Glossary
A
abstract of title
A historical summary provided by a title insurance company of all records affecting the title to a property.
acceleration clause
Allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.
adjustable rate mortgage (ARM)
A variable or flexible rate mortgage with an interest rate that varies according to the financial index it is based upon. To limit the borrower's risk, the ARM may have a payment or rate cap.
amenities
Features of your home that fit your preferences and can increase the value of your property. Some examples include the number of bedrooms, bathrooms, or vicinity to public transportation.
amortization
The liquidation of a debt by regular, usually monthly, installments of principal and interest. An amortization schedule is a table showing the payment amount, interest, principal and unpaid balance for the entire term of the loan.
annual cap See: cap.
annual percentage rate (A.P.R.)
The actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage. Disclosure of APR is required by the Truth-in-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.
appraisal
An estimate of a property's value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property's ability to produce income.
appreciation A property's increase in value due to inflation or economic factors.
assessmentCharges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.
assignmentThe transfer of a contract or a right to buy property at given rates and terms from a mortgagee to another person.
assumptionAn agreement between a buyer and a seller, requiring lender approval, where the buyer takes over the payments for a mortgage and accepts the liability. Assuming a loan can be advantageous for a buyer because there are no closing costs and the loan's interest rate may be lower than current market rates. Depending on what is in the mortgage or deed of trust, the lender may raise the interest rate, require the buyer to qualify for the mortgage, or not permit the buyer to assume the loan at all.
B
Balloon mortgage
Mortgage with a final lump sum payment that is greater than preceding payments and pays the loan in full.
Biweekly mortgage
A loan requiring payments of principal and interest at two-week intervals. This type of loan amortizes much faster than monthly payment loans. The payment for a biweekly mortgage is half what a monthly payment would be.
Bond
A certificate serving as security for payment of a debt. Bonds backed by mortgage loans are pooled together and sold in the secondary market.
Bridge loan
A loan to "bridge" the gap between the termination of one mortgage and the beginning of another, such as when a borrower purchases a new home before receiving cash proceeds from the sale of a prior home. Also known as a swing loan.
Broker
An intermediary between the borrower and the lender. The broker may represent several lending sources and charges a fee or commission for services.
Buy-down
Where the buyer pays additional discount points or makes a substantial down payment in return for a below market interest rate; or the seller offers 3-2-1 interest payment plans or pays closing costs such as the origination fee. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.
C
Cap
A limit in how much an adjustable rate mortgage's monthly payment or interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of-loan cap or an annual cap.
A payment cap is a limit on the monthly payment.
An interest cap is a limit on the amount of the interest rate.
A life-of-loan cap restricts the amount the interest rate can increase over the entire term of the loan.
An annual cap limits the amount the interest rate can increase over a twelve-month period.
certificate of reasonable value (CRV)
A Veteran's Administration appraisal that establishes the maximum VA mortgage loan amount for a specified property.
certificate of title
Document rendering an opinion on the status of a property's title based on public records.
closed-end mortgage
A mortgage principal amount that is fixed and cannot be increased during the life of the loan. See also: open-end mortgage.
closing costs
Costs payable by both seller and buyer at the time of settlement, when the purchase of a property is finalized. These costs can be up to ten percent of the mortgage amount and usually include but are not limited to the following:
cloud
A claim to the title of a property that, if valid, would prevent a purchaser from obtaining a clear title.
collateral
Something of value pledged as security for a loan. In mortgage lending, the property itself serves as collateral for a mortgage loan.
commitment fee
A fee charged when an agreement is reached between a lender and a borrower for a loan at a specific rate and points and the lender guarantees to lock in that rate.
co-mortgagor
One who is individually and jointly obligated to repay a mortgage loan and shares ownership of the property with one or more borrowers. See also: co-signer.
condominium
An individually owned unit within a multi-unit building where others or the Condominium Owners Association share ownership of common areas such as the grounds, the parking facilities and the tennis courts.
conforming loan
A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. See also: non-conforming loan.
construction loan
A short-term loan financing improvements to real estate, such as the building of a new home. The lender advances funds to the borrower as needed while construction progresses. Upon completion of the construction, the borrower must obtain permanent financing or pay the construction loan in full.
consumer handbook on adjustable rate mortgages (C.H.A.R.M.)
A disclosure required by the federal government to be given to any borrower applying for an adjustable rate mortgage (ARM).
conventional loan
A mortgage loan that is not insured, guaranteed or funded by the Veterans Administration (VA), the Federal Housing Administration (FHA) or Rural Economic Community Development (RECD) (formerly Farmers Home Administration).
convertible mortgage
An adjustable rate mortgage (ARM) that allows a borrower to switch to a fixed-rate mortgage at a specified point in the loan term.
co-signer
One who is obligated to repay a mortgage loan should the borrower default but who does not share ownership in the property. See also: co-mortgagor.
covenants
Rules and restrictions governing the use of property.
CRV See: certificate of reasonable value.
curtailmentsThe borrower's privilege to make payments on a loan's principal before they are due. Paying off a mortgage before it is due may incur a penalty if so specified in the mortgage's prepayment clause.
D
Debt
Money owed to another party that must be repaid.
Debt-to-Income Ratio (DTI)
The ratio of a borrower’s monthly payment obligations to income. For FHA or VA loans, net effective income is used; for conventional loans, gross monthly income is used.
Deed of Trust
A document used in many states instead of a mortgage, held by a trustee until the loan is fully repaid. The trustee may proceed with foreclosure without court action if the borrower defaults.
Department of Housing and Urban Development (HUD)
The U.S. government agency that administers FHA, GNMA, and other housing programs.
Discount Points
Fees paid to the lender based on a percentage of the loan amount to reduce the interest rate. One point equals 1% of the loan amount (e.g., two points on a $100,000 loan equals $2,000).
Down Payment
The difference between the purchase price and the mortgage amount. This amount becomes the borrower’s equity. It is typically cash savings but may also be a gift (not requiring repayment) or borrowed funds secured by assets.
Due-on-Sale Clause
A provision in a mortgage or deed of trust allowing the lender to demand full repayment of the loan balance if the property is sold, subject to the terms of the agreement.
Duplex
A residential property divided into two separate living units.
E
Earnest Money
A deposit in the form of cash or a note given by a buyer to a seller as a good faith assurance that the buyer intends to complete the purchase of a property.
Easement
A legal right allowing one party limited use of another person’s property, such as a utility company installing service lines.
Equal Credit Opportunity Act (ECOA)
A federal law prohibiting lenders and creditors from discrimination based on race, color, sex, religion, national origin, age, marital status, receipt of public assistance, or because an applicant exercised rights under the Consumer Credit Protection Act.
Equity
The value of a property above any liens against it; also called the owner’s interest.
Escape Clause
A contract provision allowing one or more parties to cancel all or part of the agreement if certain conditions are not met, such as failure to obtain financing within a specified time.
Escrow
Money held by a third party for safekeeping until closing, or funds collected and held for payment of property taxes and insurance during the year.
F
Fair market value
The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.
Fannie Mae
Nickname for Federal National Mortgage Association (FNMA).
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A quasi-governmental, federally-sponsored organization that acts as a secondary market investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.
Federal Housing Administration (FHA)
An agency within the Department of Housing and Urban Development that sets standards for underwriting and insures residential mortgage loans made by private lenders. One of FHA's objectives is to ensure affordable mortgages to those with low or moderate income. FHA loans may be high loan-to-value and are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.
Federal National Mortgage Association (FNMA or Fannie Mae)
A private corporation that acts as a secondary market investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.
fee simple
The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner's designated heirs. Also known as fee absolute.
fifteen-year mortgage
A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.
fixed-rate mortgage
A mortgage whose rate remains constant throughout the life of the mortgage.
flood insurance
The Federal Flood Disaster Protection Act of 1973 requires that federally-regulated lenders determine if real estate to be used to secure a loan is located in a Specially Flood Hazard Area (SFHA). If the property is located in a SFHA area, the borrower must obtain and maintain flood insurance on the property. Most insurance agents can assist in obtaining flood insurance.
FNMA
See: Federal National Mortgage Association
Freddie Mac
See: Federal Home Loan Mortgage Corporation
G
Gift
Funds provided by a relative, employer, municipality, nonprofit religious organization, or nonprofit community organization that do not have to be repaid and may be used toward a home purchase.
Ginnie Mae
Nickname for the Government National Mortgage Association (GNMA).
Good Faith Estimate
An estimate of closing costs and monthly mortgage payments provided by the lender to the borrower within three days of applying for a loan.
Government National Mortgage Association (GNMA or Ginnie Mae)
A government organization that participates in the secondary mortgage market by securitizing pools of FHA, VA, and RHS loans.
Graduated Payment Mortgage (GPM)
A fixed-interest loan with lower payments in the early years that gradually increase over time, then level off at an amount sufficient to fully repay the loan over the remaining amortization period.
H
Hazard Insurance
Insurance that protects a property against physical damage such as fire or tornadoes. Lenders typically require coverage at least equal to the mortgage loan amount.
Home Equity Loan
A loan secured by the borrower’s primary residence, commonly used for home improvements or debt consolidation.
Home Inspection
A professional evaluation of a home’s physical condition conducted before closing so repairs or negotiations can be completed prior to sale.
Homeowners Insurance
Insurance that protects the property against theft, liability, and most common disasters.
Housing and Urban Development (HUD)
The U.S. government agency that administers FHA, GNMA, and other housing programs.
Housing Affordability Index
A measure showing what percentage of homebuyers can afford an average-priced home in a specific area. The most widely known index is published by the National Association of Realtors.
Housing Expenses-to-Income Ratio
See: debt-to-income ratio.
HUD
See: Housing and Urban Development.
I
Income Approach to Value
A method used by real estate appraisers to estimate a property’s value based on its anticipated future income. Income properties include shopping centers, hotels, motels, restaurants, apartment buildings, and office spaces.
Income-to-Debt Ratio
See: debt-to-income ratio.
Index
A published interest rate based on financial indicators such as U.S. Treasury bills or the average interest rate on loans closed by savings and loan institutions. Lenders use the index to determine rates on adjustable-rate mortgages (ARMs).
Insurance
As part of PITI, the portion of the monthly mortgage payment that covers insurance and does not include principal, interest, or taxes. See also: homeowners insurance.
Interest
The cost of borrowing money on a mortgage loan, excluding the principal. As part of PITI, it is the portion of the monthly payment that does not include principal, taxes, or insurance.
Interest Cap
See: cap.
Interest Rate
The percentage charged by a lender for borrowing money, calculated on the principal balance. See also: Annual Percentage Rate (APR).
J
Joint Tenancy
See: tenancy.
Jumbo Loan
A nonconforming loan that exceeds the loan limits set by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).
K
Key lot Real estate deemed highly valuable because of its location.
L
Lien
A legal claim against a property for the payment of a debt. A mortgage is a lien. Other types include a tax lien for overdue taxes or a mechanic’s lien for unpaid debt to a subcontractor.
Life-of-Loan Cap
See: cap.
Liquidity
The ability of an asset to be easily converted into cash.
Loan Discount See: points.
Loan Origination Fee See: origination fee.
Loan-to-Value Ratio (LTV)
The relationship, expressed as a percentage, between the loan amount and the property’s appraised value.
Example: A $75,000 loan on a property appraised at $100,000 equals a 75% loan-to-value ratio.
Lock-In
A lender’s guarantee of a specific interest rate and/or points for a certain period of time. Some lenders charge a fee to lock in the interest rate.
M
Maintenance Costs
The cost of maintaining and repairing a house. These expenses may be minor (such as replacing washers in faucets) or major (such as installing a new heating system or replacing the roof) and can apply to either the interior or exterior of the home.
Margin
The amount a lender adds to the index of an adjustable-rate mortgage (ARM) to determine the adjusted interest rate. For example, a margin of 1.50 added to a 7% index results in an adjusted interest rate of 8.50%.
Market Value
The realistic price a property can sell for based on comparable sales of similar properties in the same area.
Modification
A change in the terms of a mortgage note, such as reducing the interest rate or changing the maturity date.
Mortgage
A legal agreement in which property is used as collateral to secure repayment of a loan. In some states, a deed of trust is used instead of a mortgage.
Mortgage Banker
A lender that originates, closes, services, and sells mortgage loans on the secondary market.
Mortgage Broker
An intermediary between a borrower and a lender who helps borrowers find financing options they might not locate on their own.
Mortgage Insurance
Insurance paid to protect the lender against losses due to foreclosure or loan default. Conventional loans require it when the down payment is less than 20%. FHA mortgage insurance includes an upfront fee (about 1.5% of the loan amount at closing) and an annual fee (about 0.5% added to monthly payments).
Mortgage Interest
The interest rate charged for borrowing mortgage funds. It is used to calculate the monthly interest payment.
Mortgage Term
The total length of time the mortgage loan is scheduled to last (e.g., a 30-year mortgage term).
Mortgagee
The lender.
Mortgagor
The borrower.
N
Negative Amortization
A situation where the borrower pays less interest than the amount charged on the mortgage. The unpaid interest is added to the loan principal, which may cause the borrower to owe more than the original loan amount.
Non-Assumption Clause
A provision in a mortgage contract that prevents a new buyer from assuming the mortgage without the lender’s approval.
Non-Conforming Loan
A loan that does not meet the guidelines set by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). Jumbo loans are considered non-conforming. See also: conforming loan.
Note
A signed document acknowledging a debt and confirming the borrower’s obligation to repay it.
O
Open-End Mortgage
A mortgage that allows the borrower to receive additional advances of principal from the lender during the life of the loan. See also: closed-end mortgage.
Origination Fee
A fee charged by a lender to originate and close a mortgage loan, typically expressed in points.
P
Payment Cap
See: cap.
P&I
Abbreviation for principal and interest.
PITI
Abbreviation for principal, interest, taxes, and insurance.
Points
Fees charged by the lender based on a percentage of the loan amount. One point equals 1% of the loan amount (e.g., two points on a $100,000 loan equals $2,000). Discount points are used to lower the interest rate. Points may also include a loan origination fee, typically equal to one point.
Pre-Qualification
A preliminary estimate of how much a borrower may qualify to borrow based on income, assets, and debts.
Prime Rate
The interest rate commercial banks charge their most creditworthy customers.
Principal
The original amount of the mortgage loan, excluding interest. As part of PITI, it is the portion of the monthly payment that does not include interest, taxes, or insurance.
Private Mortgage Insurance (PMI)
See: mortgage insurance.
Property Appraisal
See: appraisal.
Property Tax
A tax assessed by the state and/or local government on real property.
Prorate
To proportionally divide expenses between the buyer and seller at closing.
Q
Qualification
A lender’s determination of a borrower’s ability to repay a mortgage loan based on credit history, employment history, assets, debts, and income.
R
Rate Cap
See: cap.
RESPA
Abbreviation for the Real Estate Settlement Procedures Act, which allows consumers to review settlement costs at application and again prior to closing.
Reverse Annuity Mortgage
A type of mortgage in which the lender makes periodic payments to the borrower. The borrower’s home equity is used as security for the loan.
RHCDS
Abbreviation for Rural Housing and Community Development Service.
Right of First Refusal
The right to purchase a property under the same terms and conditions offered by another buyer and accepted by the seller.
Right of Rescission
When a borrower’s primary residence secures a loan, the borrower has three business days after signing loan documents to cancel the transaction. All funds paid must be refunded. This right does not apply to home purchase loans or certain refinances with no additional funds added.
Rollover
At the end of a construction loan period, the borrower’s file is transferred to loan servicing after final escrow funds, title policy, and homeowner’s insurance are secured.
Rural Housing and Community Development Service
A federal agency that administers mortgage loans for buyers in rural areas.
S
Second Mortgage
A loan that is subordinate to a primary (first) mortgage and typically carries a higher interest rate and shorter term.
Secondary Market
A market made up of investors such as GNMA, FHLMC, and FNMA that purchase mortgages from lenders and sell them to other investors.
Servicing
The process of collecting monthly mortgage payments, applying them to principal, taxes, and insurance, and informing the borrower of any loan status changes.
Settlement Costs
See: closing costs.
Survey
A professional measurement of a property showing its boundaries, building locations, easements, rights-of-way, roads, and other physical features.
T
Tax Deed
A legal document transferring ownership of a property repossessed by the government due to unpaid taxes.
Tax Savings
The reduction in taxes a homeowner pays to the government as a result of owning a home.
Taxes
As part of PITI, the portion of the monthly mortgage payment allocated for property taxes and not including principal, interest, or insurance.
Tenancy
Types of property ownership:
Joint Tenancy – Equal ownership by two or more parties with the right of survivorship.
Tenancy by the Entireties – Ownership between spouses where neither may sell without the other’s consent and the surviving spouse inherits the property.
Tenancy in Common – Shared ownership without the right of survivorship.
Tenancy in Severalty – Ownership by a single individual or legal entity.
Tenancy at Will – Permission to occupy property at the owner’s discretion.
Title
A legal document establishing ownership of a property.
Title Insurance
Insurance protecting the buyer against errors or defects discovered in the title search. The cost may be paid by the buyer, seller, or both.
Trust Deed
See: deed of trust.
Truth in Lending Act (TILA)
A federal law requiring lenders to disclose the Annual Percentage Rate (APR) and related loan costs within three business days of the loan application.
U
Underwriter
A professional who evaluates a borrower’s credit history, employment, assets, debts, and loan guidelines to approve or deny a mortgage loan.
Uniform Settlement Statement
A standard closing document required by the Real Estate Settlement Procedures Act (RESPA) that provides settlement details to both buyer and seller.
Utility Costs
Ongoing housing expenses such as water, electricity, natural gas, and heating fuel.
V
VA Loan
See: Veterans Administration.
Variable Rate Mortgage (VRM)
See: adjustable-rate mortgage.
Veterans Administration (VA)
The federal agency that administers the VA loan guarantee program and provides services to eligible veterans. Qualified veterans may obtain home loans with no down payment and a funding fee (typically around 1% of the loan amount).
W
walk-through An inspection of a property by the prospective buyer prior to closing on a mortgage.
warranty deedA document protecting a homebuyer against any and all claims to the property.
X
Y
Yield The rate of earnings from an investment.
Z
ZoningThe ability of local governments to specify the use of private property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc.
About Us
Florida Wholesale Mortgage brings over 20 years of lending experience and consistently ranks among the highest in overall customer satisfaction among Florida mortgage companies. Angela Smith proudly serves homebuyers across the entire state of Florida, with a strong local focus in Southwest Florida, delivering personalized mortgage solutions tailored to each client’s goals.
Angela Smith | Mortgage Loan Officer
Florida Wholesale Mortgage
Phone: 239-980-6669
Email: [email protected]
NMLS #2666684 | Licensed in FL
Florida Wholesale Mortgage LLC
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