A- thru D Credit: Credit considered to be less than perfect including late payments, collections, liens, bankruptcy, foreclosure, and hard to document income or assets. Also known as "sub-prime", A- thru D credit includes anything keeping a borrower from obtaining a FannieMae or FreddieMac type loan.

Adjustable-Rate Mortgage (ARM)
A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Amortization: A method of paying off the mortgage which pays part of the principal along with interest, rather than just paying off the interest first.

Amortization Schedule: A schedule of payments designed to liquidate a debt. May be over any agreed upon period of time. An example of this would be a standard 30-year mortgage amortization wherein a borrower would make 360 equal consecutive monthly payments at the end of which the original loan would be paid in full.

Amortization Term: The agreed upon number of months or years a borrower will be making payments to liquidate an original debt.

Annual Percentage Rate: Also known as A.P.R. the Annual Percentage Rate is the cost of your credit expressed in terms of an annual rate. The A.P.R. takes into account "points" or "closing costs" that may be included in your loan amount and is often higher than your interest rate for this reason.

Appraisal
A written report by a qualified appraiser estimating the value of a property.

Appraised Value: The value assigned to a property by a licensed professional to assess its fair market value.

Assessed value
The dollar value of an asset assigned by a public tax assessor for the purposes of taxation.

Balloon Payment: An inflated payment that comes due at an agreed upon time, usually at the end of the loan term.

Bankruptcy: A debtor that is judged legally insolvent and whose remaining property is then administered for the creditors or is distributed among them.

Binder
An offer to purchase or earnest money receipt, acknowledging a deposit along with agreement to enter into a contract for the sale of real estate.

Cash Out Refinance: A type of loan wherein an existing loan is refinanced and the borrower is allowed to receive cash in addition to the amount of the home loan. The cash is considered part of the amount financed and is part of the lien against the property securing the loan.

Cash reserves
The money the buyer has left over after the down payment and all those closing costs.

CBS
Concrete block and stucco.

CC&Rs
Covenants, conditions and restrictions, which control the use of the property.

Closing
The meeting at which the sale of a property is finalized. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property. Also known as the settlement.

Closing Costs
Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance.

Coach Home
One of a group of homes in a two-story building, with own garage and entrance.

Combined-Loan-to-Value (CLTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower) in context of two combined loans (1st and 2nd mortgages).

Comparable Rent Schedule
Lists recent rentals of similar properties in nearby areas and used to help determine the rental potential of a property.

Consumer Reporting Agency: Also known as a bureau, a Credit Reporting Agency tracks payment history, account activity and other relevant public records for the purposes of determining credit worthiness of indaviduals.

Contingency
A condition that must be satisfied before a contract is binding. Inspection and obtaining financing are the two most common.

Courtyard Home
A home with a courtyard as its main entrance.

Credit History: A history of an individuals ability to pay their bills on time as well as any other relevant public records.

Credit Range Basis: The lower credit score range of the borrower or co-borrower.

Credit Report: A report outlining an individuals credit history, public records and credit worthiness.

DTI --  Debt Ratios
Also called debt-to-income (DTI) ratio. It is the percentage of a person's monthly earnings used to pay off debt obligations. Lenders consider two ratios, constructed in slightly different ways. The first, called the front-end ratio, is the ratio of the monthly housing expenses -- including principal, interest, property taxes and insurance (PITI) is compared to the borrower's gross pretax monthly income. In the back-end ratio, a borrower's other debts, such as auto loans and credit cards, are also figured in. Lenders usually take both into account and set an acceptable ratio, which might be expressed as 33/39. Some lenders, and some lending qualifying agencies such as FHA, take only the back-end ratio into account.

Documents: Disclosures and written agreements that are required for the closing of a loan. Documents are the contract upon which the terms of a loan are outlined and agreed upon.

Earnest Money
A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property. The money usually is counted toward the down payment.

Equal Credit Opportunity Act: Federal Law aimed at protecting borrowers from being discriminated against based upon such things as ethnicity, sex, location of property and religious beliefs.

Equity
The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home's fair market value and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down or as the property appreciates.

Escrow Account
Most lenders set up this account that receives monthly payments from home buyers to pay for obligations such as insurance, taxes and assessments.

First Loan: This is what most people think of when someone says mortgage. It is a loan in first position against a property that is usually the balance of the loan used to purchase a property in the first place. All other loans against the property are subordinate to this loan.

Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in payments or terms.

HOA
Homeowners Association.

HELOC
Home Equity Line of Credit

Home Warranty
Like any other warranty, this guarantees the property against failure of mechanical systems, such as plumbing, electrical, heating and installed appliances.

Housing Expense Ratio: Also known as Debt to Income Ratio, this number is calculated by dividing all of a borrowers monthly obligations by their monthly gross income. Example: Mark has a total of $1,200.00 in monthly bills and his gross income is $2,400.00 per month. Therefore: 1200/2400 = 50%. Mark's Debt to Income Ratio is 50%.

Interest Rate: A charge for a loan usually a percentage of the amount loaned.

Joint Tenancy: Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and have equal rights in the property.

Jumbo Loan
A loan that exceeds the amount acceptable for sale in secondary market.

Lanai
A roofed patio.

Leverage
The use of financing to buy a large investment, such as a house, with a small amount of money.

Liability: Something for which one is liable; an obligation, responsibility, or debt. Examples of liability would include, a mortgage payment, a tax bill, an insurance bill, etc.

Lien
A legal claim on the property as security for a debt or charge.

Loan Origination: The beginning of the loan process. Initial contact wherein the borrower and lender agree to work together to secure a loan. Usually an application is taken and an initial quote is given. The borrower is asked to supply documents supporting the information that is included in the application and upon which the quote is based.

Loan-to-Value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

Lock:
Fixing of an interest rate or points at a certain level.

Mortgage: An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; procedure for foreclosure in event of default is established by statute.

Mortgage Banker: A direct mortgage lender. No middlemen here. A mortgage banker or lender funds loans in his or her own name and is usually more competitive than a broker in terms of "points" and "fees".

Mortgage Broker:
An independent individual (or company) who brings together borrowers and lenders together. Unlike a mortgage banker, a mortgage broker does not fund the loan. Instead, the broker originates and processes the loan, and places it with a funding source, such as a bank or thrift. Brokers typically require a fee or a commission for their services.

Mortgagee: One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation, a lender.

Mortgagor: One who gives a mortgage on his property to secure a loan or assure performance of an obligation, a borrower.

Negative Amortization: A loan in which the interest rate and payment may change independently from each other creating the potential for the principal balance of the loan to increase rather than decrease over the term of the loan. Several variations exist and all can create problems when attempting to put a second mortgage behind a neg-am loan.

Net Worth: Net worth is the difference between an individuals assets and liabilities. Net worth takes into consideration all assets and liabilities liquid or not and can be a positive or negative number.

No Cash Out Refinance: Also known as a "Rate and Term" refinance, this is a loan in which a lender simply refinances the existing first mortgage and no other bills are paid off and the borrower receives no cash as part of the transaction. These loans are usually done to improve the borrower's interest rate and to lower their mortgage payment.

Origination Fee:
A fee paid to a lender for processing a loan application, usually computed as a percentage of face value of the loan.

Patio Home:
Small, single-family home with a patio.

PITI:
Principal, interest, taxes, insurance -- the things that generally make up a monthly mortgage payment.

Point(s): A point equals 1 percent of a mortgage loan. Lenders charge points as a way to make a profit.. If you were charged one point on a $100,000.00 loan you would pay $1,000.00.

Prepayment: Provision made for loan payments to be larger than those specified in the note.

Prepayment Penalty
A fee that may be charged to a borrower who pays off a loan before it is due.

Principal: This term is used to mean the amount of money borrowed or the amount of the loan.

Principal Balance: The balance of the amount of the loan that is outstanding.

Private Mortgage Insurance (PMI)
Insurance that protects mortgage lenders against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if the down payment is less than 20 percent of the sale price. Home buyers pay for the coverage in monthly installments. PMI should be terminated when the home buyer has built up 20 percent equity in the property.

Processor: A liaison between the loan officer and the funder of a loan. The processor's responsibility is to meet all of the pre-funding conditions of a loan including, gathering all documentation and the clarification of information.

Qualifying Ratio: **See "Housing Expense Ratio"

Rate Lock: ** See "Lock"

Recording Fee:
A charge from the city or county for recording the transfer of the property.

Remaining Term: The time that is left before a loan is paid in full.

Second Loan (mortgage): A second mortgage is another loan secured by the property much like a first mortgage. It is a loan which is subordinate to the first mortgage.

Single-Family Home:
A detached house.

Sub-Prime or sub prime: A sub-prime loan is any loan in which the borrower has challenges in obtaining mortgage financing because of poor credit, hard to document income or assets, or any unique situation that would prevent them from obtaining funding through "conforming" lenders.

Tenancy in Common: Ownership by two or more persons who hold undivided interest, without right of survivorship; interests need not be equal.

Term: The agreed to amount of time for repayment of a loan.

Title Insurance:
Insurance that protects against loss from disputes over ownership of a property. A policy may protect the mortgage lender, the home buyer, or both.

Townhouse:
One of a row of houses connected with common side walls.

Tray Ceiling:
A flat ceiling with a raised center portion.

Trust Deed: Just as with a mortgage, this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan.

Trustee: One who holds property in trust for another to secure the performance of an obligation.

Vaulted Ceiling:
An arched ceiling.

Veranda:
Long covered porch.

Villa:
Smaller home on a small lot, may share side wall with another home.