Financial Terms K - Z

K

Late Payment Charges: the penalty the homeowner must pay when a mortgage payment is made after the due date grace period.

Lease: a written agreement between a property owner and a tenant (resident) that stipulates the payment and conditions under which the tenant may occupy a home or apartment and states a specified period of time.

Lease Purchase (Lease Option): assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

Lender: A term referring to an person or company that makes loans for real estate purchases. Sometimes referred to as a loan officer or lender.

Lender Option Commitments: an agreement giving a lender the option to deliver loans or securities by a certain date at agreed upon terms.

Liabilities: a person's financial obligations such as long-term / short-term debt, and other financial obligations to be paid.

Liability Insurance: insurance coverage that protects against claims alleging a property owner's negligence or action resulted in bodily injury or damage to another person. It is normally included in homeowner's insurance policies.

Lien: a legal claim against property that must be satisfied when the property is sold. A claim of money against a property, wherein the value of the property is used as security in repayment of a debt. Examples include a mechanic's lien, which might be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the title and needs to be settled before transfer of ownership. A lien release is a written report of the settlement of a lien and is recorded in the public record as evidence of payment.

Lien Waiver: A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.

Life Cap: a limit on the range interest rates can increase or decrease over the life of an adjustable-rate mortgage (ARM).

Line of Credit: an agreement by a financial institution such as a bank to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset: a cash asset or an asset that is easily converted into cash.

Listing Agreement: a contract between a seller and a real estate professional to market and sell a home. A listing agreement obligates the real estate professional (or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and most favorable terms for the property seller.

Loan: money borrowed that is usually repaid with interest.

Loan Acceleration: an acceleration clause in a loan document is a statement in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Loan Fraud: purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Loan Officer: a representative of a lending or mortgage company who is responsible for soliciting homebuyers, qualifying and processing of loans. They may also be called lender, loan representative, account executive or loan rep.

Loan Origination Fee: a charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and varies with the lender and type of loan. A loan origination fee of 1 to 2 percent of the mortgage amount is common.

Loan Servicer: the company that collects monthly mortgage payments and disperses property taxes and insurance payments. Loan servicers also monitor nonperforming loans, contact delinquent borrowers, and notify insurers and investors of potential problems. Loan servicers may be the lender or a specialized company that just handles loan servicing under contract with the lender or the investor who owns the loan.

Loan to Value (LTV) Ratio: a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock-In: since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

Lock-in Period: the length of time that the lender has guaranteed a specific interest rate to a borrower.

Loss Mitigation: a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan

Mandatory Delivery Commitment: an agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.

Margin: the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Market Value: the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Maturity: the date when the principal balance of a loan becomes due and payable.

Median Price: the price of the house that falls in the middle of the total number of homes for sale in that area.

Medium Term Notes: unsecured general obligations of Fannie Mae with maturities of one day or more and with principal and interest payable in U.S. dollars.

Merged Credit Report: raw data pulled from two or more of the major credit-reporting firms.

Mitigation: term usually used to refer to various changes or improvements made in a home; for instance, to reduce the average level of radon.

Modification: when a lender agrees to modify the terms of a mortgage without refinancing the loan.

Mortgage: a lien on the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.

Mortgage Acceleration Clause: a clause allowing a lender, under certain circumstances, demand the entire balance of a loan is repaid in a lump sum. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage-Backed Security (MBS): a Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.

Mortgage Banker: a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.

Mortgage Broker: a firm that originates and processes loans for a number of lenders.

Mortgage Life and Disability Insurance: term life insurance bought by borrowers to pay off a mortgage in the event of death or make monthly payments in the case of disability. The amount of coverage decreases as the principal balance declines. There are many different terms of coverage determining amounts of payments and when payments begin and end.

Mortgage Insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Insurance purchased by the buyer to protect the lender in the event of default. Typically purchased for loans with less than 20 percent down payment. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance is maintained on conventional loans until the outstanding amount of the loan is less than 80 percent of the value of the house or for a set period of time (7 years is common). Mortgage insurance also is available through a government agency, such as the Federal Housing Administration (FHA) or through companies (Private Mortgage Insurance or PMI).

Mortgage Insurance Premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

Mortgage Interest Deduction: the interest cost of a mortgage, which is a tax - deductible expense. The interest reduces the taxable income of taxpayers.

Mortgage Modification: a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Mortgage Note: a legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.

Mortgage Qualifying Ratio: Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28: 36.

Mortgage Score: a score based on a combination of information about the borrower that is obtained from the loan application, the credit report, and property value information. The score is a comprehensive analysis of the borrower's ability to repay a mortgage loan and manage credit.

Mortgagee: the lender in a mortgage agreement. Mortgagor - The borrower in a mortgage agreement.

Mortgagor: the borrower in a mortgage agreement

Multifamily Housing: a building with more than four residential rental units.

Multiple Listing Service (MLS): within the Metro Columbus area, Realtors submit listings and agree to attempt to sell all properties in the MLS. The MLS is a service of the local Columbus Board of Realtors?. The local MLS has a protocol for updating listings and sharing commissions. The MLS offers the advantage of more timely information, availability, and access to houses and other types of property on the market.

National Credit Repositories: currently, there are three companies that maintain national credit - reporting databases. These are Equifax, Experian, and Trans Union, referred to as Credit Bureaus.

Negative Amortization: amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.

Net Income: Your take-home pay, the amount of money that you receive in your paycheck after taxes and deductions.

No Cash Out Refinance: a refinance of an existing loan only for the amount remaining on the mortgage. The borrower does not get any cash against the equity of the home. Also called a "rate and term refinance."

No Cost Loan: there are many variations of a no cost loan. Generally, it is a loan that does not charge for items such as title insurance, escrow fees, settlement fees, appraisal, recording fees or notary fees. It may also offer no points. This lessens the need for upfront cash during the buying process however no cost loans have a higher interest rate.

Nonperforming Asset: an asset such as a mortgage that is not currently accruing interest or which interest is not being paid.

Note: a legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period of time.

Note Rate: the interest rate stated on a mortgage note.

Notice of Default: a formal written notice to a borrower that there is a default on a loan and that legal action is possible.

Notional Principal Amount: the proposed amount which interest rate swap payments are based but generally not paid or received by either party.

Non-Conforming loan: is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Notary Public: a person who serves as a public official and certifies the authenticity of required signatures on a document by signing and stamping the document.

O

Offer: indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Original Principal Balance: the total principal owed on a mortgage prior to any payments being made.

Origination: the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Origination Fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing. One point equals one percent of the loan amount. On a conventional loan, the loan origination fee is the number of points a borrower pays.

Owner Financing: a home purchase where the seller provides all or part of the financing, acting as a lender.

Ownership: ownership is documented by the deed to a property. The type or form of ownership is important if there is a change in the status of the owners or if the property changes ownership.

Owner's Policy: the insurance policy that protects the buyer from title defects.

PITI:Principal, Interest, Taxes, and Insurance: the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PITI Reserves: a cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Partial Claim: a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Partial Payment: a payment that is less than the total amount owed on a monthly mortgage payment. Normally, lenders do not accept partial payments. The lender may make exceptions during times of difficulty. Contact your lender prior to the due date if a partial payment is needed.

Payment Cap: a limit on how much an ARM's payment may increase, regardless of how much the interest rate increases.

Payment Change Date: the date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

Payment Due Date: Contract language specifying when payments are due on money borrowed. The due date is always indicated and means that the payment must be received on or before the specified date. Grace periods prior to assessing a late fee or additional interest do not eliminate the responsibility of making payments on time.

Perils: for homeowner's insurance, an event that can damage the property. Homeowner's insurance may cover the property for a wide variety of perils caused by accidents, nature, or people.

Personal Property: any property that is not real property or attached to real property. For example furniture is not attached however a new light fixture would be considered attached and part of the real property.

Planned Unit Development (PUD): a development that is planned, and constructed as one entity. Generally, there are common features in the homes or lots governed by covenants attached to the deed. Most planned developments have common land and facilities owned and managed by the owner's or neighborhood association. Homeowners usually are required to participate in the association via a payment of annual dues.

Points: a point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $95,000, one point means you pay $950 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.

Power of Attorney: a legal document that authorizes another person to act on your behalf. A power of attorney can grant complete authority or can be limited to certain acts or certain periods of time or both.

Pre-Approval: a lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.

Predatory Lending: abusive lending practices that include a mortgage loan to someone who does not have the ability to repay. It also pertains to repeated refinancing of a loan charging high interest and fees each time.

Predictive Variables: The variables that are part of the formula comprising elements of a credit-scoring model. These variables are used to predict a borrower's future credit performance.

Preferred Stock: stock that takes priority over common stock with regard to dividends and liquidation rights. Preferred stockholders typically have no voting rights.

Pre-foreclosure Sale: a procedure in which the borrower is allowed to sell a property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

Prepayment: any amount paid to reduce the principal balance of a loan before the due date or payment in full of a mortgage. This can occur with the sale of the property, the pay off the loan in full, or a foreclosure. In each case, full payment occurs before the loan has been fully amortized.

Prepayment Penalty: a provision in some loans that charge a fee to a borrower who pays off a loan before it is due.

Pre-Foreclosure sale: allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Pre-Qualify: a lender informally determines the maximum amount an individual is eligible to borrow. This is not a guaranty of a loan.

Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepayment: payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty.

Prepayment Penalty: a fee charged to a homeowner who pays one or more monthly payments before the due date. It can also apply to principal reduction payments.

Prepayment Penalty Mortgage (PPM): a type of mortgage that requires the borrower to pay a penalty for prepayment, partial payment of principal or for repaying the entire loan within a certain time period. A partial payment is generally defined as an amount exceeding 20% of the original principal balance.

Price Range: the high and low amount a buyer is willing to pay for a home.

Prime Rate: the interest rate that banks charge to preferred customers. Changes in the prime rate are publicized in the business media. Prime rate can be used as the basis for adjustable rate mortgages (ARMs) or home equity lines of credit. The prime rate also affects the current interest rates being offered at a particular point in time on fixed mortgages. Changes in the prime rate do not affect the interest on a fixed mortgage.

Principal: the amount of money borrowed to buy a house or the amount of the loan that has not been paid back to the lender. This does not include the interest paid to borrow that money. The principal balance is the amount owed on a loan at any given time. It is the original loan amount minus the total repayments of principal made.

Principal, Interest, Taxes, and Insurance (PITI): the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Private Mortgage Insurance (PMI): insurance purchased by a buyer to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance is generally maintained until over 20 Percent of the outstanding amount of the loan is paid or for a set period of time, seven years is normal. Mortgage insurance may be available through a government agency, such as the Federal Housing Administration (FHA) or the Veterans Administration (VA), or through private mortgage insurance companies (PMI).

Promissory Note: a written promise to repay a specified amount over a specified period of time.

Property (Fixture and Non-Fixture): in a real estate contract, the property is the land within the legally described boundaries and all permanent structures and fixtures. Ownership of the property confers the legal right to use the property as allowed within the law and within the restrictions of zoning or easements. Fixture property refers to those items permanently attached to the structure, such as carpeting or a ceiling fan, which transfers with the property.

Property Tax: a tax charged by local government and used to fund municipal services such as schools, police, or street maintenance. The amount of property tax is determined locally by a formula, usually based on a percent per $1,000 of assessed value of the property.

Property Tax Deduction: the U.S. tax code allows homeowners to deduct the amount they have paid in property taxes from there total income.

Public Record Information: Court records of events that are a matter of public interest such as credit, bankruptcy, foreclosure and tax liens. The presence of public record information on a credit report is regarded negatively by creditors.

Punch List: a list of items that have not been completed at the time of the final walk through of a newly constructed home.

Purchase Offer: A detailed, written document that makes an offer to purchase a property, and that may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally binding contract, sometimes called the Sales Contract.

Q

Qualifying Ratios: guidelines utilized by lenders to determine how much money a homebuyer is qualified to borrow. Lending guidelines typically include a maximum housing expense to income ratio and a maximum monthly expense to income ratio.

Quitclaim Deed: a deed transferring ownership of a property but does not make any guarantee of clear title.

RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

Radon: a radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

Rate Cap: a limit on an ARM on how much the interest rate or mortgage payment may change. Rate caps limit how much the interest rates can rise or fall on the adjustment dates and over the life of the loan.

Rate Lock: a commitment by a lender to a borrower guaranteeing a specific interest rate over a period of time at a set cost.

Real Estate Agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Real Estate Mortgage Investment Conduit (REMIC): a security representing an interest in a trust having multiple classes of securities. The securities of each class entitle investors to cash payments structured differently from the payments on the underlying mortgages.

Real Estate Property Tax Deduction: a tax deductible expense reducing a taxpayer's taxable income.

Real Estate Settlement Procedures Act (RESPA): a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

Real Property: land, including all the natural resources and permanent buildings on it.

REALTOR?: a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.
Recorder: the public official who keeps records of transactions concerning real property. Sometimes known as a "Registrar of Deeds" or "County Clerk."

Recording: the recording in a registrar's office of an executed legal document. These include deeds, mortgages, satisfaction of a mortgage, or an extension of a mortgage making it a part of the public record.

Recording Fees: charges for recording a deed with the appropriate government agency.

Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

Rehabilitation Mortgage: a mortgage that covers the costs of rehabilitating (repairing or Improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

Reinstatement Period: a phase of the foreclosure process where the homeowner has an opportunity to stop the foreclosure by paying money that is owed to the lender.

Remaining Balance: the amount of principal that has not yet been repaid.

Remaining Term: the original amortization term minus the number of payments that have been applied.

Repayment plan: an agreement between a lender and a delinquent borrower where the borrower agrees to make additional payments to pay down past due amounts while making regularly scheduled payments.

Return On Average Common Equity: net income available to common stockholders, as a percentage of average common stockholder equity.

Reverse Mortgage (HECM): the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM.

Right of First Refusal: a provision in an agreement that requires the owner of a property to give one party an opportunity to purchase or lease a property before it is offered for sale or lease to others.

Risk Based Capital: an amount of capital needed to offset losses during a ten-year period with adverse circumstances.

Risk Based Pricing: Fee structure used by creditors based on risks of granting credit to a borrower with a poor credit history.

Risk Scoring: an automated way to analyze a credit report verses a manual review. It takes into account late payments, outstanding debt, credit experience, and number of inquiries in an unbiased manner.

Sale Leaseback: when a seller deeds property to a buyer for a payment, and the buyer simultaneously leases the property back to the seller.

Second Mortgage: an additional mortgage on property. In case of a default the first mortgage must be paid before the second mortgage. Second loans are more risky for the lender and usually carry a higher interest rate.

Secondary Mortgage Market: the buying and selling of mortgage loans. Investors purchase residential mortgages originated by lenders, which in turn provides the lenders with capital for additional lending.

Secured Loan: a loan backed by collateral such as property.

Security: the property that will be pledged as collateral for a loan.

Seller Take Back: an agreement where the owner of a property provides second mortgage financing. These are often combined with an assumed mortgage instead of a portion of the seller's equity.

Serious Delinquency: a mortgage that is 90 days or more past due.

Servicer: a business that collects mortgage payments from borrowers and manages the borrower's escrow accounts.

Servicing: the collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Setback: the distance between a property line and the area where building can take place. Setbacks are used to assure space between buildings and from roads for a many of purposes including drainage and utilities.

Settlement: another name for closing.

Settlement Statement: a document required by the Real Estate Settlement Procedures Act (RESPA). It is an itemized statement of services and charges relating to the closing of a property transfer. The buyer has the right to examine the settlement statement 1 day before the closing. This is called the HUD 1 Settlement Statement.

Special Forbearance: a loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

Stockholders' Equity: the sum of proceeds from the issuance of stock and retained earnings less amounts paid to repurchase common shares.

Stripped MBS (SMBS): securities created by "stripping" or separating the principal and interest payments from the underlying pool of mortgages into two classes of securities, with each receiving a different proportion of the principal and interest payments.

Sub-Prime Loan: "B" Loan or "B" paper with FICO scores from 620 - 659. "C" Loan or "C" Paper with FICO scores typically from 580 to 619. An industry term to used to describe loans with less stringent lending and underwriting terms and conditions. Due to the higher risk, sub-prime loans charge higher interest rates and fees.

Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.

Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc. Surveys are conducted by licensed surveyors and are normally required by the lender in order to confirm that the property boundaries and features such as buildings, and easements are correctly described in the legal description of the property.

Sweat Equity: using labor to build or improve a property as part of the down payment

Third Party Origination: a process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Terms: The period of time and the interest rate agreed upon by the lender and the borrower to repay a loan.

Title: a legal document establishing the right of ownership and is recorded to make it part of the public record. Also known as a Deed.

Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.

Title Company: a company that specializes in examining and insuring titles to real estate.

Title Defect: an outstanding claim on a property that limits the ability to sell the property. Also referred to as a cloud on the title.

Title Insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers. An insurance policy guaranteeing the accuracy of a title search protecting against errors. Most lenders require the buyer to purchase title insurance protecting the lender against loss in the event of a title defect. This charge is included in the closing costs. A policy that protects the buyer from title defects is known as an owner's policy and requires an additional charge.

Title Search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Transfer Agent: a bank or trust company charged with keeping a record of a company's stockholders and canceling and issuing certificates as shares are bought and sold.

Transfer of Ownership: any means by which ownership of a property changes hands. These include purchase of a property, assumption of mortgage debt, exchange of possession of a property via a land sales contract or any other land trust device.

Transfer Taxes: State and local taxes charged for the transfer of real estate. Usually equal to a percentage of the sales price.

Treasury Index: can be used as the basis for adjustable rate mortgages (ARMs) It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities.

Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

Two Step Mortgage: an adjustable-rate mortgage (ARM) that has one interest rate for the first five to seven years of its term and a different interest rate for the remainder of the term.

Trustee: a person who holds or controls property for the benefit of another.

Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

Up Front Charges: the fees charged to homeowners by the lender at the time of closing a mortgage loan. This includes points, broker's fees, insurance, and other charges.

VA (Department of Veterans Affairs): a federal agency, which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

VA Mortgage: a mortgage guaranteed by the Department of Veterans Affairs (VA).

Variable Expenses: Costs or payments that may vary from month to month, for example, gasoline or food.

Variance: a special exemption of a zoning law to allow the property to be used in a manner different from an existing law.

Vested: a point in time when you may withdraw funds from an investment account, such as a retirement account, without penalty.

Walk Through: the final inspection of a property being sold by the buyer to confirm that any contingencies specified in the purchase agreement such as repairs have been completed, fixture and non-fixture property is in place and confirm the electrical, mechanical, and plumbing systems are in working order.

Warranty Deed: a legal document that includes the guarantee the seller is the true owner of the property, has the right to sell the property and there are no claims against the property.

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Zoning: local laws established to control the uses of land within a particular area. Zoning laws are used to separate residential land from areas of non-residential use, such as industry or businesses. Zoning ordinances include many provisions governing such things as type of structure, setbacks, lot size, and uses of a building.

Source: www.HUD.gov