The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan.
A written history of all the transactions related to the title for a specific tract of land, summarizing documents from the original land grant to the present.
A buyer’s or seller’s agreement to enter into a contract and be bound by the terms of the offer.
A fee that may be charged if you pay in full and terminate your home equity line of credit during the first 5 years.
A payment made of more than the scheduled amount to reduce the outstanding loan balance, save on interest, and/or pay off the loan early.
A mortgage with interest rates and payments that may change periodically based on an index, often with initial lower rates and rate caps.
A limit to how much a variable interest rate can change during a single adjustment period.
The date on which the interest rate of an adjustable-rate mortgage changes.
The time between interest rate changes on an adjustable-rate mortgage.
A preliminary review of a borrower's ability to afford a home, factoring in income, debts, funds, loan type, and projected costs.
The gradual reduction of loan principal over time, with payments shifting from mostly interest to mostly principal.
A schedule showing how each loan payment is split between interest and principal over time.
The number of months required to repay a loan in full. Example: 180 months for a 15-year mortgage.
The loan amount minus most upfront fees charged by the lender.
A yearly limit on how much a variable interest rate can increase or decrease.
Your total pre-tax income from all sources over a year, used by lenders to assess loan eligibility.
The annual cost of a loan, including interest and most fees, expressed as a percentage. Used for comparing loan offers.
Nonrefundable fees paid during loan application, possibly covering credit reports, appraisals, or other services.
A professional estimate of a property's value, usually required for securing a mortgage.
A clause requiring the property to appraise for at least the offer price to proceed with the transaction.
The cost of hiring a professional to assess the value of a home being purchased or refinanced.
The increase in a property's value over time due to market conditions, location, and property improvements.
The repayment period determined after loan approval, used to calculate payments and total interest.
The estimated repayment period considered before the loan is approved.
The valuation placed on a property by a tax assessor, used to calculate property taxes.
The transfer of a contract or loan terms from one party to another.
A mortgage that can be transferred to a new buyer with the same terms, often for a fee.
A scheduled, recurring mortgage payment set up through your bank to help avoid late payments.
A dated financial statement (in table form) that shows your assets, liabilities, and net worth.
A loan with lower monthly payments for a set period followed by a larger final payment; may lead to higher total interest.
An interest rate used as a benchmark or index for pricing variable-rate loans like ARMs, auto loans, and credit cards.
Equal to 1/100th of a percentage point; e.g., 50 basis points on $200,000 equals 0.50% or $1,000.
A payment plan where half your monthly mortgage is paid every two weeks, totaling 26 payments per year, which may help pay off your loan faster.
An interest-bearing certificate of debt with a maturity date; a real estate bond is usually secured by a mortgage or deed of trust.
The time when total income equals total expenses; used to evaluate when paying discount points on a mortgage pays off.
A short-term mortgage used to bridge the gap between buying a new home and selling the current one.
A third party who arranges funding or negotiates contracts but does not lend money directly.
Fees charged by a real estate or mortgage broker for facilitating a real estate transaction.
A lump-sum prepayment of mortgage interest to lower monthly payments, often for 1-3 years.
A provision giving the lender the right to demand full payment immediately after a specified period or for a specific reason.
A limit on how much a variable interest rate can increase during an adjustment period and over the loan’s life.
Funds the borrower has to cover down payment and closing costs, excluding required cash reserves or restricted sources.
The total cash a homebuyer must bring at loan closing, including down payment and closing costs.
Refinancing for an amount greater than existing loans plus costs, with the excess given to the borrower in cash.
The maximum interest rate that can be charged on a variable rate loan or adjustable-rate mortgage.
A federal document certifying a veteran’s eligibility for a VA loan.
A VA-issued document establishing the maximum loan amount based on an approved appraisal.
A statement from a title company or attorney confirming who holds the title to real estate.
The history of all documents affecting the ownership of a property, from earliest to latest.
A title free of liens or legal disputes, making it marketable and transferable.
The date when loan documents are signed and executed; may include a right of rescission period for certain refinances.
Status indicating no further action is required on an item or loan.
The event where loan documents are signed, dated, notarized, and ownership is transferred.
Fees and expenses associated with obtaining a loan, usually about 3% of the loan amount, excluding escrow and insurance.
The scheduled date for signing new loan documents and finalizing the transaction.
A document detailing interest rate, payments, and closing costs, provided at least 3 business days before closing.
An accounting of funds exchanged between buyer and seller before a real estate sale is finalized.
An additional borrower equally responsible for loan repayment and entitled to loan proceeds.
Federal law requiring employers to offer group health coverage for 18 months at the employee’s expense after job loss, excluding gross misconduct.
The sharing of insurance risk between insurer and insured, based on a percentage of the property’s value at loss.
An asset pledged to secure a loan, which the lender can claim if the borrower defaults.
Efforts to recover overdue loan payments, including legal action and foreclosure if necessary.
A first mortgage combined with a home equity second mortgage in one application to finance up to 80% of the property value.
The total outstanding balances of all mortgages on a property.
The ratio of all mortgage balances plus home equity credit limits to the appraised value of the home.
Similar recently sold properties used to determine fair market value during appraisal.
Interest calculated on both the principal and previously accrued interest.
A mortgage that meets Fannie Mae and Freddie Mac standards and is eligible for sale to them.
A short-term loan to finance home construction, disbursed in stages as work progresses.
A condition in a sales contract that must be met before the sale can close, commonly inspections or loan approval.
The monthly payment required by the loan contract, including principal, interest, taxes, insurance, and mortgage insurance if applicable.
The monthly payment owed on a HELOC, which can fluctuate and may be interest-only or include principal.
A home loan not insured or guaranteed by the government, can be conforming or non-conforming.
A provision in some ARMs allowing conversion to a fixed-rate loan at specified times.
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under certain conditions.
To transfer property title from one person to another by deed or contract.
A person who signs the loan with you, equally responsible for repayment but does not benefit from the loan proceeds.
An index used to adjust interest rates on some ARMs based on weighted costs of funds in the 11th Federal Home Loan Bank district.
A promise in a mortgage or deed restricting or requiring certain property uses, violation may lead to foreclosure.
Organizations that collect and share credit information about individuals; major bureaus include Equifax, Experian, and TransUnion.
A record of your credit activity including loans, credit cards, payments, and defaults.
A detailed report compiled by a credit bureau containing your credit history.
A numeric representation of your creditworthiness based on your credit report.
An entity or person to whom money is owed.
A single loan to pay off multiple debts, usually over a longer term. This is a popular use for a home equity line of credit.
Your total monthly debt payments (e.g., loans, credit cards, court-ordered payments) divided by your gross monthly income before taxes, expressed as a percentage. FHA guidelines recommend that your monthly mortgage payment should not exceed 31% of your income and total monthly debt should be no greater than 43%.
A document that legally transfers ownership of real estate from seller to buyer, delivered at closing. Lenders usually require a title search to confirm ownership before making a loan.
An arrangement where you voluntarily transfer ownership of your home to the lender to avoid foreclosure. May help avoid personal liability for any remaining mortgage balance if the lender waives deficiency in writing. This is a type of loss mitigation.
A document used in some states instead of a mortgage; title is vested in a trustee to secure repayment of the loan.
Failure to make mortgage payments on time or meet loan terms, which can lead to foreclosure.
Being late on loan payments. After a period of delinquency, foreclosure may begin, subject to state and federal rules.
A loan provision allowing the lender to require early repayment. The Closing Disclosure indicates if your loan has this feature.
See: Points
The cash amount you pay toward a home purchase, covering the difference between purchase price and mortgage loan. Typically ranges from 5% to 20%, depending on loan type, lender, and credit history.
Assistance from organizations (government or non-profits) to help homebuyers with down payments, given as grants or loans possibly repayable upon sale.
Obtaining an advance against your available line of credit.
The timeframe when a borrower can take advances from a line of credit. After this, the balance may be due in full or via installments.
A mortgage clause allowing the lender to demand full repayment if the property securing the loan is sold.
A deposit a buyer pays to show good faith on a signed contract to buy a home. Held by the seller or third party, it may apply to closing costs or down payment if sale closes. If contract terminates for permissible reasons, it’s returned; otherwise, it may be forfeited to the seller.
Any lien or liability attached to a property that affects or limits its title, such as unpaid taxes, mortgages, or leases.
A federal law requiring lenders to provide credit without discrimination based on race, color, religion, national origin, age, sex, marital status, or public assistance income.
The difference between your home's fair market value and your outstanding mortgage balances and other liens.
An account set up by your mortgage lender to pay property-related expenses like taxes and insurance. Part of your monthly payment goes into this account.
An account held at no cost to you to pay homeowners insurance and property taxes. Funds are collected through monthly payments and disbursed when bills arrive. Also called Impound Account.
A lender-managed account where real estate taxes and insurance funds are deposited as part of your mortgage payment and then paid out as bills come due.
A periodic review comparing escrow funds collected and paid, projecting future payments, and adjusting your escrow payment amount accordingly.
Occurs when your escrow account balance exceeds the required minimum, often due to lower taxes or insurance. You may get a refund or credit towards future payments.
Occurs when escrow balance falls below the required minimum, often due to increased taxes or insurance. You may need to increase payments or make a separate payment.
When you pay more than your contractual mortgage payment, the extra amount can cover future payments or reduce principal, potentially lowering future interest.
Law passed by Congress giving borrowers rights when dealing with credit bureaus. Credit bureaus must provide accurate credit histories to authorized businesses for insurance, employment, credit, or loans.
The likely selling price of a home, usually determined by an appraisal.
The Federal National Mortgage Association that purchases and guarantees mortgages to increase affordable lending. It is a government-sponsored enterprise under FHFA conservatorship, but not a federal agency.
A HUD agency that provides mortgage insurance and sets standards for underwriting and construction of insured residential mortgages.
Clear and absolute ownership of property, allowing the owner to use, sell, or lease the land freely.
An upfront mortgage insurance premium (UFMIP) required by FHA along with a monthly insurance premium (MIP) for most FHA loans.
Loans from private lenders regulated and insured by FHA, allowing lower credit scores and down payments as low as 3.5%. Maximum loan amounts vary by county.
Dollar limits for qualifying mortgages insured by FHA, based on location and updated annually.
A mortgage insured by FHA, also known as a government loan, which protects the lender if the borrower defaults.
Fair Isaac Corporation’s credit scoring model, ranging from 300 to 850. Higher scores indicate lower credit risk.
The total cost of consumer credit, including interest, origination points, and certain fees. Some closing costs are excluded.
Loan programs aimed at buyers who haven’t purchased a home in three years or more, including FHA, VA, USDA, Fannie Mae, and Freddie Mac options with low down payments.
The senior lien against a property, which has priority over other loans or liens.
A mortgage with a fixed interest rate for the entire loan term.
An option on some home equity lines of credit allowing borrowers to fix payments and interest rates on part of their balance for a set term, sometimes for a fee.
A loan interest rate not locked in by the lender; actual rates and points depend on market conditions at rate lock time.
A determination by a reputable source whether property lies within a special flood hazard zone.
Insurance protecting against flood damage, required by law if the property is in a special flood hazard zone.
Temporary allowance by a servicer to reduce or pause mortgage payments due to hardship, with missed payments to be made up later. A form of loss mitigation.
Insurance a servicer requires if borrower’s insurance is missing or inadequate, usually protecting only the lender and often costing more.
Legal process where a lender sells property securing a defaulted loan to repay the borrower; borrower may still owe any deficiency.
Loss of money, property, rights, or privileges due to breach of legal obligation.
Tax form reporting interest and points paid on a mortgage during the previous year.
The Federal Home Loan Mortgage Corporation, a government-sponsored enterprise that buys mortgages from lenders to promote market stability and affordability.
The date loan proceeds are made available or disbursed to the borrower.
An itemized list of estimated home loan costs the lender must provide within 3 business days of application.
A loan insured or guaranteed by FHA, VA, or RHS that protects the lender if the borrower defaults, enabling special loan options.
A government-owned corporation under HUD that supports special assistance loan programs and guarantees mortgage-backed securities.
Fees charged by state/local agencies for legally recording deeds, mortgages, and related loan documents.
A mortgage loan with an APR higher than the Average Prime Offer Rate benchmark.
An organization managing shared expenses and maintenance in a planned community or condominium.
Fees paid by homeowners for shared community services and maintenance, separate from mortgage payments.
An independent, written estimate of a property’s market value.
A revolving credit line secured by home equity, typically with adjustable rates and a draw period.
A lump sum loan using home equity as collateral, usually with a fixed interest rate.
An evaluation of a home’s condition, often checking structural and mechanical systems before purchase.
The agreed amount the buyer pays the seller to purchase the home.
Insurance protecting a home from damage, theft, and liability, often required by lenders.
A federal agency supporting affordable housing and sponsoring housing counseling nationwide.
A document listing all charges and credits in a real estate settlement or refinance, used before October 3, 2015.
See: escrow impound account.
Collection of funds by a lender to pay property taxes and insurance premiums on the borrower's behalf.
Regular earnings from work, commissions, investments, rent, or other sources.
Real estate purchased or developed to generate rental income.
A financial benchmark rate used to determine interest rate adjustments on adjustable-rate mortgages (ARMs), e.g., SOFR or Treasury bills.
The percentage increase in prices of consumer goods over time.
The maximum interest rate increase allowed at the first adjustment of an ARM, commonly 2% or 5%.
The first withdrawal against a line of credit.
An initial line of credit withdrawal made at closing, which may qualify for interest rate discounts if maintained.
A discount on interest rate if the initial advance is at least $25,000 and maintained for three billing cycles.
The portion of a HELOC or construction loan drawn at closing.
The upfront amount paid at closing to fund an escrow account for taxes and insurance.
The starting interest rate on a loan, sometimes called a "teaser rate," before adjustments begin.
A request for a consumer's credit report by the consumer or a lender.
A loan repaid with fixed, equal payments over time.
A contract providing compensation for losses in exchange for periodic premiums.
Temporary proof of insurance coverage until a permanent policy is issued.
A mortgage protected by insurance that covers the lender if the borrower defaults.
The rate at which interest accumulates on the mortgage principal.
A loan where only interest is paid for a set term, with principal due later.
The yearly cost of borrowing expressed as a percentage, excluding fees.
See: Buydown.
A limit on how much the interest rate on an adjustable loan can increase per adjustment and over the life of the loan.
Real estate purchased to generate rental income or for resale at a profit.
A court decree that one person owes a specified debt to another. In some states, the court can place a lien on the debtor’s real property to secure payment.
A loan exceeding conforming limits for sale to Fannie Mae and Freddie Mac. Often subject to higher fees and stricter terms. Also called a nonconforming loan.
Lender’s title insurance protects your lender against problems with the title to your property—such as someone with a legal claim against the home. It only protects the lender; to protect yourself, consider purchasing owner’s title insurance.
A person’s debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.
See: Homeowners insurance.
The legal claim of a creditor on a borrower’s property, used as security for a debt.
An individual or entity that has placed a lien on real property.
A cap used with adjustable rate mortgages (ARMs) that limits how much the interest rate can increase over the life of the loan. For example, if the cap is 5%, the rate can never be more than 5 percentage points higher than the initial rate.
An agreement by a lender to extend credit up to a maximum amount for a specified time. In a home equity line of credit, the credit line is secured by the borrower’s home. Learn more about a home equity line of credit.
When a buyer takes over the seller’s mortgage, assuming the remaining balance under the original loan terms. The buyer must qualify for the assumption. This can make sense when current mortgage rates are higher than the original loan’s rate. The difference between the sale price and loan balance is paid by the buyer.
A formal notification from a lender stating that a borrower’s loan has been conditionally approved, specifying the terms under which the lender agrees to make the loan.
An agreement to postpone overdue mortgage payments to help borrowers avoid foreclosure. Deferred payments come due when the loan is refinanced, the home is sold, or the mortgage ends.
A disclosure form lenders must provide within 3 business days of receiving a borrower’s application containing key information, helping consumers understand and compare mortgage loan terms and costs.
A change to the terms of your mortgage to make payments more affordable. May include extending the loan term, reducing interest rate, or lowering principal balance.
The process by which a lender creates a mortgage loan and records a mortgage against the borrower’s property.
See: Term.
The ratio of the unpaid loan principal to the appraised value of the property, expressed as a percentage. For example, $80,000 loan on a $100,000 property equals 80% LTV.
The time prior to closing during which an interest rate is guaranteed. Lock periods range from 30 to 90+ days. Longer locks may cost more.
Actions mortgage servicers take to help borrowers avoid foreclosure, including repayment plans, forbearance, loan modifications, short sales, or deed-in-lieu of foreclosure. For assistance, contact a HUD-approved housing counselor or call the HOPE™ Hotline at (888) 995-HOPE (4673).
A structure partially or entirely built elsewhere and moved to the property on a permanent foundation. It may or may not be a mobile home.
The fixed number of percentage points a lender adds or subtracts from the index rate to determine interest rate adjustments on a mortgage.
The date when the loan’s outstanding principal, interest, and fees must be fully repaid.
Payments made through Online or Mobile Banking that may be applied to fees, principal, or other categories, including unapplied funds if less than the contractual payment due. See the FAQ on "How do you apply my home loan payment?".
A residence built on a wheeled chassis designed to be transported from site to site.
A factory-built home erected on-site, resembling a site-built residence in appearance and characteristics.
The amount spent each month on obligations such as rent or mortgage, utilities, car payments, child support, insurance, and essentials like food.
A legal document giving a lender a lien on real estate to secure repayment of a loan, typically lasting 10 to 30 years. Also called a deed of trust or security deed.
A list of steps to prepare and understand the mortgage closing process, helping you close with confidence.
Costs paid at closing including origination, appraisal, credit report, title insurance, and other fees. These are summarized in the Loan Estimate.
Insurance protecting the lender if you default, typically required if down payment is less than 20%. Also known as private mortgage insurance (PMI).
A change in loan terms to make payments more affordable, often part of loss mitigation.
See: Points.
Taking out a new loan to pay off an old one, usually to lower interest rate, monthly payments, or borrow more money. Closing costs may apply.
The length of time you have to repay the mortgage, typically 15, 20, or 30 years.
Three basic programs: FHA loans, VA loans (for qualifying veterans), and conventional loans. FHA and VA loans are government-insured/guaranteed; conventional loans are not.
A residential property containing 2 to 4 individual housing units such as duplexes, triplexes, or quadplexes.
When monthly payments do not cover all interest due, unpaid interest is added to the loan balance, causing the borrower to owe more than the original loan amount.
The total of the existing credit line plus any additional credit requested.
A loan where the borrower pays no out-of-pocket closing costs; instead, the lender includes those costs in the loan principal or charges a higher interest rate.
See: Jumbo loan.
Properties where the owner does not live.
A written promise to pay a specified sum to a named person or company by a certain date or on demand.
The interest rate stated in a mortgage note.
A formal written notice to a borrower indicating a default has occurred and legal action may follow.
A type of adjustable-rate mortgage (ARM) that offers four monthly payment options to provide flexibility in managing payments during rising or falling interest rate periods.
The date that the proceeds of a loan are disbursed.
The date on which a loan is funded or disbursed.
A fee charged by the lender for processing, underwriting, funding, and other administrative services related to the mortgage loan.
A property purchase transaction where the seller provides all or part of the financing.
A property occupied by the owner as their principal residence.
Insurance that protects the homeowner if a claim arises against the property from before the purchase.
PACE financing provides a way to fund energy efficiency home improvements.
A limit on how much a monthly payment can increase at any one time. Payment caps don’t limit interest charged and may cause negative amortization. See also: Interest rate cap.
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM), generally the month after the interest rate adjustment date. Borrower notified 30 days prior.
A way to use mortgage insurance to help a struggling homeowner avoid foreclosure. The insurer sets aside money to cover missed payments, repaid when the mortgage is terminated.
The total amount required to completely pay off your mortgage loan, including unpaid principal, interest accrued up to payoff date, and any fees.
Permanent change of station orders given to active duty servicemembers, potentially impacting home sales. Some servicers offer programs to avoid paying remaining loan balance when selling below market value.
Interest amount that accrues daily on a loan, calculated by (loan balance × annual interest rate) ÷ 365.
An acronym for principal, interest, taxes, and insurance — components of the monthly housing expense.
Amounts paid to the lender at closing to lower the interest rate; one point equals one percent of the loan amount. Negative points credit the borrower to reduce closing costs. Also called discount or mortgage points.
A lender’s conditional agreement to lend a specific amount to a homebuyer under specified terms.
An arrangement where the lender agrees to offer special terms for future refinancing to incentivize the borrower to enter the original mortgage.
See: Short Sale.
Expenses paid in advance, such as escrowed taxes and insurance, typically at closing.
Interest charges due at closing for the period between closing date and the start of your first monthly payment period.
Any amount paid to reduce the principal balance before it is due.
A fee some lenders charge if a loan is paid off early, usually limited to the initial years of the mortgage. See also: Account termination fee.
A preliminary estimate by a lender on how much a borrower may obtain, based on financial info, but not a commitment to lend.
The interest rate banks charge their best customers. The U.S. Prime Rate influences variable rates such as credit cards and mortgages.
Principal is the loan amount borrowed; interest is the charge for borrowing. Together they form the bulk of your mortgage payment.
The amount of the mortgage loan that must be repaid. Monthly payments include a portion that reduces the principal.
The portion of a monthly payment applied to reduce the principal balance. Also refers to any prepayments to principal.
Private Mortgage Insurance protects lenders if a borrower defaults. Usually required when down payment is under 20% on conventional loans.
Fee charged to cover administrative costs of processing a loan request.
A written promise to repay a specified sum over a specified period.
Taxes charged by local governments based on property value, often paid monthly via escrow or directly by the homeowner.
A contract signed by buyer and seller outlining the terms and conditions of a property sale.
A category of loans with certain stable features designed to help ensure you can afford your loan.
Calculations used to determine mortgage qualification, including housing expense as a percent of income and total debt obligations as a percent of income.
Written correspondence a borrower or authorized party sends to a mortgage servicer to request information or report errors. Alternatives include a Notice of Error or Request for Information.
The amount of interest on a loan, expressed as a percentage.
See: Interest rate cap.
A commitment by a lender to guarantee a specific interest rate for a fixed period. Rate lock expiration occurs when that period ends, subjecting the loan rate to market changes.
When a rate lock period ends, the guaranteed rate expires, and the loan’s interest rate becomes subject to market fluctuations. A new rate lock must be established prior to closing.
A provision allowing the borrower to reduce the interest rate at a later date without refinancing or requalifying for the loan.
A consumer protection law requiring advance disclosure of settlement costs, prohibiting certain referral fees, regulating escrow accounts, and requiring notices when loan servicing is transferred.
To recalculate the mortgage payment schedule based on the remaining loan balance, typically after an interest-only period, so the loan will be fully paid by the end of the term.
A fee charged by a public official to note a legal document affecting property title in public records.
The act of officially entering legal documents related to property title into public records, often incurring a fee.
A charge by a public official for recording legal documents that affect property ownership or liens.
A loan qualification method where borrowers provide income information without needing verification documentation.
Replacing an existing loan with a new loan, usually to get a lower rate, reduce payments, or change loan terms.
A mortgage that allows borrowers to purchase or refinance and make improvements to a home, qualifying based on the property’s completed value.
The time allotted to fully repay a loan balance, such as the period following the draw phase in a home equity line of credit.
An agreement to repay missed mortgage payments over time to avoid foreclosure, usually structured with the lender or servicer.
The cancellation of a contract. In refinancing of a primary residence, borrowers have three business days to cancel the transaction.
Savings set aside in addition to the down payment to cover emergencies or unforeseen expenses, often required by lenders during loan approval.
A loan for homeowners 62+ that allows borrowing against home equity with payments made to the borrower rather than the lender; the loan balance increases over time.
A contractual provision giving a party the first opportunity to purchase or lease a property before it’s offered to others.
The consumer’s right to cancel certain loan contracts (like refinance loans) within three business days of signing after receiving required disclosures.
A loan offered by the USDA’s Rural Housing Service to finance homes in rural areas for qualified borrowers unable to get loans elsewhere.
A USDA agency providing loans from the U.S. Treasury to qualified rural borrowers, often when other financing is unavailable.
A property occupied part-time by a person in addition to his or her primary residence.
A second mortgage or junior lien is a loan you take out using your house as collateral while you still have another loan secured by your house.
Loans for which the borrower gives the lender a lien on property such as an automobile, boat, other personal property or real estate that will serve as collateral for the loan.
The property that will be pledged as collateral for a loan. If the borrower defaults, the lender can sell the collateral to satisfy the debt.
Seller financing is a loan that the seller of your home makes to you.
The completion of a property’s sale or purchase, or the completion of all steps necessary to receive the proceeds of (and create an obligation to repay) a loan. See also: Closing
Your mortgage servicer is the company that sends you your mortgage statements. Your servicer also handles the day-to-day tasks of managing your loan.
Your loan servicer typically processes your loan payments, responds to borrower inquiries, keeps track of principal and interest paid, and manages your escrow account (if you have one). The loan servicer may initiate foreclosure under certain circumstances. Your servicer may or may not be the same company that originally gave you your loan.
A person or entity that conducts the settlement to transfer title of the property and to close on the mortgage loan. May be an attorney, a title insurer, a title agent or an escrow agent.
Under a shared appreciation mortgage, you agree to give your lender a share of any increase in the value of your home.
A short sale is a sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but because it is a sale, you will have to leave your home. If your lender or servicer agrees to a short sale, you may be able to sell your home to pay off your mortgage, even if the sale price or proceeds turn out to be less than the balance remaining on your mortgage. A short sale is a type of loss mitigation. If you live in a state in which you are responsible for any deficiency (the difference between the value of your property and the amount you still owe), ask your lender to waive the deficiency. If waived, get the waiver in writing and keep it for your records.
A detached individual housing unit. The property shares no common ground with neighboring properties and shares no wall or roof, but can be part of a planned unit development (PUD).
Secured Overnight Financing Rate; SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities.
The starting interest rate for an adjustable-rate mortgage (ARM) loan or variable-rate home equity line of credit. Also known as an initial rate or intro rate. It provides lower interest and lower monthly payments at the beginning but may adjust at the next adjustment period.
When lenders use the term, they generally mean a loan program for borrowers who do not qualify for a prime loan, often with a higher interest rate.
Any mortgage or other lien that has a priority lower than that of the first mortgage. The subordinate loan has a claim to payment in a foreclosure only after the first mortgage is paid.
A survey is a drawing of your property showing the location of the lot, the house and any other structures, as well as any improvements on the property.
See: Bridge loan
The number of years it will take to pay off a loan. The loan term is used to determine the payment amount, repayment schedule and total interest paid over the life of the loan.
Fees charged for services rendered by parties other than the borrower or the lender. Such fees may include appraisal, credit report, title and flood certifications.
Written evidence of ownership in property.
The agency that will investigate a property’s title (or deed) for discrepancies or undiscovered liens and that will issue title insurance to the lender after the title is deemed clear.
Title service fees are part of the closing costs you pay when getting a mortgage. When you purchase a home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title,” to the home to you. Title service fees are costs associated with issuing a title insurance policy for the lender.
Insurance that protects an interested party, either the owner or the lender, against issues that would affect legal ownership of the property.
An examination of records used to determine the legal ownership of property and all liens and encumbrances on it. Usually performed by a title company or attorney.
The Total Interest Percentage (TIP) is a disclosure that tells you how much interest you will pay over the life of your mortgage loan.
The fee that may be charged each time you draw on your credit line.
An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or derived from the U.S. Treasury’s daily yield curve. See also: Prime rate
"TRID" is an acronym for the TILA-RESPA Integrated Disclosure rule.
A fiduciary that holds or controls property for the benefit of another.
A federal law requiring disclosure of credit terms using a standard format. This is intended to facilitate comparisons between lending terms of different financial institutions.
When your entire payment or a portion of your payment received by Bank of America may be placed into a Suspense account. See the "How does a suspense account work?" FAQ in the Making mortgage payments section on our FAQ page.
The person who approves or denies a home loan, based on the lender’s underwriting and approval criteria.
The lender’s process of deciding whether to make a loan to a potential borrower based on credit, employment, assets and other factors, and the matching of this risk to an appropriate rate, term and loan amount.
The standard loan application form published by the Federal National Mortgage Association (Fannie Mae) and used by most lenders.
The amount you borrowed (which may include amounts added through loan modifications) that has not yet been paid back. Interest is charged on this balance according to the terms of your loan.
A line of credit that is not backed by collateral.
A loan that is not backed by collateral.
The costs you must pay when applying for a loan. These typically include application fees and, in some cases, a portion of closing costs.
A mortgage program from the U.S. Department of Agriculture (USDA) offering no down payment and generally favorable interest rates to rural homebuyers who meet income eligibility requirements.
A VA loan is a loan program offered by the Department of Veterans Affairs (VA) to help servicemembers, veterans, and eligible surviving spouses buy homes. The VA does not make the loans but sets the rules for qualification and mortgage terms. It guarantees a portion of the loan to reduce risk to the lender. Generally only available for a primary residence.
A vacation home is a single-family property that the borrower occupies in addition to their primary residence. It must not be income-producing or part of a mandatory rental pool. Rental income cannot be used to qualify the applicant. Also known as a second home.
An interest rate that may fluctuate or change periodically, often in relation to an index such as the prime rate. Payments may increase or decrease accordingly.
The minimum monthly payment on a home equity line of credit (HELOC), excluding Fixed-Rate Loan Payment Option. Includes principal and interest (minimum $100), recalculated monthly based on loan balance and interest rate to repay the loan in equal installments over the remaining term.
A wage and tax statement provided by your employer annually. The W-2 form details your income and the various local and federal taxes withheld. It is submitted to the IRS with your tax return.
A final inspection shortly before settlement to ensure the property is in the same condition as when the offer contract was written.
An affordability analysis based on hypothetical scenarios. Useful when full data is unavailable or to explore impacts of changes to income, liabilities, or other financial factors.
Your application number is listed in your Welcome Letter or other bank communications. If you haven’t received it or need help, call 1.800.269.3084.
To protect your information and verify your identity when creating online credentials. Your Social Security number helps confirm your identity.
Insurance that covers damage from windstorms, often required in coastal areas. May also cover personal property and living expenses if the home is uninhabitable.
A transfer of money from one person’s bank account to another’s, either domestically or internationally.
A report showing how much interest was paid over the year and the remaining mortgage loan balance at year’s end. If the bank manages an impound account, it also includes amounts paid and reserved for property taxes. Without an impound account, tax details are not shown.
