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.

T

TAX

Tax as applied to real estate is an enforced charge imposed on persons, property, or income to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.

TAX LIEN

Lien for nonpayment of taxes.

TAX SALE

Public sale of property at an auction by a governmental authority due to non-payment of property taxes.

TENANCY

A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on payment of rent or tenure.

TENANCY AT WILL

A tenancy that may be terminated at the will of either the lessor or lessee.

TENANT

Any person in possession of real property with the permission of the owner.

TENANT IN COMMON

Two or more persons who own a property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of one, may sue to partition the property.

TENANTS BY THE ENTIRETY

A husband and wife own the property with the common law right of survivorship so, if one dies, the other automatically inherits.

TESTATE

Having made a will before death.

TIME IS OF THE ESSENCE

Legal phrase in a contract requiring punctual performance of all obligations.

TITLE

Document that gives evidence of an individual's ownership of property.

TITLE, ESCROW, AND CLOSING AGENT FEES

Fees charged by these various companies in exchange for their services.

TITLE INSURANCE

An insurance policy that protects the insured (purchaser and lender) against loss arising from defects in title.

TITLE SEARCH

A review of the public records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the records, which would adversely affect the marketability or value of title.

TRUSTEE

A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

TRUTH-IN-LENDING ACT (TILA)

Federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for the loan.

TRUTH-IN LENDING STATEMENT (REGULATION Z)

A federal government regulation that provides details of the cost of obtaining a mortgage loan. Lenders must provide this shortly after the loan application has been completed.

TWO-STEP MORTGAGE

Mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7 or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days' notice at the end of 7 or 10 years.

U

UNDERWRITING

The process a lender goes through to decide whether or not to make a loan based on credit history, assets, ability to repay, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

USURY

Interest charged in excess of the legal rate established by law.

V

VA LOANS

Long-term, low or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FUNDING FEE

The VA Mortgage Funding Fee is required by law and enables the Veteran who obtains a VA home loan with low or no down payment to contribute toward the cost of this benefit, thereby reducing the cost to taxpayers. The Funding Fee can be financed and the percentage is based on the type and length of time in the service, in addition to being a first-time user or subsequent user.

VALUATION

The act or process of estimating value; the amount of estimated value.

VARIABLE RATE

An interest rate that may change periodically in relation to an index. Rates could increase or decrease according to market conditions.

VERIFICATION OF DEPOSITS (VOD)

Document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE)

Document signed by the borrower's employer verifying his/her position and salary.

W

W2 FORM

Income tax form that is provided by employers to employees that states the income earned and taxes paid in a calendar year.

WAREHOUSE FEE

Many mortgage firms must borrow funds on a short-term basis in order to originate loans that are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short-term loans than on mortgage loans, the mortgage firm has an economic loss that is offset by charging a warehouse fee.

WARRANTY DEED

Most valuable type of deed in which the grantor makes formal assurance of title.

WRAPAROUND

The debt secured includes an existing debt already on the property. The payments made to the holder of the wraparound include payments due on the existing loan and the holder must forward the appropriate portion of each payment to the existing note holder.

Y

YIELD

The interest earned by an investor on his investment (or bank on the money it has lent). Also called Return.

Z

ZONING ORDINANCES

The acts of an authorized local government establishing building codes and setting forth regulations for property land usage.