Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

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 the remaining balance on the loan.

Adjustable Mortgage Loan
Any mortgage that does not have a fixed interest rate and a fixed payment for the term of the loan, or does not amortize to zero at the end of the set term, when required payments are made on time.

Adjustable Rate Mortgage
A mortgage in which the interest rate is adjusted periodically according to the movement in a pre-selected index.

Adjusted basis
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken

Adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Interval
For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

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.

Agreement of Sale
Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

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
A payment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal.

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.

Amortize
Reduce a debt by regular payments of both principal and interest.

Amortization Schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.

Annual Percentage Rate (APR)
The total yearly cost of a mortgage stated as a percentage of the loan amount: includes the base interest rate, primary 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.

Application Fee
The fee charged by the lender to the borrower for applying for a loan.

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.

Appraisal
A professional opinion of the market value of a property.

Appreciation
An increase in the value of a house due to changes in market conditions or other causes.

Assessed Value
The valuation placed upon 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.

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 Loan
These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

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.

Assumption of Mortgage
An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.

Attorney-in-fact
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage. Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

Balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.

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.

Bill of sale
A written document that transfers title to personal property.

Binder or "Offer to Purchase"
A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded. Broker (See Real Estate Broker)

Blanket insurance policy
A single policy that covers more than one piece of property (or more than one person).

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.

Borrower
One who receives funds with the expressed or implied intention of repaying the loan in full.

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.

Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Building code
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Line or Setback
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Buy down
Money advanced by an individual (seller, builder, etc.) to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.

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.

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.

Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase.

Cash Out
A loan transaction in which the borrower receives funds at the time of closing.

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.

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. 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 certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property, which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title, which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

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.

Claim
An amount requested of an insurer, by a policyholder or a claimant, for an insured loss.

Clear title
A title that is free of liens or legal questions as to ownership of the property

Closing
The occasion where a sale is finalized; the buyer signs the mortgage, and closing costs are paid. Also called "settlement."

Closing Costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."

Closing cost item
A fee or amount that a homebuyer must pay at closing for a single service, tax, or product.

Closing Day
The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Cloud (On Title)
An outstanding claim or encumbrance, which adversely affects the marketability of title.

Co-Borrower
An additional borrower on a loan. A co-borrower's obligation on a loan are the same as all other borrowers.

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.

Commission
Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale.

Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.

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 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
A abbreviation for comparable properties used for comparative purposes in the appraisal process; facilities of reasonably the same size and location with similar amenities; properties which have been recently sold, which have characteristics similar to property under consideration, thereby indicating 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 taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities, which serve the multi-unit project.

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 loan for funding the cost of construction. The lender advances funds to the builder 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.

Contract
An oral or written agreement to do or not to do a certain thing.

Contractor
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage
Any 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 time.

Convertible Arm
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Coverage
The amount of protection, usually expressed in a percentage of the total claim amount, an insured receives under a certificate.

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 Housing
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Cooperative mortgages
Mortgages related to a cooperative project.

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.

Covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Commitment
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

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 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.

Cure
A loan that is removed from a delinquency status with no loss to the insurer.