, without fraud.
bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation.
A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
breach: A violation of any legal obligation.
bridge loan: A form of second trust that is collateralized by the borrower's present home (which is usually for
sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known
as "swing loan."
broker: A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between
them.
budget: A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines
for managing future investments and expenses.
budget category: A category of income or expense data that you can use in a budget. You can also define your own
budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary"
is a typical income category.
building code: Local regulations that control design, construction and materials used in construction. Building
codes are based on safety and health standards.
buydown account: An account in which funds are held so that they can be applied as part of the monthly mortgage
payment as each payment comes due during the period that an interest rate buydown plan is in effect.
buydown mortgage: A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to
reduce a borrower?s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate
over the entire life of a mortgage.
c
call option: A provision in the mortgage that gives the mortgagee (the lender) the right to call the mortgage due
and payable at the end of a specified period for whatever reason.
cap: A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments
may increase or decrease. See lifetime payment cap, lifetime rate cap, periodic payment cap and periodic rate cap.
capital: (1) Money used to create income, either as an investment in a business or an income property. (2) The money
or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person
or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.
capital expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.
capital improvement: Any structure or component erected as a permanent improvement to real property that adds to
its value and useful life.
cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the
total of the money needed to repay the existing first mortgage, closing costs, points and the amount required to satisfy any
outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional
cash that can be used for any purpose.
certificate of deposit: A document written by a bank or other financial institution that is evidence of a deposit,
with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.
See adjustable rate mortgage (ARM).
certificate of deposit index: An index that is used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates
of deposit. See adjustable-rate mortgage.
Certificate of Eligibility: A document issued by the federal government certifying a veteran's eligibility for a
Department of Veterans Affairs (VA) mortgage.
Certificate of Reasonable Value (CRV): A document issued by the Department of Veterans Affairs (VA) that establishes
the maximum value and loan amount for a VA mortgage.
certificate of title: A statement provided by an abstract company, title company, or attorney stating that the title
to real estate is legally held by the current owner.
chain of title: The history of all of the documents that transfer title to a parcel of real property, starting with
the earliest existing document and ending with the most recent.
change frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage
(ARM).
chattel: Another name for personal property.
clear title: A title that is free of liens or legal questions as to ownership of the property.
closing: A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying
closing costs. Also called "settlement." At this meeting, ownership of the property is transferred from the seller to the
buyer.
closing cost item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product.
Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost
items are included as numbered items on the HUD-1 statement.
closing costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring
ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in
escrow and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of
the country; lenders or REALTORS® often provide estimates of closing costs to prospective homebuyers.
closing statement: See HUD-1 statement.
cloud on title: Any conditions revealed by a title search that adversely affect the title to real estate. Usually
clouds on title cannot be removed except by a quitclaim deed, release, or court action.
coinsurance: A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship
between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the
loss.
coinsurance clause: A provision in a hazard insurance policy that states the amount of coverage that must be maintained
-- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.
collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing
the asset if the loan is not repaid according to the terms of the loan contract.
collection: The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed
with foreclosure when necessary.
co-maker: A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the
loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
commission: The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission
is generally a percentage of the price of the property or loan.
commitment letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.
Also known as a "loan commitment."
common area assessments: Levies against individual unit owners in a condominium or planned unit development (PUD)
project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve
or operate the common areas of the project.
common areas: Those portions of a building, land and amenities owned (or managed) by a planned unit development
(PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used
by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming
pools, tennis courts and other recreational facilities, as well as common corridors of buildings, parking areas, means of
ingress and egress, etc.
common law: An unwritten body of law based on general custom in England and used to an extent in the United States.
Community Land Trust Mortgage Option: An alternative financing option that enables low- and moderate-income home
buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property
stands.
community property: In some western and southwestern states, a form of ownership under which property acquired during
a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
Community Seconds®: An alternative financing option for low- and moderate-income households under which an investor
purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state,
county or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and
carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year
the buyer remains in the home.
comparables: An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process.
Comparables are properties like the property under consideration; they have reasonably the same size, location and amenities
and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
compound interest: Interest paid on the original principal balance and on the accrued and unpaid interest.
condemnation: The determination that a building is not fit for use or is dangerous and must be destroyed; the taking
of private property for a public purpose through an exercise of the right of eminent domain.
condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest
in the common areas of the project and sometimes the exclusive use of certain limited common areas.
condominium conversion: Changing the ownership of an existing building (usually a rental project) to the condominium
form of ownership.
condominium hotel: A condominium project that has rental or registration desks, short-term occupancy, food and telephone
services and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.
construction loan: A short-term, interim loan for financing the cost of construction. The lender makes payments
to the builder at periodic intervals as the work progresses.
contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often
include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection
report from a qualified home inspector.
contract: An oral or written agreement to do or not to do a certain thing.
conventional mortgage: A mortgage that is not insured or guaranteed by the federal government. Contrast with government
mortgage.
convertibility clause: A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the
ARM to a fixed-rate mortgage at specified timeframes after loan origination.
convertible ARM: An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified
conditions.
cooperative (co-op): A type of multiple ownership in which the residents of a multiunit housing complex own shares
in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
cooperative corporation: A business trust entity that holds title to a cooperative project and grants occupancy
rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.
cooperative mortgages: Mortgages related to a cooperative project. This usually refers to the multifamily mortgage
covering the entire project but occasionally describes the share loans on the individual units.
cooperative project: A residential or mixed-use building wherein a corporation or trust holds title to the property
and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary
lease as evidence of title.
corporate relocation: Arrangements under which an employer moves an employee to another area as part of the employer's
normal course of business or under which it transfers a substantial part or all of its operations and employees to another
area because it is relocating its headquarters or expanding its office
capacity. cost of funds index (COFI): An index that is used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings and advances of the 11th District members
of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).
covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender
at a later date.
credit history: A record of an individual's open and fully repaid debts. A credit history helps a lender to determine
whether a potential borrower has a history of repaying debts in a timely manner.
credit life insurance: A type of insurance often bought by mortgagors because it will pay off the mortgage debt
if the mortgagor dies while the policy is in force.
creditor: A person to whom money is owed.
credit report: A report of an individual's credit history prepared by a credit bureau and used by a lender in determining
a loan applicant's creditworthiness.
credit reporting agency (or bureau): An organization that prepares reports that are used by lenders to determine
a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from
other sources.
credit repository: An organization that gathers, records, updates and stores financial and public records information
about the payment records of individuals who are being considered for credit.
d
debt: An amount owed to another. See installment loan and revolving liability.
deed: The legal document conveying title to a property.
deed-in-lieu: A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called
a "voluntary conveyance."
deed of trust: The document used in some states instead of a mortgage; title is conveyed to a trustee.
default: Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
delinquency: Failure to make mortgage payments when mortgage payments are due.
deposit: A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance
of funds in the processing of a loan. See earnest money deposit.
depreciation: A decline in the value of property; the opposite of appreciation. discount
points See point.
dower: The rights of a widow in the property of her husband at his death.
down payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with
a mortgage.
due-on-sale provision: A provision in a mortgage that allows the lender to demand repayment in full if the borrower
sells the property that serves as security for the mortgage.
due-on-transfer provision: This terminology is usually used for second mortgages. See due-on-sale provision.
e
earnest money deposit: A deposit made by the potential home buyer to show that he or she is serious about buying
the house.
easement: A right of way giving persons other than the owner access to or over a property.
effective age: An appraiser?s estimate of the physical condition of a building. The actual age of a building may
be shorter or longer than its effective age.
effective gross income: Normal annual income including overtime that is regular or guaranteed. The income may be
from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and
stable.
eminent domain: The right of a government to take private property for public use upon payment of its fair market
value. Eminent domain is the basis for condemnation proceedings.
employer-assisted housing: A special housing initiative that offers several different ways for employers to work
with local lenders to develop plans to assist their employees in purchasing homes.
encroachment: An improvement that intrudes illegally on another?s property.
encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements
or restrictions.
endorser: A person who signs ownership interest over to another party. Contrast with co-maker.
Equal Credit Opportunity Act (ECOA): A federal law that requires lenders and other creditors to make credit equally
available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of
income from public assistance programs.
equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of
the property and the amount still owed on its mortgage.
escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment
of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they
become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale
of real estate.
escrow account: The account in which a mortgage servicer holds the borrower?s escrow payments prior to paying property
expenses.
escrow analysis: The periodic examination of escrow accounts to determine if current monthly deposits will provide
sufficient funds to pay taxes, insurance and other bills when due.
escrow collections: Funds collected by the servicer and set aside in an escrow account to pay the borrower?s property
taxes, mortgage insurance and hazard insurance. escrow disbursements The use of escrow funds to pay real estate taxes, hazard
insurance, mortgage insurance and other property expenses as they become due.
escrow payment: The portion of a mortgagor?s monthly payment that is held by the servicer to pay for taxes, hazard
insurance, mortgage insurance, lease payments and other items as they become due. Known as "impounds" or "reserves" in some
states.
estate: The ownership interest of an individual in real property. The sum total of all the real property and personal
property owned by an individual at time of death.
eviction: The lawful expulsion of an occupant from real property.
examination of title: The report on the title of a property from the public records or an abstract of the title.
exclusive listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property
for a specified time, but reserving the owner?s right to sell the property alone without the payment of a commission.
executor: A person named in a will to administer an estate. The court will appoint an administrator if no executor
is named. "Executrix" is the feminine form.
f
Fair Credit Reporting Act: A consumer protection law that regulates the disclosure of consumer credit reports by
consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
fair market value: The highest price that a buyer, willing but not compelled to buy, would pay and the lowest a
seller, willing but not compelled to sell, would accept.
Fannie Mae: A New York Stock Exchange company and the largest non-bank financial services company in the world.
It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages.
Fannie Mae Properties: Fannie Mae owns, manages and has available for sale, single-family detached homes, two- to
four-unit properties, condominiums and townhouses in a variety of neighborhoods. The number, type and sales price may vary
substantially. The homes vary in age and may require repairs. Fannie Mae homes are sold through local real estate brokers
whose contact information is provided in the Fannie Mae Properties for Sale search results on homepath.com.
Fannie Mae's Community Home Buyer's Program(SM): An income-based community lending model, under which mortgage insurers
and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease
the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase
home-buyer education sessions.
Fannie 97®: A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with
a term between 15 and 30 years. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and is designed to expand
homeownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home-buyer education session
to qualify for a Fannie 97 mortgage.
Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its
main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct housing.
fee simple: The greatest possible interest a person can have in real estate.
fee simple estate: An unconditional, unlimited estate of inheritance that represents the greatest estate and most
extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project,
the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an
owner in common with respect to the land and other common portions of the property.
FHA coinsured mortgage: A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and
the originating lender share the risk of loss in the event of the mortgagor's default.
FHA mortgage: A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government
mortgage.
finder's fee: A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
firm commitment: A lender?s agreement to make a loan to a specific borrower on a specific property.
first mortgage: A mortgage that is the primary lien against a property.
fixed installment: The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal
and interest.
fixed-rate mortgage (FRM): A mortgage in which the interest rate does not change during the entire term of the loan.
fixture: Personal property that becomes real property when attached in a permanent manner to real estate.
flood insurance: Insurance that compensates for physical property damage resulting from flooding. It is required
for properties located in federally designated flood areas.
foreclosure: The legal process by which a borrower in default under a mortgage is deprived of his or her interest
in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the
sale being applied to the mortgage debt.
forfeiture: The loss of money, property, rights or privileges due to a breach of legal obligation.
fully amortized ARM: An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the
remaining balance, at the interest accrual rate, over the amortization term.
g
government mortgage: A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the
Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortage.
Government National Mortgage Association: A government-owned corporation within the U.S. Department of Housing and
Urban Development (HUD). Created by Congress on Sept. 1, 1968, GNMA assumed responsibility for the special assistance loan
program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
grantee: The person to whom an interest in real property is conveyed.
grantor: The person conveying an interest in real property.
ground rent: The amount of money that is paid for the use of land when title to a property is held as a leasehold
estate rather than as a fee simple estate.
group home: A single-family residential structure designed or adapted for occupancy by unrelated developmentally
disabled persons. The structure provides long-term housing and support services that are residential in nature.
growing-equity mortgage (GEM): A fixed-rate mortgage that provides scheduled payment increases over an established
period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of
the mortgage.
guarantee mortgage: A mortgage that is guaranteed by a third party.
guaranteed loan: Also known as a government mortgage.
h
hazard insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism,
or other hazards.
Home Equity Conversion Mortgage (HECM): A special type of mortgage that enables older home owners to convert the
equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike
traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In
addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse
mortgage.
home equity line of credit: A mortgage loan, which is usually in a subordinate position, that allows the borrower
to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified
percentage of the borrower's equity in a property.
home inspection: A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory
home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
HomeKeeper(SM): Fannie Mae's adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow
against the value of their homes and receive the proceeds according to the payment option they select. The amount available
is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns
his or her own home free and clear or has very low mortgage debt is eligible.
homeowners' association: A nonprofit association that manages the common areas of a planned unit development (PUD)
or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it
holds title to the common elements.
homeowner's insurance: An insurance policy that combines personal liability insurance and hazard insurance coverage
for a dwelling and its contents.
homeowner's warranty (HOW): A type of insurance that covers repairs to specified parts of a house for a specific
period of time. It is provided by the builder or property seller as a condition of the sale.
HomeStyle® Mortgage Loan: A mortgage that enables eligible borrowers to obtain financing to remodel, repair and
upgrade their existing homes or homes that they are purchasing. See also HomeStyle Standard Mortgage, HomeStyle Remodeler,
HomeStyle Community Mortgage and HomeStyle Consumer Energy Loan.
housing expense ratio: The percentage of gross monthly income that goes toward paying housing expenses.
HUD median income: Median family income for a particular county or metropolitan statistical area (MSA), as estimated
by the Department of Housing and Urban Development (HUD).
HUD-1 statement: A document that provides an itemized listing of the funds that are payable at closing. Items that
appear on the statement include real estate commissions, loan fees, points and initial escrow amounts. Each item on the statement
is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement
define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by
the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement
sheet."
i
income property: Real estate developed or improved to produce income.
index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally
a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index
to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated
with the mortgage.
in-file credit report: An objective account, normally computer-generated, of credit and legal information obtained
from a credit repository.
inflation: An increase in the amount of money or credit available in relation to the amount of goods or services
available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing
power of a dollar, making it worth less.
initial interest rate: The original interest rate of the mortgage at the time of closing. This rate changes for
an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."
installment: The regular periodic payment that a borrower agrees to make to a lender. installment loan Borrowed
money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.
insurable title: A property title that a title insurance company agrees to insure against defects and disputes.
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insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual
contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
insurance binder: A document that states that insurance is temporarily in effect. Because the coverage will expire
by a specified date, a permanent policy must be obtained before the expiration date.
insured mortgage: A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage
insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the
insured amount.
interest: The fee charged for borrowing money.
interest accrual rate: The percentage rate at which interest accrues on the mortgage. In most cases, it is also
the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment
change limitations.
interest rate: The rate of interest in effect for the monthly payment due.
interest rate buydown plan: An arrangement wherein the property seller (or any other party) deposits money to an
account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.
During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate.
interest rate ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage
note.
interest rate floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage
note.
investment property: A property that is not occupied by the owner.
IRA (Individual Retirement Account): A retirement account that allows individuals to make tax-deferred contributions
to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks,
bonds or mutual funds.
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joint tenancy: A form of co-ownership that gives each tenant equal interest and equal rights in the property, including
the right of survivorship.
judgment: A decision made by a court of law. In judgments that require the repayment of a debt, the court may place
a lien against the debtor's real property as collateral for the judgment's creditor.
judgment lien: A lien on the property of a debtor resulting from the decree of a court.
judicial foreclosure: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and
conducted entirely under the auspices of a court.
jumbo loan: A loan that exceeds Fannie Mae?s mortgage amount limits. Also called a nonconforming loan.
k
l
late charge: The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the
due date.
lease: A written agreement between the property owner and a tenant that stipulates the conditions under which the
tenant may possess the real estate for a specified period of time and rent.
leasehold estate: A way of holding title to a property wherein the mortgagor does not actually own the property
but rather has a recorded long-term lease on it.
lease-purchase mortgage loan: An alternative financing option that allows low- and moderate-income home buyers to
lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest,
taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings
account in which money for a downpayment will accumulate.
legal description: A property description, recognized by law, that is sufficient to locate and identify the property
without oral testimony.
liabilities: A person's financial obligations. Liabilities include long-term and short-term debt, as well as any
other amounts that are owed to others.
liability insurance: Insurance coverage that offers protection against claims alleging that a property owner's negligence
or inappropriate action resulted in bodily injury or property damage to another party.
lien: A legal claim against a property that must be paid off when the property is sold.
lifetime payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or
decrease over the life of the mortgage. See cap.
lifetime rate cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase
or decrease over the life of the loan. See cap, interest rate ceiling and interest rate floor.
line of credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain
amount for a certain time to a specified borrower. See home equity line of credit.
liquid asset: A cash asset or an asset that is easily converted into cash.
loan: A sum of borrowed money (principal) that is generally repaid with interest.
loan commitment: See commitment letter.
loan origination: The process by which a mortgage lender brings into existence a mortgage secured by real property.
loan-to-value (LTV) percentage: The relationship between the principal balance of the mortgage and the appraised
value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage
of 80 percent.
lock-in: A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing
within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
lock-in period: The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.
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margin: For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate
on each adjustment date, subject to any limitations on the interest rate change.
master association: A homeowners' association in a large condominium or planned unit development (PUD) project that
is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level"
association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting
their particular portions of the project.
maturity: The date on which the principal balance of a loan, bond or other financial instrument becomes due and
payable.
maximum financing: A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed
for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent
is the maximum allowable LTV percentage for that product.
merged credit report: A credit report that contains information from three credit repositories. When the report
is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your
credit.
modification: The act of changing any of the terms of the mortgage.
money market account: A savings account that provides bank depositors with many of the advantages of a money market
fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.
money market fund: A mutual fund that allows individuals to participate in managed investments in short-term debt
securities, such as certificates of deposit and Treasury bills.
monthly fixed installment: That portion of the total monthly payment that is applied toward principal and interest.
When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.
monthly payment mortgage: A mortgage that requires payments to reduce the debt once a month.
mortgage: A legal document that pledges a property to the lender as security for payment of a debt.
mortgage banker: A company that originates mortgages exclusively for resale in the secondary mortgage market.
mortgage broker: An individual or company that brings borrowers and lenders together for the purpose of loan origination.
Mortgage brokers typically require a fee or a commission for their services.
mortgagee: The lender in a mortgage agreement.
mortgage insurance: A contract that insures the lender against loss caused by a mortgagor's default on a government
mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as
the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage
of or virtually all of the mortgage loan. See private mortgage insurance.
mortgage insurance premium (MIP): The amount paid by a mortgagor for mortgage insurance, either to a government
agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
mortgage life insurance: A type of term life insurance often bought by mortgagors. The amount of coverage decreases
as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically
satisfied by insurance proceeds.
mortgagor: The borrower in a mortgage agreement.
multidwelling units: Properties that provide separate housing units for more than one family, although they secure
only a single mortgage.
multifamily mortgage: A residential mortgage on a dwelling that is designed to house more than four families, such
as a high-rise apartment complex.
multifamily properties: Fannie Mae provides financing for multifamily (buildings with five or more units) rental
properties through a nationwide network of mortgage lenders.
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negative amortization: A gradual increase in mortgage debt that occurs when the monthly payment is not large enough
to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative"
amortization.
net cash flow: The income that remains for an investment property after the monthly operating income is reduced
by the monthly housing expense, which includes principal, interest, taxes and insurance (PITI) for the mortgage, homeowners'
association dues, leasehold payments and subordinate financing payments.
net worth: The value of all of a person's assets, including cash, minus all liabilities.
no cash-out refinance: A refinance transaction in which the new mortgage amount is limited to the sum of the remaining
balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any
mortgage liens that are more than one year old (if the borrower chooses to satisfy them) and other funds for the borrower's
use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
nonliquid asset: An asset that cannot easily be converted into cash.
note: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified
period of time.
note rate: The interest rate stated on a mortgage note.
notice of default: A formal written notice to a borrower that a default has occurred and that legal action may be
taken.
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original principal balance: The total amount of principal owed on a mortgage before any payments are made.
origination fee: A fee paid to a lender for processing a loan application. The origination fee is stated in the
form of points. One point is 1 percent of the mortgage amount.
owner financing: A property purchase transaction in which the property seller provides all or part of the financing.
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partial payment: A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
payment change date: The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM)
or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately
after the adjustment date.
periodic payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or
decrease during any one adjustment period.
periodic rate cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase
or decrease during any one adjustment period, regardless of how high or low the index might be.
personal property: Any property that is not real property.
PITI: See principal, interest, taxes and insurance (PITI) below.
PITI reserves: A cash amount that a borrower must have on hand after making a down payment and paying all closing
costs for the purchase of a home. The principal, interest, taxes and insurance (PITI) reserves must equal the amount that
the borrower would have to pay for PITI for a predefined number of months.
planned unit development: See PUD below.
point: A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
power of attorney: A legal document that authorizes another person to act on one?s behalf. A power of attorney can
grant complete authority or can be limited to certain acts and/or certain periods of time.
prearranged refinancing agreement: A formal or informal arrangement between a lender and a borrower wherein the
lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated
as an inducement for the borrower to enter into the original mortgage transaction.
preforeclosure sale: A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property
for less than the amount that is owed to the investor.
prepayment: Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a
mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure.
In each case, prepayment means payment occurs before the loan has been fully amortized.
prepayment penalty: A fee that may be charged to a borrower who pays off a loan before it is due.
pre-qualification: The process of determining how much money a prospective home buyer will be eligible to borrow
before he or she applies for a loan.
prime rate: The interest rate that banks charge to their preferred customers. Changes in the prime rate influence
changes in other rates, including mortgage interest rates.
principal: The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance
of a mortgage.
More principal balance: The outstanding balance of principal on a mortgage. The principal balance does not include
interest or any other charges. See remaining balance.
principal, interest, taxes and insurance (PITI): The four components of a monthly mortgage payment. Principal refers
to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing
money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage
and hazard insurance.
private mortgage insurance (MI): Mortgage insurance that is provided by a private mortgage insurance company to
protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV)
percentage in excess of 80 percent.
promissory note: A written promise to repay a specified amount over a specified period of time.
public auction: A meeting in an announced public location to sell property to repay a mortgage that is in default.
PUD (Planned Unit Development): A project or subdivision that includes common property that is owned and maintained
by a homeowners' association for the benefit and use of the individual PUD unit owners.
purchase and sale agreement: A written contract signed by the buyer and seller stating the terms and conditions
under which a property will be sold.
purchase money transaction: The acquisition of property through the payment of money or its equivalent.
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qualifying ratios: Calculations that are used in determining whether a borrower can qualify for a mortgage. They
consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent
of income ratio.
quitclaim deed: A deed that transfers without warranty whatever interest or title a grantor may have at the time
the conveyance is made.
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radon: A radioactive gas found in some homes that in sufficient concentrations can cause health problems.
rate-improvement mortgage: A fixed-rate mortgage that includes a provision that gives the borrower a one-time option
to reduce the interest rate (without refinancing) during the early years of the mortgage term.
rate lock: A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest
rate for a specified period of time. See lock-in.
real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of the property
owner.
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give borrowers
advance notice of closing costs.
real property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals
and the interest, benefits and inherent rights thereof.
REALTOR®: A real estate broker or an associate who holds active membership in a local real estate board that is
affiliated with the NATIONAL ASSOCIATION of REALTORS®.
recission: The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent.
Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.
recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes
known as a "Registrar of Deeds" or "County Clerk."
recording: The noting in the registrar?s office of the details of a properly executed legal document, such as a
deed, a mortgage note, a satisfaction of mortgage or an extension of mortgage, thereby making it a part of the public record.
refinance transaction: The process of paying off one loan with the proceeds from a new loan using the same property
as security.
rehabilitation mortgage: A mortgage created to cover the costs of repairing, improving and sometimes acquiring an
existing property.
remaining balance: The amount of principal that has not yet been repaid. See principal balance.
remaining term: The original amortization term minus the number of payments that have been applied.
rent loss insurance: Insurance that protects a landlord against loss of rent or rental value due to fire or other
casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
rent with option to buy: See lease-purchase mortgage loan.
repayment plan: An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans
are called "relief provisions."
replacement reserve fund: A fund set aside for replacement of common property in a condominium, PUD, or cooperative
project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
revolving liability: A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved
line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any
interest due.
right of first refusal: A provision in an agreement that requires the owner of a property to give another party
the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
right of ingress or egress: The right to enter or leave designated premises.
right of survivorship: In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
Rural Housing Service (RHS): An agency within the Department of Agriculture, which operates principally under the
Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing
to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are
borrowed from the U.S. Treasury.
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sale-leaseback: A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously
leases the property back to the seller.
second mortgage: A mortgage that has a lien position subordinate to the first mortgage.
secondary mortgage market: The buying and selling of existing mortgages.
secured loan: A loan that is backed by collateral.
security: The property that will be pledged as collateral for a loan.
seller take-back: An agreement in which the owner of a property provides financing, often in combination with an
assumable mortgage. See owner financing.
servicer: An organization that collects principal and interest payments from borrowers and manages borrowers? escrow
accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
servicing: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
settlement: See closing.
settlement sheet: See HUD-1 statement.
single-family properties: One- to four-unit properties including detached homes, townhomes, condominiums and cooperatives.
special deposit account: An account that is established for rehabilitation mortgages to hold the funds needed for
the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.
standard payment calculation: The method used to determine the monthly payment required to repay the remaining balance
of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
step-rate mortgage: A mortgage that allows for the interest rate to increase according to a specified schedule (i.e.,
seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain
constant for the remainder of the loan.
subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or
lease.
subordinate financing: Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
subsidized second mortgage: An alternative financing option known as the Community Seconds® mortgage for low- and
moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second
mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second
mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally
for each year the buyer remains in the home.
survey: A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements,
rights of way, encroachments and other physical features.
sweat equity: Contribution to the construction or rehabilitation of a property in the form of labor or services
rather than cash.
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tenancy by the entirety: A type of joint tenancy of property that provides right of survivorship and is available
only to a husband and wife. Contrast with tenancy in common.
tenancy in common: A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by
the entirety and with joint tenancy.
tenant-stockholder: The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation
and a tenant of the unit under a proprietary lease or occupancy agreement.
third-party origination: A rocess by which a lender uses another party to completely or partially originate, process,
underwrite, close, fund or package the mortgages it plans to deliver to the secondary mortgage market. See mortgage broker.
title: A legal document evidencing a person's right to or ownership of a property.
title company: A company that specializes in examining and insuring titles to real estate.
title insurance: Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss
arising from disputes over ownership of a property.
title search: A check of the title records to ensure that the seller is the legal owner of the property and that
there are no liens or other claims outstanding.
total expense ratio: Total obligations as a percentage of gross monthly income. The total expense ratio includes
monthly housing expenses plus other monthly debts.
trade equity: Equity that results from a property purchaser giving his or her existing property (or an asset other
than real estate) as trade as all or part of the down payment for the property that is being purchased.
transfer of ownership: Any means by which the ownership of a property changes hands. Lenders consider all of the
following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of
the mortgage debt by the property purchaser and any exchange of possession of the property under a land sales contract or
any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer
of a beneficial interest in the trust to be a transfer of ownership.
transfer tax: State or local tax payable when title passes from one owner to another.
Treasury index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM)
plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived
from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities
in the over-the-counter market. See adjustable-rate mortgage (ARM).
Truth-in-Lending: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of
a mortgage, including the annual percentage rate (APR) and other charges.
two-step mortgage: An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years
of its mortgage term and a different interest rate for the remainder of the amortization term.
two- to four-family property: A property that consists of a structure that provides living space (dwelling units)
for two to four families, although ownership of the structure is evidenced by a single deed.
trustee: A fiduciary who holds or controls property for the benefit of another.
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underwriting: The process of evaluating a loan application to determine the risk involved for the lender. Underwriting
involves an analysis of the borrower's creditworthiness and the quality of the property itself.
unsecured loan: A loan that is not backed by collateral.
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VA mortgage: A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government
mortgage.
vested: Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals
who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes
may be due on any funds that are actually withdrawn.
Department of Veterans Affairs (VA): An agency of the federal government that guarantees residential mortgages made
to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders
to make mortgages to veterans.
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what-if analysis: An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if
you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available
funds or to the qualifying ratios or down payment expenses that are used in the analysis.
what-if scenario: A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario
can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that
are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.
wraparound mortgage: A mortgage that includes the remaining balance on an existing first mortgage plus an additional
amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards
the payments on the first mortgage to the first mortgagee.
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