Glossary of Terms
It is often said that mortgage financing has a language of its own. To help you through the process, we have a dictionary of common terms you’re likely to come across during the home financing process. Of course, if you’re unsure about a term, or you see something you’re unfamiliar with, give us a call at 888-509-2867.
A lien such as a tax lien or judgment lien, that attaches to all property of the debtor rather than the lien of, for example, a trust deed that attaches only to a specific property.
GENERAL WARRANTY DEED
A deed that conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
GOOD FAITH ESTIMATE
A document provided at application and closing of installment equity loan that provides estimates of all closing costs associated with obtaining and closing a mortgage loan.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA/GINNIE MAE)
A government-owned agency that acts as a secondary market conduit for FHA and VA loans. GNMA guarantees the timely principal and interest payments to investors.
The clause in a law permitting the continuation of a use, business, etc., that was permissible but because of a change in the law is now no longer permissible.
Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.
GRADUATED PAYMENT MORTGAGE (GPM)
A type of flexible-payment mortgage wherein the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
The buyer, who receives a deed.
The seller, who gives a deed.
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm, and the like.
HEIRS AND ASSIGNS
One who might inherit or succeed to an interest in a property under the rules of law applicable when a property owner dies.
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.
Policy that expands insurance for a homeowner. It may include theft, liability, earthquake, etc.
HOMEOWNER'S OR MAINTENANCE FEES
Payments made by property owner(s) of a condominium or a unit in PUD (Planned Unit Development) to the homeowners' association for expenses incurred in upkeep of the common areas.
Tract of land occupied as a family home.
HOUSING AND URBAN DEVELOPMENT (HUD)
The federal government agency that oversees FHA.
HOUSING EXPENSES-TO-INCOME RATIO
The ratio, expressed as a percentage that results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans).
A closing document required by HUD that outlines the settlement cost of a loan. The closing agent generally prepares the document and the buyer receives it shortly after the loan is closed.
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.
Account held by a lender for payment of taxes, insurance or other related expenses. Also known as an escrow account.
Valuable additions to property that raise the value of the property.
Fees and other costs (Recording, Delivery, Wire, etc.) that are incurred when a real estate loan is closed.
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one-, three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.
A tax term used to describe a sale that is usually accomplished by use of a land contract.
A mortgage insured against loss to the mortgagee (lender) in the event of default and failure of the mortgaged property to satisfy the balance owing plus cost of foreclosure.
The sum paid for borrowing money.
A type of mortgage that works best for people with fluctuating income from commissions or bonuses, or for those who expect to earn more money over the next few years. Borrowers pay only the interest on these loans for a fixed period of time, usually five or seven years.
INTEREST PAYMENT NOTIFICATION (1098)
A federal tax form that lenders use at year end to notify borrowers of the interest that was paid on their mortgage over the last year.
The percentage of an amount of money that is paid for its use for a specified time.
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
A property that is not occupied by the owner and in most cases produces income or is held for gains from appreciation.
A money source for a lender.
JOINT OWNERSHIP AGREEMENT
An agreement between owners defining their rights, ownership, monetary obligations, and responsibilities. This could be between an investor and an occupant or between occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant's payment is deemed rent for tax purposes.
An undivided interest in property taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance and beginning at the same time. Upon death of a joint tenant, the interest passes to the surviving joint tenants rather than to the heirs of the deceased.
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
A loan that is larger than the limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
A mortgage subordinate to another mortgage.
Abbreviation referring to K. Hovnanian® American Mortgage, L.L.C.™.
Abbreviation referring to K. Hovnanian® et. al.