Dictionary of Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Acceleration Clause: Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

Acceptance: An offeree’s consent to enter into a contract and be bound by the terms of the offer.

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 loan.

Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgagee or the Canadian rollover mortgage.

Affordability Analysis: A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

Adjustment Interval: On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Agency: A legal relationship resulting from an agreement or contract, either expressed or implied, written or oral, whereby one person, called the agent, is employed by another, called the principal, to do certain acts in dealing with a third party.

Amenities: In real estate, amenities refer to such circumstances, in regard to location outlook, or access to a park, lake, highway, view or the like which enhance the pleasantness or desirability of real estate and which contribute to the pleasure and enjoyment of the occupants.

Amortization: Loan repayment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Amortization Table: Mathematical table that shows how a mortgage or other loan is gradually repaid by applying the appropriate amounts of the loan payment to principal and interest. In the beginning of the repayment period, only a small portion is applied to reducing the loan principal. As the loan approaches maturity, the portion of the payment applied to principal rises.

Annual Mortgagor Statement: A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate (APR): An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other costs. For example, if a borrower pays $500 in closing costs to obtain a $10,000 loan, the APR is higher than the simple interest rate because the borrower is repaying a $10,000 loan but only receiving net proceeds of $9,500. The federal Truth-in-Lending Act requires lenders to disclose the APR.

Appraisal: In real estate, an estimate of the quality or value of property, made by a qualified professional called an "appraiser"

Appurtenance: That which belongs to something else; something adapted to the use of the real property to which it is connected or belongs, and which was intended to be a permanent addition to the land, and which passes as an incident to said land, as a house, barn, garage, right of

Assessed Valuation: The estimate of value by a unit of government for taxation purposes.

Assignee: The party to whom a legal right has been assigned or transferred.

Assignment: A transfer to another of a legal right.

Assignor: The party who assigns or transfers a legal right.

Assumption: The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market rate interest charges will apply.

Attachment: A type of encumbrance, permitted only under special circumstances, which is placed against the real estate of a defendant in a pending lawsuit for money damages.

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Balloon Payment: When credit is advanced by note or contract and payment is required in regular equal installments and the note or contract will mature before the note or contract is paid in full, a payment which may be larger than the regular payment will fall due. This payment is called a "balloon payment".

Beneficiary: The person who receives or is to receive the benefits resulting from certain acts; one receiving benefits, profits or advantage; one for whose benefit a trust is created.

Bill of Sale: A written instrument by which one person transfers or conveys right, title or interest in personal property to another.

Blanket Mortgage: A single mortgage which covers more than one piece of property.

Broker: An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money him/herself. Brokers usually charge a fee or receive a commission for their services.

Building Code: Regulations established by local governments setting forth the structural requirements of buildings.

Buy-Down: When the lender and/or the homebuilder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

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Caps (Interest): Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (Payment): Consumer safeguards which limit the amount the monthly payment on an adjustable rate mortgage may change.

Caveat Emptor: "Let the Purchaser beware". The buyer is duty-bound to examine the property he is purchasing and he assumes conditions which are readily known upon view.

Certificate of Reasonable Value: Commonly referred to as a "CRV" Veterans Administration's certified appraisal of value of real property.

Certificate of Taxes Dues: A written statement or guaranty of the condition of the taxes on a certain property, made by the County Treasurer of the county wherein the property is located. Any loss resulting to any person from an error in a tax certificate shall be paid by the county which such treasurer represents.

Closing: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called the settlement.

Closing Costs: Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit reporting charge and other costs assessed at closing. The costs of closing usually are about 3 to 6 percent of the mortgage amount.

Cloud on the Title: An outstanding claim or encumbrance which, if valid, would affect or impair the title of the owner of the property.

Commingling: Mixing money belonging to other with personal or business funds. Illegal commingling is using the money of one beneficiary for the benefit of another or failing to maintain such money in identified escrow accounts.

Commitment: An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Condominium Ownership: The individual outright ownership of a single unit in a multi-unit property together with an interest in the common elements of that property.

Consideration: One of the essential elements of a contract A promise or an act of legal value bargained for and received in return for a promise.

Construction Loan: A short-term interim loan used to finance the construction of a building. The lender advanced funds to the builder at periodic intervals as the work progresses.

Contingency: A condition that has to be removed before the transaction can be finalized.

Contract: An agreement, enforceable at law, between two or more competent persons, having for its object a legal purpose, wherein the parties agree to act in a certain manner.

Conventional Mortgage: A mortgage securing a loan made by private investors without governmental participation; that is, which is not FHA insured or VA guaranteed.

Conveyance: An instrument in writing by which some estate, interest, or title in real estate is transferred from one person to another, such as a deed or mortgage.

Counter Offer: The rejection of an initial offer to purchase with a substitute offer that could change the price and/or terms of the original offer.

Credit Report: A report documenting the credit history and current status of a borrowers credit standing.

Curb Appeal: Condition of a building exterior and its grounds.

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Debt-To-Income Ratio: The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debt is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans)

Deed: A legal instrument, duly executed and delivered, whereby the owner of real property (grantor) conveys to another (grantee) some right, title or interest in or to real estate.

Deed Restriction: A provision in a deed controlling or limiting the use of the land.

Default: Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Maintenance: Postponed or delayed maintenance causing decline in building's physical condition. Delinquency Failure to make payments on time. This can lead to foreclose.

Depreciation: The loss in value due to deterioration through ordinary wear and tear, action of the elements, functional or economic obsolescence.

Discount Points: See points

Down payment: Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional loans, and up to 5 percent on FHA and VA loans.

Dual Agent: If a real estate broker represents both the buyer and the seller in the same transaction.

Due-On-Sale Clause: A provision in a mortgage or trust deed which allows the lender to call a promissory note immediately due and payable in full upon the sale or transfer of a secured property; Allows the lender to raise the interest rate or demand other changes in terms upon assumption of the loan.

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Earnest Money: Down payment made by a purchaser of real estate as evidence of good faith.

Easement: A right or interest in the real property of another The right to use another's land for a specific purpose, as a right of way.

Economic Life: The period of time over which a property may be profitability used. It is reduced to a percent in the capitalization process. Example 100% divided by 50 years equals 2% anticipated depreciation per year.

Eminent Domain: The right of a government to take private property for public use upon the payment of just compensation. The legal proceeding by which the government exercises this right is called "condemnation proceedings".

Encroachment: The illegal intrusion of a structure, part of a building, or obstruction over or upon a highway, sidewalk or the property of another. Encumbrance A claim, lien, charge, or liability attached to and binding upon real property, such as a judgment, mortgage, mechanics lien, lien or unpaid taxes, right of way.

Endorsement: Writing one's name, either with or without additional words, on a negotiable instrument or on an attachment thereto.

Equity: In real estate, the interest or value of the real estate over and above amount of indebtedness thereon.

Escheat: The revision of property to the state in the event the owner of the property dies without leaving a will and has no blood heirs or relatives to whom the property may pass by lawful decent.

Escrow: In real estate, it is the state or condition of a deed which is conditionally held by a third party, called the escrow agent, pending the performance or fulfillment of some act or condition.

Escrow Agreement: A written agreement between two or more parties whereby the grantor, promisor or obligor delivers certain instruments or property into the hands of a third party, the escrow agent, to be held by said third party until the happening of a contingency or performance of a condition, and then to be delivered to the grantee, promisee or obligee.

Estate: In real estate, it refers to the degree, quantity, nature and extent of interest which a person has in real property; such as a fee simple absolute estate, an estate for years.

Eviction: Dispossession by process of law; the act of depriving a person of the possession of lands, in pursuance of the judgment of a court.

Exclusive Right to Sell Listing: A listing whereby the owner appoints one real estate broker as his sole agent for a specified period of time. No matter who sells the property, including the owner himself, the broker is entitled to a commission.

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"Fannie Mae": A common term used in real estate finance taken from FNMA (Federal National Mortgage Association). It provides a market for government secured mortgages held by primary lenders and provides them with a ready market so as to permit a greater turnover of money for loans.

Farmers Home Administration (FMHA): Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation (FHLMC): Also called "Freddie Mac", is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Fee Simple Absolute: Often called a fee or fee simple; the most comprehensive ownership of real property known to the law; the largest bundle of ownership rights possible in real estate.

FHA Insured Mortgage: A mortgage under which the Federal Housing Administration insures loans made according to its regulations by approved lenders.

Fiduciary: A person or a position of trust or confidence. Fiduciary refers to the relationship of an agent to his principle.

Fixed Rate Mortgage: A loan in which the interest rate and the monthly payment do not change over the life of the loan.

Fixture: An article of personal property which has been installed in or attaches to land or a building thereon, in a permanent manner, so that is now considered to be a part of the real estate.

Foreclosure: A termination of the rights of the mortgagor in the property covered by the mortgage; a court process instituted by a mortgage or lien creditor to defeat any interest of equity of redemption which the mortgagor or debtor-owner may have in the property.

Freddie Mac: See Federal Home Loan Mortgage Corporation.

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General Warranty Deed: See Warranty Deed.

Ginnie Mae: See Government National Mortgage Association.

Government National Mortgage Association (GNMA): Also known as "Ginnie Mae", provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Grantee: A person to whom real estate is conveyed; the buyer.

Grantor: A person who conveys real estate; the seller.

Gross Monthly Income: The total amount the borrower earns per month, before any expenses are deducted.

Guaranty: 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.

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Hazard Insurance: A form of insurance in which the insurance company protects the insured from specified losses, such as fires, windstorm and the like.

Homestead Exemption: Often called "homestead" or "homestead right"; a right given by statue to a householder or head of a family to designate real estate as his homestead and said homestead is exempt, up to a stated amount, from execution by his creditors.

Housing Expenses-To-Income Ratio: The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income ratio.

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Impound: That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due. Typically, a monthly mortgage payment has four components: principal, interest, taxes and insurance ("PITI"). The taxes and insurance portions represent property taxes and homeowner's insurance premium, respectively. These are often required by the lender to be included in a monthly payment since regular and timely payment of both of these obligations improves the lender's collateral position.

Indemnify: To insure; to secure against loss.

Index: 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 US Treasury security yields, the monthly average interest rate on loans closed by saving and loan institutions, and the monthly average cost-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Rate Cap: A limit on the amount the interest rate can increase. A periodic cap limits how much the rate can increase at each adjustment period. A lifetime cap limits how much the rate can increase during the term of the loan. Also called an interest rate ceiling.

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Joint Tenancy: A type of co-ownership of real property, held by two or more persons, with all co-owners being equally entitled to the use, enjoyment, control and possession of the land and with the right of survivorship.

Jumbo Loan: A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

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Land: Real property; the surface of the earth and that which is affixed to it permanently, that which is below it, and the space above it; synonymous with "real property", "realty", and "real estate" Sometimes used to mean only the unimproved surface of the earth.

Lease: An agreement under which a tenant receives the possession and use of real property for a certain period of time and the landlord receives the payment to rent and/or the performance or other conditions.

Legal Description: A description recognized by law which is sufficient to locate and identify the property without oral testimony.

Lessee: The party who possesses a right or estate in realty, holding under a lease; also commonly referred to as the tenant.

Lessor: The party who conveyed a right or estate in realty to the lessee under a lease; commonly referred to as the landlord.

Lien: A right given by law to a creditor to have a debt or charge satisfied out of the real or personal property belonging to the debtor.

Lis Pendens: A public notice, filed against specific lands, that an action at law is pending that may affect the title to the land.

Listing: An agreement or contract of employment, either oral or written, whereby the owner authorizes the real estate broker to sell, exchange or lease real estate.

Loan Points: Amount charged by a lender to increase the loan yield. Usually a percentage such as 1% of the loan, which would equal one point.

Loan to Value (LTV) Ratio: Loan amount divided by the fair market value of the collateral, generally the appraisal value. For instance, a lender considering an 80% LTV on a home appraised at $250,000 would consider a loan request of $200,000. When considering a home equity loan, the lender will consider the combined LTV, assuming full disbursement of the equity loan. For instance, if a lender will consider a 90 percent combined LTV in the same example, he would consider a home equity loan request of $25,000 for combined debt that equals 90 percent of the appraisal value.

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Margin: The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. For instance, if a one-year ARM is priced at a margin of 300 basis points (100 basis points is equal to one percent) over the yield on the one-year constant maturity-adjusted Treasury bill, and the T-bill's yield is 6.5 percent, the one-year ARM rate would be 9.5 percent.

Marketable or Merchantable Title: A title which is free from reasonable doubt of defect which can be readily sold or mortgaged to a reasonably prudent purchaser or mortgagee; a title free from material defects or grave doubts and reasonably free from possible litigation.

Market Value: The price, in terms of dollars, which a ready and able buyer, not forced to buy, would pay and which a ready and willing seller, not forced to sell, would accept, assuming further that both parties are fully informed, act reasonably, and have sufficient time to consider the transaction with due care.

Mechanic's Lien: A lien created by statute which exists against real property in favor of persons who have performed work of furnished materials for the improvement of the real estate.

Mortgage: A conditional conveyance of property as security for the payment of a debt or fulfillment of some obligation. Upon payment of the debt or performance of the obligation the mortgage becomes void.

Mortgage Insurance: Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

Mortgagee: The lender.

Mortgagor: The borrower.

Multiple Listing Service: An arrangement among real estate brokers whereby they share their listings. The commission is divided, according to previous agreement, between the listing broker and the selling broker.

Mutual Assent: One of the essential elements of a contract, often called Meeting of the Minds; the agreement of the parties to the contract, mutually consenting to be bound by the exact terms thereof.

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National Association of Realtors: A national association of real estate personnel whose goal is the professional advancement of the real estate industry and whose membership is comprised of state and Local real estate boards. Often abbreviated NAR.

Negative Amortization: The opposite of amortization. In the case of an adjustable-rate mortgage with a payment cap, an upward adjustment in the interest rate may cause the loan payment to be insufficient to cover even the interest portion of the scheduled payment. In this case, the unpaid interest is added to the mortgage loan principal (if the loan agreement permits) and the loan amount increases.

Negotiable Instrument: A written instrument signed by a maker or drawer, containing an unconditional promise to pay a certain sum of money, which can be passed freely from one person to another.

Note: A written instrument acknowledging a debt and promising payment.

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Obsolescence: Impairment of desirability and usefulness of the property resulting from economic, functional, physical, fashion, or other changes.

Offer: A promise to act in a certain manner provided the other party will act in the manner requested.

Offeree: One to whom an offer is made.

Offeror: One who makes an offer.

Option: A temporary right for a designated period of time that one person has to purchase or lease property at a certain price, for which a consideration is paid.

Optionee: One to whom an option has been granted.

Optionor: One who has granted an option to another.

Origination Fee: The fee charged by the lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the amount of the loan.

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PITI: Principle, interest, taxes and insurance. Also called monthly housing expense.

Party Wall: A wall erected on a line between adjoining properties for the use of both properties.

Personal Property: Generally, all things which are not real property; things of a temporary or movable nature.

Points (Loan Discount Points): Prepaid interest accessed at closing by the lender. Each point is equal to 1 percent of the loan amount. For example, 2 points on a $100,000 mortgage would be $2,000.00 The IRS considers points to be a form of prepaid interest which means they can be deducted from taxable income. Lenders often require that the borrower pay one or two points at closing in exchange for a lower mortgage rate (the lender's target APR remains the same).

Power of Attorney: A legal instrument which authorizes another person to act, either a specific act or generally, in the stead of the person drawing the instrument.

Prepaids: Expenses necessary to create an escrow account or to adjust the seller's existing escrow. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment: Paying off a loan before its due date.

Prepayment Penalty: Money charged for an early repayment of a debt. Prepayment penalties are allow in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Principle: Any person, partnership, association or corporation who authorizes or employs another, called the agent, to do certain acts on his behalf.

Principle Note: The promissory note which is secured by the mortgage or trust deed.

Private Mortgage Insurance (PMI): Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the loan-to-value ratio is greater than 80 percent. The Homeowners Protection Act of 1998 mandates that a lender notify a borrower when the LTV falls below 80 percent, at which time a borrower is allowed to cancel the PMI coverage.

Procuring Cause: The cause that results from an agent's employment in the sale or leasing of property, finding a buyer.

Property: The rights of ownership; the right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is generally classified into two groups; persona property and real property.

Public Trustee: the public official in each county, whose office has been created by statute, to whom title to real property is conveyed by Trust Deed for the use and benefit of the beneficiary, who usually is the lender.

Purchase Money Mortgage: mortgage given by the purchaser to secure a loan for part or all of the purchase price. Such a mortgage becomes a lien on the property simultaneously with the passing of title, and if immediately recorded becomes prior to any lien against the purchaser.

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Quiet Title Suit: An action in court to remove a defect, cloud or suspicion regarding the legal rights of the owner to the parcel of real estate.

Quitclaim Deed: A deed in which the grantor warrants nothing It conveys only the grantor's present interest in the real estate, if any.

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RESPA: Real Estate Settlement Procedure Act.

Real Estate: Real property, realty, land.

Real Property: Land; the surface of the earth and whatever is erected, growing upon, or affixed to the land; including that which is below it and the space above it. Synonymous with "land", "realty" and "real estate".

Realtor: The term is a copyrighted trade name which can be used only by those persons belonging to the National Association of Realtors.

Realty: Real property, land, real estate.

Receiver: A court appointed custodian who holds property for the Court, pending final disposition of the matter before the Court.

Recision: the cancellation of a contract With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Recording: The act of writing or entering an instrument in a book of public record, usually in the office of county clerk and recorder. Such recording constitutes notice to all persons of the rights of claims contained in the instrument. This type of notice is called "constructive notice or "legal notice".

Recording Fees: Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Redemption: the right of an owner to redeem or reclaim the real estate by paying the debt or charge (such as mortgage or tax lien) after default, together with interest and costs. More correctly, equity of redemption refers to the right to redeem the propertyafterdefault but before foreclosure. The statutory right of redemption refers to the right to redeem the property after foreclosure, or other enforcement action, during a certain period of time specified by statue.; For example, in Colorado, the mortgagor has the statutory right to redeem his property any time within six months for agricultural property (75 days of platted residential dwellings) after a mortgage foreclosure or three years after a sale for delinquent property taxes.

Release: The relinquishment or surrender of a right, claim or interest.

Release of Lien;: the discharge or release of specific property from the charge or lien of a judgment, mortgage or other claim.

Restrictive Covenant: A clause in a deed limiting the use to which the property may be put.

Reverse Annuity Mortgage (RAM): A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security.

Right of Survivorship: A characteristic of a joint tenancy; upon the death of one of the tenants, his rights in the property pass automatically to the surviving tenant or tenants.

Right of Way: An easement or right of passage over another's land; the strip of land used as roadbed or used for a public purpose by other public utilities.

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Sale-Leaseback: Owner sells property, but retains occupancy by leasing from the buyer.

Servicing: All the steps and operations a lender performs to keep a loan in good standing, such as a collection of payments, payment of taxes, insurance, property inspections and the like.

Settlement/Settlement Costs: See Closing/Closing Costs.

Severalty Ownership: Owned by one person only (sole ownership).

Special Warranty Deed: A deed in which the grantor warrants or guarantees the title only against defects arising during his ownership of the property and not against defects existing before the timed of his ownership.

Specific Performance: A remedy which the court will grant, in certain cases, compelling the defendant to perform or carry out the terms of a valid, existing agreement or contract.

Subordination Clause: A clause in a mortgage or lease stating that the rights of the holder shall be secondary or subordinate to a subsequent encumbrance.

Survey: The process by which a parcel of land is measured and its area ascertained.

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Tenancy in Common: A type of co-ownership of real property; a holding of an estate is land by two or more persons, each being entitled to possession of the property according to his proportionate share distinct from a joint tenancy in that there is no right of survivorship in a tenancy in common.

Term Mortgage: See Balloon payment mortgage

Testate: When a person dies leaving a will.

Title: A document that gives evidence of an individual's ownership of property.

Title Insurance: A policy of insurance which indemnifies the holder for loss sustained by reason of a defect in the title, provided the loss does not result from a defect excluded by the policy provisions.

Truth-in-Lending: A federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for the loan.

Trust Deed: A form of mortgage by which a borrower or debtor conveys title to his property to a Trustee, usually a Public Trustee, who holds the title for the protection of a
lender or creditor as a pledge or as security for the repayment of the loan or debt described in the instrument.

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Underwriting: The decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

Usury: Charging more than the legal rate of interest for the use of money.

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VA Loan: A long-term, low or no-dumfounded loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee: A premium up to 1.875 percent (depending on the size of the dumfounded) paid on a VA-backed loan. On a $75,000 30 year fixed-rate mortgage with no downpayent, this would amount to $1,406 either paid at closing or added to the amount financed.

Variable Rate Mortgage: See Adjustable Rate Mortgage.

Verification of Deposit (VOD): A document signed by the borrowers financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment: A document signed by the borrowers employer verifying his/her position and salary.

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Warranty Deed: Often called a General Warranty Deed; a deed in which the grantor warrants or guarantees the title to real property against defects existing before the grantor acquired title or arising during the grantor's ownership.

What-if Analysis: An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.

What-if Scenario: A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.

Wraparound: Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payment to the first lender after taking the additional amount off the top.

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