Loan / Real Estate Terms

Definitions to Common Mortgage, Real Estate and Loan Terms

It can be hard to understand the loan process especially when words are thrown around which you do not know the meaning of. To help you better understand the real estate and loan processes, the staff at BCI has taken the time to put together a list of many common loan terms.

Acceleration Clause- This is a provision in a mortgage that allows the lender to demand payment of outstanding loan balances in certain circumstances. Often this applies to when someone defaults on the loan or does not pay the mortgage for several months.

Acre – A measurement of the amount of land or area. It equals 43,560 square feet. Acre is a common measurement used in real estate for land.

Adjustment Date- On an adjustable rate mortgage this is the date the interest rate changes.

Adjustable Rate Mortgage- This is the type of mortgage where the interest rate varies according to different indices like the prime lending rate.

Agent- In real estate a person who handles the sale of the house acting in behalf of the seller and sometimes the buyers.

Amenity- This is any feature that adds value to the sale of the property. It can be natural amenities like a beautiful view of the valley or man made like swimming pools, saunas, and other recreation.

Amortization- The process of any person paying back a loan to the lender through regular periodic payments.

Amortization Schedule- The break down of individual payments of an amortized loan showing the principal contribution and interest fees. It is shown for the number of years the loan is for.

Amortization Term- This is the length of time an amortized loan is repaid. It is often 15 or 30 years.

Annual Percentage Rate- When someone takes out a loan this is the amount of interest charged on it.

Application: When this relates to applying for a mortgage it is a detailed applications form that gives borrower’s income, financial picture, debt, savings and other information that determines credit worthiness.

Appraisal- A document that details the value of a property or home. It is often derived from sales of other property that is similar by licensed professional appraiser.

Appraised Value- A document that details the value of a property or home by licensed certified appraiser often using many factors to determine the value. Some of these are age of home, electric service, property, interior design, style of home and other factors.

Appraiser- This is a certified professional with the education and knowledge of the real estate market. They know values and selling trends. Often they are independent and have no vested interest in the value or sales property of the item they access.

Appreciation- The rise in the value of a home or property due to market trends and value of the dollar.

Asset- In real estate it is a home or property that has value that a person owns.

Assumable Mortgage- This is a mortgage that the buyer can take over payments when the house is sold. They take on the seller’s loan or mortgage.

Balloon Mortgage- This is a mortgage with small payments not large enough to repay the loan when it is due. At the end of the loan the remaining balance become due in single large lump payment.

Balloon Payment- This is the final large payment at the end of a balloon mortgage that the person has been paying on.

Biweekly Mortgage- This is a mortgage that you make half payment every few weeks instead of one payment per month. This makes 13 payments per year instead of 12 reducing the time to pay off a loan.

Bridge Financing- A short term loan that helps the buyer purchase a new home before his current home sells. The equity is available from the other home to fund a new purchase.

Broker- A person that makes the purchasing of real estate or property happens by bringing together the buyer and seller.

Cap – This is a limit on high monthly payments or interest rates can change for life of mortgage or during a certain period time. It is usually associated with an adjustable rate mortgage.

Closing- The sale of the property where the home buyer signs all the paperwork needed and paying the appropriate costs associated with the sale. A closing usually has a lawyer present and realtor who have all the necessary documents to finalize the deal.

Closing Costs- These are all the costs the sale of the house or property entails. The buyers must pay the points, appraisal fees, title insurance, taxes and other expenses that are part to the deal.

Conventional Mortgage- This is usually a traditional way to finance a mortgage. It is not backed by any government or other agency.

Convertible Arm- This is a mortgage that begins with an adjustable rate and over time can be converted to a fixed rate mortgage. It must be done in a certain time frame.

Credit History- This is the record of a person’s loan payments, credit card history, debt, past and present used to determine if the person is credit worthy of a loan. Mortgage lender checks a person’s credit history.

Creditor- It is the person to whom you owe the money that you’re borrowed. It can be bank, credit card company or credit union.

Credit Report- This is a detailed report of employment history, credit card payments, loan payments, and other financial records used to determine a person’s ability to repay a loan or mortgage.

Deed- This is the document that names the owner of a home or property.

Depreciation- The decline in value of a home or property due to wear and tear and market values fluctuating. Sometime the value plummets when the buyer does not repair and keep up the home.

Down Payment- Often a large amount of money put down when purchasing a home or property. The intent is to pay off the remaining balance usually in monthly mortgage payments.

Equity- The difference between what the property is worth and what the owner owes on the mortgage or loan.

Equity Buildup- The buildup of value an owner had in a home or property through market value appreciation and repayment of debts owed.

Escrow- A certain amount of money often held by a third party for payment of taxes or insurance on real property.

Escrow Account- An account set up by a bank or other mortgage service companies to hold money to pay insurance, property taxes and other payments each month.

Exclusive Listing- This is usually an exclusive agreement between a homeowner and real estate agent that the agency is the only one that can sell and list the property or home.

Fannie Mae- It is a private company that makes mortgage money available to those that want to purchase homes. It is the nation’s second largest source of financing for home mortgages.

Fixed Rate Mortgage- It is a mortgage that has a fixed rate of interest that means it does not go up but remains the same during the duration of the loan.

Home Equity Conversion Mortgage- This is called a reverse annuity mortgage. It allows homeowners to use equity in their home to improve value by remodeling or paying off debts. The value is converted to cash. It is paid in monthly payments to the bank like any loan.

Home Equity Line of Credit- A loan that uses the value of the home to borrow cash to make improvements or pay off debts. Often the money is paid back like a regular loan in monthly payment.

Home Inspection- This is a detailed inspection of a building and property to uncover any defects or problems that can affect its value and the ultimate sale.

Home Inspector- This is a person who performs inspections of home. A professional that knows home construction and common problems to look for and; how to identify them.

Interest Rate- A percentage that is paid to the bank or lender as compensation for loaning or giving the buyer the mortgage.

Late Charge- An extra charge added to the regular mortgage payment when it is late by a specific time written in the document.

No Point Loan- A loan that has no points to pay on closing. This usually makes the interest rate on the loan higher than when you pay points. It is also called a refinance loan that includes closing costs as part of the loan.

Mortgage- This is a financial arrangement between and individual and bank where buyer borrows money with intention of paying it back over certain period of time.

Mortgage Banker- This is a financial institution like a bank provides primary and secondary mortgage to people that want to purchase homes and property.

Mortgage Broker- An organization or even a person that serves as a middleman to help buyers and bankers find loans. Often a broker represents many banks and tries to find best deal for each buyer.

Mortgage Insurance- This insurance will pay the mortgage when the owner defaults or can no longer make the payments.

Mortgage Insurance Premium – A fee often included in regular payment that includes money needed to pay for mortgage insurance.

Note- This is a legal document that states a borrower must repay the loan in a certain period of time at a certain interest rate.

Original Principal Balance – This is the amount owed principal on a mortgage during the closing of the sale or deal.

Point- This is usually a percentage of a mortgage amount you must pay in closing costs usually around 1 percent or more.

Pre-Approval- The process of applying for a loan before you look for a home by having your employment history, credit and financial information checked. If you are pre qualified you have more buying clout when looking for a home. This is also known as the process of Pre Qualification. This is written statement from a loan officer that the buyer has money to buy a home.

Principal- This is the amount of a monthly mortgage payment that does not include interest and other added fees.

Principal, Interest, Taxes and Insurance- This is the most common type of fees included in most regular monthly mortgage payments.

Purchase Agreement- A written document that is signed by the buyer and seller detailing the condition in which a home or property will be sold.

Real Estate Agent – It is a licensed professional responsible for buying and selling home, condos, and property.

Sale Price- The actual price a home or property sell for with any added fees.

Second Mortgage- A second loan secured using the equity in a home when a primary mortgage already exists.

Title- A real estate document that serves as proof of ownership of property.

Title Search- When a property is researched by a company to make sure the title history is clear and has no existing or outstanding claims.