Your Maryland Home Equity Loans & Mortgage Company Glossary
Maryland Home Equity Loans & Mortgage Company Related Glossary of Terms (click on a letter
below to go directly to alphabetized sections)...
A | B
| C | D | E
F | G | H
| I | J
K | L | M
| N | O
P | Q | R
| S | T
U | V | W
| X | Y | Z
A
adjustable-rate mortgage (ARM) A mortgage
that changes interest rate periodically based upon the changes
in a specified index.
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). amortization The repayment of a mortgage loan by
installments with regular payments to cover the principal
and interest.
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.
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).
application A form, commonly referred to as a 1003
form, used to apply for a mortgage and to provide information
regarding a prospective mortgagor and the proposed security.
appraisal A written analysis of the estimated
value of a property prepared by a qualified appraiser.
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.
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.
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.
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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.
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.
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 mortgage The mortgage that is secured by
a cooperative project, as opposed to the share loans on
individual units within the project.
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.
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 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.
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 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). 
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."
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. closing statement Also referred
to as the HUD1. The final statement of costs incurred to
close on a loan or to purchase a home.
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.
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 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.
Community Home Improvement Mortgage Loan An
alternative financing option that allows low- and moderate-income
home buyers to obtain 95 percent financing for the purchase
and improvement of a home in need of modest repairs. The
repair work can account for as much as 30 percent of the
appraised value.
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.
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.
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.
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.
consumer 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.
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.
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.
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.
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 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. See
merged credit report.
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.
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D
debt An amount owed to another. 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.
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.
depreciation A decline in the value of property;
the opposite of appreciation.
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
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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.
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.
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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 congressionally chartered, shareholder-owned
company that is the nation's largest supplier of home mortgage
funds.
Fannie Mae's Community Home Buyer's Program
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.
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.
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.
first mortgage A mortgage that is the primary lien
against a property.
fixed-rate mortgage (FRM) A mortgage in which the
interest rate does not change during the entire term of
the loan.
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.
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.
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G
good faith estimate An estimate of charges which
a borrower is likely to incur in connection with a settlement.
H
hazard insurance Insurance protecting against loss
to real estate caused by fire, some natural causes, vandalism,
etc., depending upon the terms of the policy.
housing ratio The ratio of the monthly housing payment
in total (PITI - Principal, Interest, Taxes, and Insurance)
divided by the gross monthly income. This ratio is sometimes
referred to as the top ratio or front end ratio.
HUD The U.S. Department of Housing and Urban
Development. index (return to top) A published interest
rate to which the interest rate on an Adjustable Rate Mortgage
(ARM) is tied. Some commonly used indeces include the 1
Year Treasury Bill, 6 Month LIBOR, and the 11th District
Cost of Funds (COFI).
I
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L
lien An encumbrance against property for money
due, either voluntary or involuntary.
lifetime cap A provision of an ARM that limits the
highest rate that can occur over the life of the loan.
loan to value ratio (LTV) The ratio of the amount
of your loan to the appraised value of the home. The LTV
will affect programs available to the borrower and generally,
the lower the LTV the more favorable the terms of the programs
offered by lenders.
lock-in A written agreement guaranteeing the home
buyer a specified interest rate provided the loan is closed
within a set period of time. The lock-in also usually specifies
the number of points to be paid at closing.
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M
margin The number of percentage points a lender
adds to the index value to calculate the ARM interest rate
at each adjustment period. A representative margin would
be 2.75%.
mortgage A legal document that pledges a property
to the lender as security for payment of a debt.
mortgage disability insurance A disability insurance
policy which will pay the monthly mortgage payment in the
event of a covered disability of an insured borrower for
a specified period of time.
mortgage insurance (MI) Insurance written by an
independent mortgage insurance company protecting the mortgage
lender against loss incurred by a mortgage default. Usually
required for loans with an LTV of 80.01% or higher.
mortgagee The person or company who receives
the mortgage as a pledge for repayment of the loan. The
mortgage lender.
mortgagor The mortgage borrower who gives
the mortgage as a pledge to repay.
N
non-conforming loan Also called a jumbo loan. Conventional
home mortgages not eligible for sale and delivery to either
Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various
reasons, including loan amount, loan characteristics or
underwriting guidelines. Non-conforming loans usually incur
a rate and origination fee premium.The current non-conforming
loan limit is ,601 and above.
note A written agreement containing a promise
of the signer to pay to a named person, or order, or bearer,
a definite sum of money at a specified date or on demand.
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O
origination fee A fee imposed by a lender to cover
certain processing expenses in connection with making a
real estate loan. Usually a percentage of the amount loaned,
such as one percent.
owner financing A property purchase transaction
in which the property seller provides all or part of the
financing.
P
Planned Unit Developments (PUD) A subdivision of
five or more individually owned lots with one or more other
parcels owned in common or with reciprocal rights in one
or more other parcels.
PITI Principal, interest, taxes and insurance--the
components of a monthly mortgage payment.
points Charges levied by the mortgage lender
and usually payable at closing. One point represents 1%
of the face value of the mortgage loan.
prepaids Those expenses of property which
are paid in advance of their due date and will usually be
prorated upon sale, such as taxes, insurance, rent, etc.
prepayment penalty A charge imposed by a mortgage
lender on a borrower who wants to pay off part or all of
a mortgage loan in advance of schedule.
principal Amount of debt, not including interest.
The face value of a note or mortgage.
private mortgage insurance (PMI) Insurance provided
by nongovernment insurers that protects lenders against
loss if a borrower defaults. Fannie Mae generally requires
private mortgage insurance for loans with loan-to-value
(LTV) percentages greater than 80%.
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Q
qualifying ratios The ratio of your fixed monthly
expenses to your gross monthly income, used to determine
how much you can afford to borrow. The fixed monthly expenses
would include PITI along with other obligations such as
student loans, car loans, or credit card payments.
R
rate cap A limit on how much the interest rate can
change, either at each adjustment period or over the life
of the loan.
rate lock-in A written agreement in which the lender
guarantees the borrower a specified interest rate, provided
the loan closes within a set period of time.
rebate Compensation received from a wholesale
lender which can be used to cover closing costs or as a
refund to the borrower. Loans with rebates often carry higher
interest rates than loans with "points" (see above).
refinancing The process of paying off one
loan with the proceeds from a new loan using the same property
as security.
residential mortgage credit report (RMCR) A
report requested by your lender that utilizes information
from at least two of the three national credit bureaus and
information provided on your loan application.
S
seller carry back An agreement in which the owner
of a property provides financing, often in combination with
an assumed mortgage.
survey A print showing the measurements of
the boundaries of a parcel of land, together with the location
of all improvements on the land and sometimes its area and
topography.
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T
tenants-in-common An undivided interest in property
taken by two or more persons. The interest need not be equal.
Upon death of one or more persons, there is no right of
survivorship.
title The evidence one has of right to possession
of land.
title insurance Insurance against loss resulting
from defects of title to a specifically described parcel
of real property.
title search An investigation into the history of
ownership of a property to check for liens, unpaid claims,
restrictions or problems, to prove that the seller can transfer
free and clear ownership.
total debt ratio Monthly debt and housing payments divided
by gross monthly income. Also known as Obligations-to-Income
Ratio or Back-End Ratio.
Truth-in-Lending Act A federal law requiring a disclosure
of credit terms using a standard format. This is intended
to facilitate comparisons between the lending terms of different
financial institutions.
U
V
Veterans Administration (VA) A government agency
guaranteeing mortgage loans with no down payment to qualified
veterans.
X
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