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1003
The number assigned to the form all potential customers must complete to apply for a home loan. This application is commonly referred to as “the 1003?and is produced by the Federal government. See also LOAN APPLICATION.

1040 FEDERAL TAX RETURN
The Federal tax form used by U.S. citizens and residents to report their annual income to the Federal government. The 1040 tax return must be accompanied by any applicable schedules, which provide line-item detail of various sources of income. Schedule A details itemized deductions. Schedule B details investment income. Schedule C details business income. Schedule D details capital gains/losses. Schedule E details supplemental income, such as rental income. Schedule F details farming profit/loss.

1065 FEDERAL TAX RETURN
The Federal tax form used by U.S. partnerships to report their annual income to the Federal government.

1099
A document that reports to the Federal government gross and net income earned by individuals who receive pension, social security or miscellaneous income, such as income from contract work. 1099s must be mailed to recipients by January 31 of each year for the previous year.

1120 FEDERAL TAX RETURN
The Federal tax form used by U.S. corporations to report their annual income to the Federal government.

1st POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner declare bankruptcy or default on the secured loan.

2-4 UNIT PROPERTY
A property that consists of a structure that provides living space for 2 to 4 families, although a single mortgage or deed of trust evidences ownership of the structure. Ameriquest Mortgage Company lends money using 2-4 unit properties as collateral.

3 Cs
Lenders consider three factors, credit, capacity and collateral when considering a credit application. Credit is the borrower’s proven willingness to repay a debt. Capacity is the borrower’s financial ability to repay a debt. Collateral refers to the property used to secure a loan transaction.

30-DAY LATES, 60-DAY LATES, ETC.
Designations of the severity of mortgage delinquency. A mortgage payment is considered 30 days late when 2 payments are due. A mortgage payment is considered 60 days late when 3 payments are due.

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ABSTRACT OF JUDGMENT
A summary of the essential provisions of a court judgment which, when recorded in the county recorder’s office, creates a lien upon the property of the debtor in that county, both presently owned or after acquired.

ABSTRACT OF TITLE
A history of a property’s title record used in some states to prepare the Preliminary or Title Commitment report. An Abstract of Title lists anyone who’s ever had a claim to the property, past and present. Some states require mortgage lenders to obtain a complete Abstract of Title. However, most states condense the abstract into a document called either the Preliminary or Title Commitment which lists only current claims to the property.

ACCRUED INTEREST
Interest on a note, bond, etc., which has been earned but not yet paid.

ADDENDUM
An attachment to a contract, deed or other document that incorporates additional terms of information to the original.

ADJUSTABLE-RATE MORTGAGE (ARM)
A mortgage loan where the interest rate is not fixed for the entire term of the loan, and can change during the life of the loan in line with movements of an index rate.

ADJUSTABLE-RATE RIDER
A rider is an addition to a security instrument. The adjustable-rate rider outlines terms and conditions specific to an adjustable-rate loan. It must be recorded along with the security instrument at the county recorder’s office. See also SECURITY INSTRUMENT.

ADJUSTMENT CAP
The adjustment cap limits the degree of interest rate changes during a specific period, during the life of the loan.

ALIMONY
Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse. Alimony may be taken as a deduction from adjusted gross income by the person who pays it, while the person who receives it must claim it as a taxable income.

ALTA
An acronym for American Land Title Association. Commonly used in reference to a particular type of Title policy. See AMERICAN LAND TITLE ASSOCIATION.

AMERICAN LAND TITLE ASSOCIATION (ALTA)
An organization composed of title insurance companies, which has adopted certain insurance policy forms to standardize title insurance coverage on a national basis. See also TITLE INSURANCE.

AMORTIZATION
Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. Amortization is the process of reducing principal and interest in equal installment payments at specific intervals over a set term. For example, a fully amortized loan payment is a portion of which will be applied to pay the accruing interest on the loan with the remainder being applied to principal. Over time, the interest portion decreases as the loan balance decreases and the amount applied to principal increases so that the loan is paid off in the specified term .

ANNUAL PERCENTAGE RATE
The Annual Percentage Rate ("APR") is a measure of the cost of credit, expressed as a yearly rate. The APR takes into account the amount financed, the finance charge, and the amounts and timing of the payments. Under the Truth in Lending Law, the APR must be disclosed and labeled.

ANNUITY
Fixed payments an individual receives for a lifetime or specified number of years at consistent intervals. For example, a customer may receive an annuity from a pension plan or from an investment.

APPRAISAL
Opinion as to the monetary value of the property. For example, an appraisal of property provides an idea of how much money the property is worth in the housing market at a given time.

APPRECIATION
An increase in value. Example: An increased value of property due to either a positive improvement of the area or the elimination of negative factors.

AS IS CONDITION
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.

ASSUMPTION
An act that occurs when the buyer of a property assumes the seller's debt or obligation without obtaining new financing. This must be approved by the lender and be permitted under the terms of the note that the seller executed with the lender.

ATTACHMENT
A legal process whereby the judgment creditor may obtain a lien against the debtor’s property. See also LIEN.

ATTORNEY IN FACT
A person given the authority to act on behalf of another under a power of attorney.

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BACK-END DEBT RATIO
This refers to the borrower's debt ratio and is calculated using a borrower’s total of monthly payments due on credit obligations divided by the borrower’s gross monthly income. It’s expressed as a percentage. See also DEBT RATIO.

BALLOON PAYMENT
A large payment due at the end of a loan contract. Equal to the remaining principal balance plus any interest and charges due.

BANKRUPTCY (BK)
Court proceedings to relieve the debts of an individual or business unable to pay its creditors. See also CHAPTER 7 BK and CHAPTER 13 BK.

BENEFICIARY
The entity or lender that funds the loan and to which the loan is owed.

BORROWER
One who borrows money and is responsible for repaying it to the lender. Also known as obligor. If the loan is secured by a mortgage, the borrower is known as a mortgagor.

BROKER
One who acts as an intermediary between parties to a transaction in exchange for a fee or commission.

BUSINESS LICENSE
A license that authorizes a business to operate and is typically required and issued by the city in which the business is located.

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C C & Rs
An acronym for Covenants, Conditions and Restrictions. See COVENANTS, CONDITIONS AND RESTRICTIONS.

CANCELED CHECK
A check that has been cashed by the bank on which the check was drawn.

CAPS
The maximum increase of an adjustable-rate mortgage period and lifetime. Example: The original loan is made at 10% with a 6% cap. The interest rate on the loan may never exceed 16%, regardless of index changes. See ADJUSTABLE RATE MORTGAGES.

CASH FLOW
The amount of cash generated from income-producing property or investments after all operating expenses and loan payments have been made.

CASH VALUE
The amount of money one would receive today by selling an asset in the market place.

CASH-OUT
A refinance transaction in which the borrower receives cash that may be used for any purpose.

CASH-OUT EXPLANATION LETTER
A handwritten, signed and dated letter provided by customers who are receiving cash from the loan to explain how they intend to use that cash. Generally used to verify that borrowers aren’t planning to use the cash to incur additional debt that will add to their monthly obligations and decrease disposable monthly income.

CASHIER’S CHECK
A check drawn by a bank on itself rather than on an account of a depositor. A cashier’s check is generally acceptable to close a sale without waiting for the check to clear.

CEILING
The highest interest rate that may be assessed or an adjustable-rate loan during the life of the loan based on the start rate and lifetime cap.

CERTIFICATE OF OCCUPANCY
A certificate issued by a local city government to the property owner stating the building is in proper condition to be occupied.

CERTIFIED COPY
A copy attested to be true by the individual or entity holding the original.

CHAPTER 13 BK
Chapter 13 is a debt reorganization plan where debts are repaid under a court-supervised repayment plan. Debtors submit part of their income for distribution among creditors. Also known as the wage-earner plan.

CHAPTER 7 BK
A Chapter 7 BK is a straight liquidation bankruptcy where the debtor submits all of their non-exempt assets to the trustee for liquidation; proceeds are disbursed to creditors.

CHARGE-OFF
A delinquent credit account with a balance owed that was never fully satisfied and the creditor removed it from the books for accounting purposes even though the debtor still owes payment in full.

CHILD SUPPORT
Periodic payments made under a divorce decree or a written separation agreement for the support of the children.

CLOSING AGENT
The party designated to conduct the loan closing, and to ensure the mortgage or deed is recorded and the funds disbursed on time.

CLOSING COSTS
Money paid by the borrower to effect the closing of a mortgage loan, including such costs as title insurance premiums, appraisal fees, lender fees, closing agent fees, recording fees, etc.

CLOSING STATEMENT
A statement required by Federal law (the Real Estate Settlement Procedures Act) that itemizes all changes imposed on the borrower and seller (if any) in connection with a mortgage secured loan transaction. Also known as a settlement statement, HUD-1 or HUD-1A

CO-BORROWER
A 2nd borrower on a loan.

COLLATERAL
Property pledged by the borrower to secure the repayment of the loan. The lender's claim or lien appears on the title report for the property. See the 3Cs definition for additional information.

COMBINED LOAN TO VALUE (CLTV)
The total of all liens on the subject property divided by the appraised value of the property.

COMBINED MONTHLY HOUSING EXPENSE
Monthly expenses for the customer’s primary residence, which include rent or mortgage payments, other financing, hazard and flood insurance, mortgage insurance, real estate taxes, utilities and homeowner association dues.

COMMERCIAL PROPERTY
A property used for business purposes.

COMMUNITY PROPERTY
Property owned equally by a husband and wife. This classification of property is only used in certain states.

COMPARABLE (COMP)
Properties used to determine the value of a specific property for comparative purposes in the preparation of an appraisal.

COMPENSATING FACTORS
Positive characteristics about an applicant's credit, employment history, etc. that contribute to a loan being a sound risk or investment.

CONDOMINIUM (CONDO)
A residential property with 2 or more units where each unit owner holds title to a unit and an undivided interest in the common areas of the project.

CONDOMINIUM ASSOCIATION
An association of owners of condominium units.

CONVENTIONAL LOAN
A loan that was not underwritten by HUD, the SBA, VA or the FHA.

CONVERSION CLAUSE
A provision in some Adjustable Rate Mortgages ("ARM") that allows a borrower to change the ARM to a fixed-rate loan at some point during the term.

CORPORATION
An artificial person or legal entity created by or under the authority of the law of a state. May have limited liability, perpetual life, freely transferable shares and centralized management.

COSMETIC REPAIR
Repairs that improve the appearance of the property.

COVENANTS, CONDITIONS AND RESTRICTIONS (C C & Rs)
Limitations placed on the use and enjoyment of real property. Usually intended to maintain a certain look within a neighborhood and common in subdivisions, PUDS or condominium communities.

CREDIT AUTHORIZATION LETTER
A letter signed by the borrower that authorizes a lender, to conduct a credit investigation.

CREDIT BUREAU
A company that collects and organizes information about an individual’s credit and payment habits. The 3 national credit bureaus are Experian, TransUnion and Equifax.

CREDIT HISTORY
The history of whether the borrower has met financial obligations on time in the past.

CREDIT LENGTH
The length of time a customer has had established credit.

CREDIT REPORT
A report provided by a credit reporting bureau that provides a detailed account of the applicant's credit history.

CREDIT SCORE
A numerical assessment assigned to the customer by credit bureaus that represents a measurement of the customer’s overall credit rating. The scores are weighted and range from approximately 365 to 840. Low scores reflect a “high risk? while higher scores reflect a “lower risk? Each credit bureau has its own credit score system.

CREDITOR
An individual or entity to whom money is owed.

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DEBT LOAD
The total amount of debt a customer currently owes.

DEBT RATIO (DR)
The percentage of the customers?gross monthly income allocated to pay the monthly installments on their debt owing. See also BACK-END and FRONT-END.

DEED
A written instrument by which a property owner, the “grantor,?conveys and transfers to a “grantee?an ownership interest in real property.

DEED IN LIEU
A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.

DEED OF RECONVEYANCE
A document used to transfer legal title from the trustee back to the borrower after a debt secured by a deed of trust has been paid in full.

DEED OF TRUST
A security instrument used in some states in place of a mortgage by which legal title is conveyed to one or more trustees to secure the repayment of a debt. Same as TRUST DEED.

DEFAULT
Failure to meet legal obligations of a contract such as the failure to make the monthly mortgage payment or the failure to pay property taxes when due or maintain hazard insurance on the property.

DELINQUENCY
Failure to make payments when due.

DEMAND
A letter from a lender showing the total amount due to pay off a mortgage or trust deed, inclusive of unpaid principal, interest, impound amounts, prepayment penalty, etc. Also, known as a Demand for Payoff Request or Beneficiaries Demand Letter.

DISCHARGE
Following a completed bankruptcy proceeding, discharged debts are no longer enforceable. The customer has successfully completed the process and debtors are either paid in full or eliminated based on the plan.

DIVORCE DECREE
A document issued by the court that dissolves the marriage relation.

DOCS
Abbreviation for mortgage loan documents.

DOWN PAYMENT
The difference between the purchase price and the mortgage amount for home purchase transactions.

DUPLEX
Any building containing 2 separate dwelling units.

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EARNEST MONEY
The cash deposit paid by the prospective buyer of real property, as evidence of good faith intentions, to complete the purchase transaction.

EFFECTIVE DATE
This is the date a new mortgage payment is effective—the month following the rate change date .

ENDORSEMENT
An addition to a title insurance policy that adds or subtracts coverage.

EQUAL CREDIT OPPORTUNITY ACT (ECOA)
A Federal act passed in 1974 that prohibits discrimination in lending on the basis of sex, marital status, race, color, religion, national origin, age or receipt of public assistance.

EQUITY
Interest or value that an owner has in real estate over and above the liens against it.

EQUITY LINE OF CREDIT
A combination of a line of credit and equity loan secured by real property. A maximum loan amount is established based on credit and equity. A mortgage is recorded against the potential borrower’s property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the credit line.

ESCROW
Delivery of something of value by a grantor to a 3rd party for delivery to the grantee upon the happening of a contingent event. In some states, all instruments necessary to the sale are delivered to a 3rd party, with instructions as to their use.

ESCROW INSTRUCTIONS
For purchase transactions, instructions signed by both buyer and seller, which enable the escrow agent to carry out the procedures necessary to transfer real property, a business or other assignable interest .

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FAIR HOUSING ACT ("FHA")
A Federal act that prohibits discrimination in any aspect related to the sale, rental or financing of dwellings on the basis of race, color, religion, national origin, sex, handicap or familial status.

FANNIE MAE
The nation’s largest mortgage investor created in 1968 by an amendment to Title III of the National Housing Act. This stockholder-owner corporation, a portion of whose board of directors is appointed by the President of the United States, supports the secondary market in mortgages on residential property.

FEDERAL TAX LIEN
A lien attaching to a property for nonpayment of a Federal tax. A Federal tax lien differs from other liens in that it’s not automatically eliminated by a senior lien holder foreclosing on a mortgage or trust deed recorded before the tax lien.

FEE SIMPLE ESTATE
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and under which the property can be left by will or inherited. Commonly, a synonym for ownership. See also ESTATE (REAL PROPERTY).

FICO
The name given to a numerical score assigned by credit bureaus to measure a borrower’s credit characteristics. See CREDIT SCORE.

FINANCE CHARGE
This is the amount of interest, prepaid finance charges, loan fees and certain insurance premiums the customer will pay over the life of the loan.

FIRST POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner someday declare bankruptcy or default on the secured loan.

FISCAL YEAR
The accounting year used by corporations for tax purposes. A fiscal year runs 12 months, but does not necessarily begin in January.

FIXED INCOME
Income of a specified and consistent value that is received at specified and consistent intervals. Types of fixed income include social security benefits, VA benefits, pension income, permanent disability benefits, welfare/aid income and child support/alimony.

FIXED-RATE MORTGAGE
A mortgage having a rate of interest that remains the same for the life of the mortgage.

FLOOD INSURANCE
Insurance indemnifying against loss by flood damage. Required in federally designated special Flood Hazard Areas. The insurance is private but federally subsidized.

FLOOR
The lowest an adjustable-rate mortgage rate can ever be during the life of the loan.

FLOOR RATE
The start rate on an adjustable-rate program.

FORECLOSURE
A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner of property in order to sell the property to satisfy a lien against it.

FREE AND CLEAR
Real property against which there are no liens, especially voluntary liens.

FRONT-END DEBT RATIO
This refers to the debt ratio calculation using only principal, interest, tax and insurance divided by gross monthly income. It’s expressed as a percentage. See also DEBT RATIO.

FULLY INDEXED RATE
The fully indexed rate is equal to the rate index plus the loan’s margin and is used with adjustable-rate mortgages. Example: If LIBOR is 6.50% and the margin on the loan is 4.00%, the fully indexed rate is 10.50%. Same as FULLY ADJUSTED RATE.

FUNDING
The disbursement of loan funds, either by check or by wire transfer to the title company.

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GIFT LETTER
A letter to the lender from the donor stating a gift of money has been made to the buyer in order to purchase specific property. The relationship of the donor and donee is stated, as well as the amount of the gift.

GRACE PERIOD
The period of time between the contractual due date and the date a late charge will be assessed.

GRANT DEED
A written instrument used to transfer or convey real property. A grant deed contains warranties against prior conveyances or encumbrances.

GRANTEE
One who received property rights when a grant is made. Generally, the buyer or purchaser of real property.

GRANTOR
One who grants property or property rights to another .

GROSS INCOME (BUSINESS)
The total income earned, either actual or estimated, from a business or property.

GROSS MONTHLY INCOME (BORROWER)
The total amount the borrower earns per month, before any expenses are deducted.

GROSS RENTAL INCOME
The monthly rental income received before mortgage payments, taxes and insurance are deducted.

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HAZARD INSURANCE
Insurance protecting real property against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

HOLDBACK
A portion of a mortgage loan held back by the lender from the customer until a contingency is met by the customer. An example of a contingency would be repairs needed for a property’s roof. Upon completing the required repairs, the lender releases the held back funds to the borrower. Same as WITHHOLD.

HOME MORTGAGE DISCLOSURE ACT (HMDA)
This act requires Ameriquest Mortgage Company to report selected information to the Federal government about each application received . HUD (U.S. Department of Housing and Urban Development) uses HMDA to detect discrimination and identify trends in lending patterns.

HOMEOWNERS?ASSOCIATION (HOA)
An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. Unpaid HOA dues can become a lien against a property.

HOMESTEAD
Status provided to a homeowner’s principal residence by some state statutes; protects a home against judgments up to specified amounts.

HUD-1 (or HUD-1a)
Final statement of the actual settlement costs of the loan and all other disbursements of a loan’s proceeds. A Federal requirement under RESPA. Same as SETTLEMENT STATEMENT.

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IMPOUND ACCOUNT
Account held by the lender for the payment of taxes, insurance or other periodic debts against real property.

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 , which is then used to adjust the interest rate on an adjustable-rate mortgage. Examples include LIBOR, the Prime Rate and Treasury indices. The Wall Street Journal publishes index information.

INITIAL ADJUSTMENT CAP
This is the 1st rate adjustment on an adjustable rate mortgage loan.

INQUIRIES
An indication of credit investigations made by companies that are considering granting credit to a person who appears on the credit report.

INTEREST RATE
Percentage paid for the use of money, usually expressed as an annual percentage.

INVESTMENT INCOME
Money earned from investments of money, such as stock dividends and annuity payments.

INVESTMENT PROPERTY
Property used for investment purposes.

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JOINT TENANCY
A form of holding title in which the property is owned by 2 or more persons who may have rights of survivorship.

JUDGMENT
The decision of a court of law; debts resulting from a court order for payment. Money judgments, when recorded, become a lien against the defendant’s property.

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LEASEHOLD
A tenant’s right to occupy real estate during the term of the lease. This is a personal property interest.

LEGAL DESCRIPTION
A method of geographically identifying a parcel of land that is acceptable in a court of law.

LEGAL TITLE
The manner in which property ownership is recorded with the county in which the property is located . See also VESTING.

LIBOR
An acronym for London Interbank Offered Rate, one of several published indices. It’s the average rate of interest that major London banks charge as they lend to one another.

LIEN
A secured financial interest or legal encumbrance on a property. For example, a secured loan appears as a lien on the property’s title report. See also VOLUNTARY LIEN and INVOLUNTARY LIEN.

LIFETIME CAP
This is the cap that limits how high an interest rate can increase over the life of an adjustable-rate mortgage loan . Example: Start rate + 6% = lifetime Cap.

LINES OF CREDIT
A type of mortgage loan from which borrowers can write a check or draw funds. Some lines of credit are also balloon loans. Usually the borrower is given 5 to 10 years to use the line of credit. After this period, many lines of credit require the borrower to pay the loan in full. Others may require the loan to be paid in full over the next 10 to 15 years.

LIQUID ASSETS
Cash or assets, such as checking/savings accounts, stocks/bonds, that are immediately convertible to cash.

LOAN AMOUNT
The amount of money originally lent to a borrower.

LOAN APPLICATION (1003)
The form potential customers must complete to apply for a home loan. This application is commonly referred to as “the 1003?and is produced by the Federal government. See also 1003.

LOAN TERM
The loan term is the period of time over which the loan will be paid. First mortgage loans typically have terms of 30, 20 or 15 years.

LOAN TO VALUE RATIO (LTV)
The loan amount in relationship to the appraised value or selling price expressed as a percentage .

LOSS PAYABLE CLAUSE
A clause in an insurance policy listing the priority of claims in the event of destruction of the property insured. Generally, a mortgage or beneficiary under a deed of trust is the party appearing in the clause, being paid up to the amount owing under the mortgage or deed of trust before the owner is paid.

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MARGIN
A constant number, set in the terms of the note, added to an rate index to compute the interest rate on an adjustable-rate mortgage. This fixed number is added to an index to determine the new interest rate when a new change period begins.

MARKET VALUE
The highest price a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MECHANICS LIEN
A lien created by state law for debts owed to a carpenter, contractor, plumber or other entity hired by the property’s titleholder for services performed or materials provided to repair or improve the property.

MIXED-USE PROPERTY
A property in which a portion is used for commercial or retail purposes and the other portion is used for residential purposes. A property can also be considered mixed use if different combinations of uses are present such as commercial/industrial or residential/industrial. For example, a multi-unit dwelling with the front unit used as a commercial store and the back unit used as a dwelling.

MORTGAGE
A written instrument that creates a lien upon real estate as collateral for the payment of a specified debt. The borrower retains possession and use of the property.

MORTGAGE BANKER
A non-depository financial institution that specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.

MORTGAGE BROKER
A mortgage broker is one who arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when the loan closes.

MORTGAGE LATE
More than 1 payment due at the same time the most recent payment is due.

MORTGAGEE
The lender.

MORTGAGOR
The borrower.

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NATIONAL NOTARY ASSOCIATION
An association that sends out necessary application materials and supplies to initiate one’s notary commission.

NEGATIVE AMORTIZATION
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on a mortgage loan by its maturity date. 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 even after making many payments, a borrower may owe more than was owed at the beginning of the loan.

NET DISPOSABLE INCOME
Money left after subtracting the principal, interest, taxes and insurance and all other obligations from the monthly net income. The surplus amount the borrower has available for living expenses after housing expenses are subtracted.

NET RENTAL INCOME
The monthly gross rental income minus the monthly mortgage payments, insurance, maintenance, taxes and other miscellaneous payments.

NET WORTH
The difference between total assets and total liabilities of an individual, corporation, etc.

NON-OWNER OCCUPIED
A property used as a residence by a renter/tenant instead of the owner of the property.

NON-RECURRING CLOSING COSTS
Fees and costs associated with the closing of a loan, such as title, appraisal, notary fees, etc., that occur only once in the transaction and don’t recur.

NOTARY PUBLIC
One who is authorized by the state or Federal government to administer oaths and to attest to the authenticity of signatures.

NOTE
An agreement containing an expressed and absolute promise of the signer to pay to a named person or bearer a definite sum of money at a specified date or on demand. Usually provides for interest, and if concerning real property, is secured by a mortgage or trust deed.

NOTICE OF DEFAULT (NOD)
A notice filed with a county records office to show that the borrower under a mortgage or deed of trust is in default .

NOTICE OF RIGHT TO CANCEL
Under Regulation Z, customers must be notified they are entering into a transaction that will result in a lien against their primary residence. This document explains they have the right to cancel the transaction, at no cost, within 3 business days from the date of signing the closing documents on a loan.

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ORIGINATION FEE
A 1-time setup fee charged by the lender. One of the lender’s charges to a borrower for handling a loan transaction.

OVERIMPROVEMENT
An improvement, excessive in cost or size, in relation to land value or value of surrounding improvements.

OWNER OCCUPIED
Designation given to property used as the owner’s residence.

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P & L
An abbreviation for profit and loss statement. See PROFIT AND LOSS STATEMENT.

PAR
The principal amount of a mortgage with no premium or discount.

PARTNERSHIP
An agreement between 2 or more individuals or entities to go into business or invest together. Either partner may bind the other, within the scope of the partnership. Each partner is liable for all the partnership’s debts.

PAY STUB
The portion of the paycheck the employee retains for his/her records. The pay stub verifies pay-period and year-to-date gross and net earnings.

PAYMENT CHANGE DATE
On an adjustable rate mortgage, this is the date the new mortgage payment is effective after an interest rate change. It is usually the 1st of the month following the interest rate change date.

PAYMENT SCHEDULE
This schedule outlines the number of payments due, the amount of each payment and the date payments are due.

PERIODIC ADJUSTMENT CAP
This cap limits how much the interest rate can change in the future on an adjustable-rate mortgage.

PIGGYBACK LOAN
See SECONDARY FINANCING.

PITI
Acronym for principal, interest, taxes and insurance. See PRINCIPAL, INTEREST, TAXES AND INSURANCE.

PLAINTIFF
An individual or entity who files a legal action against another.

PLANNED UNIT DEVELOPMENT (PUD)
A single-family residence located in a community with association dues and other required monthly payments.

PLAT MAP
A map dividing a parcel of land into lots, as in a subdivision. For example, a Title/Commitment report and an appraisal report will provide a plat map of the subject property, which shows the location of the property within the subdivision .

POINTS
Each point is an amount equal to 1% of the principal amount of an investment or note.

POWER OF ATTORNEY
An authority by which 1 person authorizes another to act on his or her behalf. A power of attorney can be limited to specific areas or be general.

PRELIMINARY TITLE REPORT (PRELIM)
A report showing all current claims against a property before a sale or loan transaction and identifying those items that must be removed to obtain a 1st lien position. After completion of the transaction, a title insurance policy is issued. Same as TITLE COMMITMENT.

PREPAID FINANCE CHARGE
The finance charges charged at closing exclusive of interest. Examples include points, processing and application fees, tax certification, etc.

PREPAID INTEREST CHARGE
The portion of interest, added on at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 retroactively pays interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.

PRIMARY RESIDENCE
The property in which the customer resides the majority of the time.

PRIME RATE INDEX
A rate index which is the prevailing rate that banks charge to lend money to corporations.

PRINCIPAL
The amount of debt on a mortgage, not including interest. The face value of a note, mortgage, etc.

PRINCIPAL AND INTEREST (P&I)
This refers to the principal and interest portions of a monthly mortgage payment.

PRINCIPAL, INTEREST, TAXES & INSURANCE (PITI)
The total of the monthly mortgage payment due, which includes all principal, interest, taxes and insurance.

PRIVATE MORTGAGE INSURANCE (PMI)
Insurance against a loss by a lender normally required in the event the lender has lent more than 80% of the value of the property securing the loan. The premium is paid by the borrower and is included in the mortgage payment.

PRO RATE
To divide in proportionate shares, such as taxes, insurance, rent or other items that buyer and seller share as of the time of closing, or other agreed upon time.

PROFIT AND LOSS STATEMENT (P & L)
A statement documenting business revenues and expenses for a specified time period to establish whether a business gained a profit or suffered a loss.

PROMISSORY NOTE
A written promise by the borrower to pay a debt owed, within a specified time, to the holder of the note under conditions mutually agreed upon.

PROPERTY TAXES
Generally, a tax levied on both real and personal property. The amount of the tax is dependent on the value of the property.

PURCHASE AGREEMENT
The agreement made between the buyer and seller of a property, containing the purchase price and contingencies of the sale.

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QUITCLAIM DEED
A deed operating as a release; intended to pass any title, interest or claim that the grantor may have in the property, but not containing any warranty that such title is valid, nor containing any warranty or covenants for title.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A Federal law that requires lenders to disclose, in advance, an estimate of the costs associated with a loan and prohibits “kickbacks?for referring business to 3rd parties associated with a loan.

REAL PROPERTY
Land and all attachments to the land, such as buildings, crops or mineral rights. Ownership of real property can be divided into various types of interests and rights.

REBUILD LETTER
A letter provided by the appropriate municipality, stating a structure on a specific property can be rebuilt as originally constructed in the case of damage or destruction.

RECONVEYANCE (RECON)
An instrument used to transfer title from a trustee to the property owner when title is held as security for a debt. Most commonly used upon payment in full of a mortgage or trust deed.

RECORDING
The act of recording a document such as a deed or mortgage in a public registry thereby giving notice to future purchasers, creditors or other interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to be recorded.

RECORDING FEES
The amount charged by a public records office to record the security instrument within the county.

REFINANCE (REFI)
The creation of a new loan to pay off existing debts.

REGULATION Z (REG Z)
Federal Reserve regulation issued under the Truth-in-Lending Law, which requires a credit purchaser be advised in writing of all costs connected with the credit portion of the purchase.

RELEASE OF LIEN
When a lien against the property is satisfied, the note holder records a document that reflects the discharge of the obligation and releases the lien recorded against the property.

RELEASE OF MORTGAGE
A recordable instrument that transfers title from a mortgagee to the mortgagor when title is held as collateral security for a debt. Most commonly used upon payment in full of a mortgage.

RENTAL AGREEMENT
A contract used by property owners who rent their property to another individual. Rental agreements should state the amount of rent the customer will collect from the renter.

REQUEST FOR FULL RECONVEYANCE
Written instructions provided by the beneficiary to the trustee to issue a deed of reconveyance when the conditions of obligation have been fulfilled.

RIDER
A rider is an addition to the security instrument.

RIGHT OF SURVIVORSHIP
If one property owner dies, all ownership rights automatically belong to the surviving owner.

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SCHEDULE A
A section of the Preliminary Title Report/Title Commitment that lists the name of the proposed insured, amount of title insurance, estate or interest in the land, how legal title is vested and the legal description of the property.

SCHEDULE B
A section of the Preliminary Title Report/Title Commitment that lists exceptions to title if any.

SECOND MORTGAGE
A 2nd loan, on the same property, that is in a junior lien or subordinate position.

SECONDARY FINANCING
A loan secured by a 2nd mortgage or trust deed of real property. Same as PIGGYBACK LOAN.

SECONDARY MARKET
The financial markets where groups of loans are sold to investors. Example: Primary mortgage lenders originate loans while the secondary market sells funded loans.

SECONDARY RESIDENCE
A property used by a person as a second residence, not as an investment.

SECTION 32
A section of the Federal Truth-in-Lending Act pertaining to high fee loans and the restrictions and compliance issues with which this type of loan transaction must comply.

SECURITY INSTRUMENT
The security instrument is used to identify and encumber the real property used as collateral for the loan. It’s notarized and then recorded with the county in which the property is located. Once recorded, it secures an interest in, or lien against, the property. The security instrument used is state specific. Examples are, deed of trust, security deed, a trust deed or a mortgage.

SERVICING
The operations a lender or servicer performs post-origination to manage a loan, such as collection of payments, payment of taxes, insurance, property inspections and so on.

SERVITUDE
A burden resting upon one estate for the benefit or advantage of another. An agreement granting limited permission to use the property. Same as LAND BURDEN.

SETTLEMENT STATEMENT
Final statement of the actual settlement costs of the loan . A Federal requirement under RESPA. Same as HUD-1.

SIMPLE INTEREST
Interest computed on the unpaid principal balance of a loan, as opposed to compounded interest.

SINGLE FAMILY RESIDENCE (SFR)
A standard home with no common areas, no homeowners?dues or sharing of common walls. A home intended to be occupied by 1 family.

SOLE PROPRIETORSHIP
Ownership of a business, with no formal entity as a vehicle or structure. The sole proprietorship reports its tax information on Federal tax form 1040.

STANDARD COVERAGE POLICY
A title insurance policy used in several states, not having as broad a coverage as the nationally recognized American Land Title Association policies. See AMERICAN LAND TITLE ASSOCIATION.

START RATE
The initial interest rate charged on an adjustable-rate mortgage loan.

SUBMISSION
This refers to a complete loan application package submitted for loan approval.

SUBORDINATE
A lien taking a legal title position junior to another lien that recorded later. For example, if a mortgage lien recorded in 1996, it can subordinate to a lien recorded in 1999. Subordination may apply not only to mortgages, but also to leases, real estate rights and any other type of debt instruments.

SUBORDINATION AGREEMENT
An agreement by which a lienholder agrees to accept a lien position junior to that of a later-recorded lien. For example, when a lienholder agrees to subordinate, a formal agreement must be drawn, signed and recorded to make it a legal transaction. Subordinations may apply not only to mortgages, but also to leases, real estate rights and any other types of debt interests.

SUBSTITUTION OF TRUSTEE
A document that is recorded to change the trustee named in a deed of trust.

SUPPLEMENTAL TAXES
Additional taxes assessed by the city and/or county on property. These taxes are in addition to any taxes impounded in an escrow account.

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TAX LIEN
A lien for outstanding or delinquent property, IRS or state taxes. Tax liens for delinquent property taxes are the most common and attach only to the property upon which the taxes are unpaid. Property tax liens always take priority over other liens.

TEMPORARY DISABILITY AWARD LETTER
A letter issued to employees who are awarded temporary disability benefits because they are unable to work due to medical disability. These employees are expected to return to work once their disability heals.

TENANCY IN COMMON
A form of holding title in which the property is owned by 2 or more persons whereby each tenant holds an undivided interest in the property and no right of survivorship.

TITLE
The right or ownership in land; also, the evidence of such ownership.

TITLE INSURANCE
Insurance against certain loss resulting from undisclosed defects of title to a specifically described parcel of real property.

TRUST DEED
An instrument used in many states in place of a mortgage. Grants an interest in the property as collateral for a loan and, when recorded with the county, creates a lien having priority over later-filed mortgages or trust deeds. Same as DEED OF TRUST.

TRUTH-IN-LENDING DISCLOSURE
This disclosure is required by law under the Federal Truth in Lending Act, which requires a full disclosure of a loan amount, finance charges and APR.

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UNDERWRITING
The analysis of a customer’s credit capacity and the loan’s collateral upon which a risk is given. UNIFORM RESIDENTIAL APPRAISAL REPORT (URAR) The most common appraisal form in use. The URAR is used to document the methods used to determine the market value of single-family residences and planned unit developments.

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VARIABLE INTEREST RATE
An interest rate that fluctuates as a result of changes in a controlling index rate . With adjustable-rate mortgages, there are usually maximums as to the frequency and amount of fluctuation.

VERFICATION OF MORTGAGE (VOM)
Documentation that establishes the customer’s mortgage payment history.

VERIFICATION OF DEPOSIT (VOD)
Documentation that confirms the customer has access to specified amounts of money through a bank or investment account. Verifications of Deposit are documented on Fannie Mae form 1006.

VERIFICATION OF EMPLOYMENT (VOE)
Documentation that confirms the customer works in the job and at the employer listed on the handwritten loan application and receives a stream of income from this source. Verifications of Employment confirm the customer’s position title, date of hire, employment type, hours of work per week, frequency of payment and salary.

VOR
Acronym for Verification of Rent.

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W-2
A document that reports to the Federal government income earned by salaried employees. This document reports employees?total gross and withholdings made during the previous tax year. Employers must mail W-2s by January 31 of each year for the prior tax year.

WHOLESALE LENDER
A lender who works only with mortgage brokers and takes completed loan packages and underwrites them. They offer mortgage brokers discounted pricing in return for the up-front work done by the mortgage broker.

WITHHOLD
Portion of a loan held back by the lender until a condition is satisfied or met. Usually regarding the appraisal and repairs to be made to the property which secures the loan. Same as HOLDBACK.

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ZONING
The division of a city or county by legislative regulations into areas specifying the permitted uses allowable for the real property in these areas.

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