mortgage marvel logo

Whether you are looking for a low mortgage rate to purchase a home or refinance your existing mortgage, searching for a mortgage can be a confusing process. Our mortgage glossary will help you understand the entire process from application to closing and everything in between.

Our easy to understand definitions are written by experts with decades of experience in the mortgage industry. Just click a letter in the list above to get started.


Abandonment
The voluntary surrender of property, owned or leased, without naming a successor as owner or tenant.
Back to Top

Absentee Owner
An owner who does not personally manage or reside at property owned.
Back to Top

Absolute Auction
An auction in which the subject property is sold to the highest bidder regardless of the amount of the winning bid.
Back to Top

Abstract Exam
A fee related to the title insurance required by the lender. A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property.
Back to Top

Acceleration Clause
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
Back to Top

Acceptance
A party's consent to enter into a contract and be bound by the terms of the offer.
Back to Top

Accepted Contract
A sales contract signed by both seller and buyer that defines the terms of the sale.
Back to Top

Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance of the loan.
Back to Top

Adjustable Rate Mortgage
An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes (up or down) are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.
Back to Top

Adjusted Basis
The original cost of a property, plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.
Back to Top

Adjustment Date
The date on which the interest rate changes for an adjustable rate mortgage (ARM).
Back to Top

Adjustment Period
The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
Back to Top

Administrative Fee
A fee charged by a lender to cover the administrative costs of processing your loan request.
Back to Top

Administrator
A person appointed by a probate court to administer the estate of a person who died intestate.
Back to Top

Adverse possession
A claim of property title-ship made by a party (not the real owner) living or using land. Often squatters use this strategy as a way to keep a roof over-head.
Back to Top

Affiliated Business Arrangement
Occurs when businesses that offer different real estate settlement services are owned or controlled by a common corporate parent. These businesses are known as "affiliates." If one affiliate refers a consumer to another affiliate, RESPA requires the referring party to provide an Affiliated Business Arrangement Disclosure. This form will confirm that the consumer is generally not required to use the affiliate and are free to shop for other providers.
Back to Top

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.
Back to Top

Alt-A
A category of mortgage loans between prime and sub-prime loans that is generally designed for situations that do not meet the requirements of prime loans due to minor issues with qualifying the borrower or property.
Back to Top

Alternative Documentation
A way to expedite loan processing by providing documents such as pay stubs, W-2's and bank statements rather than having the lender request direct written verifications from the source.
Back to Top

Amenity
A feature of a property that enhances its attractiveness and increases the occupant's or user's satisfaction, although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Man-made amenities include swimming pools, tennis courts, community buildings and other recreational facilities.
Back to Top

American Society of Home Inspectors (ASHI)
A professional association of independent home inspectors. Home Inspectors provide you with information about the condition of a home based on a professional inspection. For more information, visit the ASHI website at www.ashi.org.
Back to Top

Amortization
A loan repayment plan which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.
Back to Top

Amortization Schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Back to Top

Amortization Term
The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amortization term is 360 months.
Back to Top

Amortize
To repay a mortgage with regular payments that cover both principal and interest.
Back to Top

Amount Financed
From the Truth In Lending Statement provided by lenders, the amount financed is the loan amount requested less any fees that are considered finance charges. For example, for a $100,000 loan request with $2000 of fees charged that are considered finance charges, the amount financed would be $98,000.
Back to Top

Annual Fee
An annual fee for a line of credit is sometimes required. If an annual fee is applicable you will be billed for that amount annually until the loan is paid in full.
Back to Top

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.
Back to Top

Annual Percentage Rate (APR)
To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.
Back to Top

Annuity
A specified income paid yearly or at other regular intervals, often on a guaranteed dollar basis.
Back to Top

Application
The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.
Back to Top

Application Deposit
Funds required by a lender in advance of processing a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable. Check with your lender to determine if the fee is refundable and under what circumstances.
Back to Top

Application Fee
An administrative fee charged by some lenders to offset the cost of processing a loan request. Typically, the application fee will cover expenses that must be incurred prior to the loan closing, such as an appraisal and credit report.
Back to Top

Appraisal
An analysis performed by a qualified individual to determine the estimated value of a home.
Back to Top

Appraisal Fee
In order to verify that the value of your home supports the loan amount you request, the lender will order an appraisal. The appraisal is generally performed by a professional who is familiar with home values in the area and compares the features of the home they are appraising to the features of other homes in the same area that have sold recently. The fee for the appraisal is commonly passed on to the borrower by the lender.
Back to Top

Appraisal Report
A detailed written report on the value of a property based on recent sales of comparable sites in the area.
Back to Top

Appraised Value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience and analysis of the property.
Back to Top

Appraiser
A person qualified by education, training, and experience to estimate the value of real property and personal property.
Back to Top

Appreciation
An increase in the value of a property due to changes in market conditions and other causes. The opposite of depreciation.
Back to Top

APR
To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR, to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.
Back to Top

ARM
An ARM (adjustable rate mortgage) is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes (up or down) are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.
Back to Top

Assessed Value
The valuation placed on property by a public tax assessor for purposes of taxation.
Back to Top

Assessment
The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
Back to Top

Assessment Rolls
The public record of taxable property.
Back to Top

Assessor
A public official who establishes the value of a property for taxation purposes.
Back to Top

Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds and so on).
Back to Top

Assignment
The transfer of a mortgage from one person to another.
Back to Top

Assumable Mortgage
A loan that does not have to be paid in full if the home is sold. Instead, the new owner can take over payments on the existing loan and pay the seller the difference between the sales price and the balance on the loan.
Back to Top

Assumption
The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.
Back to Top

Assumption Clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
Back to Top

Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Back to Top

Attorney-In-Fact
One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
Back to Top

Attorney Opinion Fee
This fee is related to the title insurance required by the lender. It is for the production of a document, commonly referred to as a "title opinion", that is issued by an attorney listing any liens or encumbrances that could affect the property that are a matter of public record. This fee may be included in the title insurance or closing fee by some lenders.
Back to Top

Attorney Witness Fee
Related to the settlement/closing fee. This fee is standard in some states and is the closing attorney's fee for witnessing the signing of the closing documents. For our comparison purposes, an attorney witness fee is considered to be a third party fee and may be included in the title insurance or closing fee by some lenders.
Back to Top

Automated Underwriting
A way to determine if a loan application should be approved by using a computer system that evaluates characteristics of the borrower's financial and credit history, as well as information about the property. Generally this process can occur within seconds.
Back to Top

Automated Underwriting System (AUS)
The general name for systems that perform automated underwriting as explained above. Both Fannie Mae and Freddie Mac support automated underwriting systems. Referred to as Desktop Underwriter and Loan Prospector respectively. Other companies, including many large wholesale mortgage buyers and private mortgage insurance companies, support systems as well.
Back to Top