GLOSSARY OF TERMS
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.
LEGAL DESCRIPTION: A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.
LENDER: An institution that makes loans to borrowers on real estate.
LIABILITIES: A persons 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 owners 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 when the property is sold.
LIFETIME CAP: A provision of an ARM that limits the total increase in interest rates over the life of the loan.
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.
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.
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: Formal offer by a lender stating the terms under which it agrees to loan money to a home buyer.
LOAN ESTIMATE: is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying. The Loan Estimate must be provided to consumers no later than three business days after they submit a loan application.
LOAN ORIGINATION: The process by which a mortgage lender brings into existence a mortgage secured by real property.
LOAN SERVICING: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
LOAN-TO-VALUE: (LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.
LOCK: The period, expressed in days, during which a lender will guarantee a rate.
LOCK-IN-PERIOD: The time period during which the lender has guaranteed an interest rate to a borrower.
MARKETABLE TITLE: A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
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.
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.
MARGIN: (Also called Spread). The amount the lender adds to the index to determine the Fully Indexed Accrual Rate.
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 HOUSING EXPENSE: Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.
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 a payment of a debt.
MORTGAGE BANKER: A company that originates mortgages exclusively for resale in the secondary market.
MORTGAGE BROKER: A company that for a fee matches borrowers with lenders.
MORTGAGE: The lender in a mortgage agreement.
MORTGAGE COMMITMENT: A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
MORTGAGE INSURANCE PREMIUM: The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.
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.
MORTGAGE NOTE: A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.
MORTGAGOR: The borrower in a mortgage agreement.
MULTI-DWELLING 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.