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401(k)
An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations.
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401(k) loan
Some administrators of 401(k) plans allow for loans against the monies you have accumulated in these plans -- monies must be repaid to avoid serious penalty charges.
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acceleration clause
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance. For example, if a monthly payment is missed or the mortgage contains a due on sale provision.
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acceptance
An offeree's consent to enter into a contract and be bound by the terms of the offer.
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acre
A measure of land, 43560 square feet.
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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 mortgage loan.
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adjustable-rate mortgage
A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified financial index.
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adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
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adjustment period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
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agreement for deed
A contract to purchase certain real estate.
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amortization
A payment method that involves paying off part of the principal along with the interest, instead of interest-only payments. Amortization can speed up loan payments and decrease the balance owed by keeping interest from accruing.
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amortization table
An amortization table shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
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amortization term
The amount required to pay off a mortgage loan at a point in time.
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annual percentage rate(APR)
The actual finance charge for a loan, including points and loan fees in addition to the stated interest rate.
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application
A form used to apply for a mortgage loan.
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appraisal
A written analysis of the estimated worth of a property on which a mortgage is based.
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appraised value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
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appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.
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assessed value
The valuation placed on property by a public tax assessor for purposes of taxation.
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assessment
Value assigned to property by local government for tax purposes. This is not used to determine the fair market value.
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asset
Anything of monetary value that is owned by an applicant. Assets include but are not limited to bank accounts, stocks, mutual funds, real property and personal property.
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assignment
The transfer of a mortgage from one party to another.
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assumable mortgage
A mortgage that can be taken over by the buyer when a home is sold.
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assumption
The transfer of the seller's existing mortgage to the buyer.
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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. Usually, the lender reserves the right to approve the buyer.
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assumption fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
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attorney-in-fact
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
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balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.
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balloon mortgage
A mortgage that has periodic payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
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balloon payment
A principal payment due all at once at the end of a specified period.
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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.
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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.
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beneficiary
The person designated to receive the income from a trust, estate, or a deed of trust.
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bequeath
To transfer personal property through a will.
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bill of sale
A written document that transfers title to personal property.
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binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
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biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
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bona fide
In good faith, without fraud.
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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.
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borrower
A mortgagor whom recives funds in the form of a loan with the obligation.
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breach
A violation of any legal obligation.
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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. Also known as "swing loan."
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broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
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budget
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
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building code
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
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buydown account
An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
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buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
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cap
Limit on how much the interest rate or mortgage payment may change on an ARM
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capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
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cash-out refinance
A refinance transaction in which the borrower receives cash in excess of existing mortgages and certain financing costs.
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Certificate of Eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.
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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.
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certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
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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.
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clear title
A title that is free of liens or legal questions as to ownership of the property.
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closing
A meeting to sign documents that transfer ownership of a property from seller to buyer.
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closing cost item
A fee or amount that a home buyer must pay at closing for a service, such as origination fees, title fees, loan fees etc.
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closing costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey.
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cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
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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 jointly responsible for the repayment.
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collateral
An asset that secures the repayment of a loan.
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collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
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commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction.
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commitment letter
A formal offer by a lender stating the terms under which it agrees to lend money to a borrower.
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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.
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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.
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common law
An unwritten body of law based on general custom and usage which is recognized and enforced by the courts.
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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.
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comparable
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location , and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
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compound interest
Interest paid on the original principal balance and on the accrued and unpaid interest.
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condemnation
The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.
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condominium
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
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condominium conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
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construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
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contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
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contract
An oral or written agreement to do or not to do a certain thing.
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conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
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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 timeframes after loan origination.
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convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
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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.
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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.
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cooperative mortgages
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.
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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.
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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.
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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.
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covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
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credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
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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.
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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.
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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. See merged credit report.
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credit 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 credit repositories (EFX, Experian, TU), as well as from other sources.
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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.
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creditor
A person to whom money is owed.
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deed
The legal document conveying title to a property from the seller to the buyer.
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deed of trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
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deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
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default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
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delinquency
Failure to make mortgage payments when mortgage payments are due.
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deposit
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
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dower
The rights of a widow in the property of her husband at his death.
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down payment
The part of the purchase price of a property that the buyer pays in cash and may not borrow.
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due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Comparing Mortgage Rates Since 1998
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