Acceleration clause:
A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.
Adjustable-rate mortgage:
A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
Adjusted Basis:
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
Administrator:
A person appointed by a probate court to administer the estate of a person who died intestate.
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.
Amortization:
The gradual repayment of a mortgage by installments, calculated to pay off the obligation at the end of a fixed period of time.
Amortization schedule:
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.
Annual Percentage Rate (APR):
The total cost of a mortgage stated as a yearly rate; includes such items as the base interest rate, loan origination fee (points), commitment fees, prepaid interest, and other credit costs that may be paid by the borrower.
Appraisal:
A professional opinion or estimate of the market value of a property.
Balance sheet:
A financial statement that shows assets, liabilities, and net worth as of a specific date. professional opinion or estimate of the market value of a property
Balloon mortgage:
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
Balance payment:
The final lump sum payment that is made at the maturity date of a balloon mortgage.
Bankrupt:
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee
Business Inventories And Sales:
These figures measure the inventories and sales of manufacturing, wholesalers, and retail establishments. These figures are released monthly by the Bureau of Census. In most cases, an increase in these numbers indicates an expanding economy which could be inflationary. Bond Market Moves Down In Price.
Call Option:
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
Consumer Price Index (CPI):
The consumer price index is an indicator of the general level of prices. Components include energy, food and beverages, housing, apparel, transportation, medical care, and entertainment. When the consumer price index goes up, it is a sign of an inflationary environment. Consumers have to pay more for the same amount of goods and services. Bond Market Moves Down In Price.
Cap:
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.
Capacity Utilization:
The capacity utilization rate measures the percent of industrial output currently in use. A change in the rate indicates a change in the direction of economic activity. As the percentage rate moves closer to 90% the industrial output is practically at full capacity and is inflationary. A number closer to 70% is recessionary. A higher percent- age indicates a stronger manufacturing sector and an expanding economy which can be inflationary. Bond Market Moves Down in Price.
Capital:
(1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities
Deed:
The legal document conveying title to a property.
Deed-in-lieu:
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
Deed of trust:
The document used in some states instead of a mortgage; title is conveyed to a trustee.
Default:
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Durable Goods Orders:
This gives a reading on the country's future manufacturing activity. Durable goods include those manufactured items with a normal life expectancy of three years or longer. An increase in the amount of durable goods orders may indicate an expansion in the economy and, if inflationary, the Federal Reserve could choose to tighten money by raising interest rates. Bond Market Moves Down In Price.
Earnest money deposit:
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Easement:
A right of way giving persons other than the owner access to or over a property.
Effect Of Economic Indicators On Fixed Income Investments:
Market participants look to U.S. Government economic releases as an indication of the economy's strength and general direction. Overall, economic indicators reflect the rate of economic growth and inflation which, in turn, affects interest rates. There is an inverse relationship between interest rates and bond prices. I
Effective age:
An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective gross income:
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Factory Orders:
Manufacturer's shipments, inventories, and orders. Factory orders include shipments, inventories, and new and unfilled orders. An increase in the factory order total may indicate an expansion in the economy and could be an inflationary factor. Bond Market Moves Down In Price.
Fair Credit Reporting Act:
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fair market value:
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fanne Mae (FNMA):
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
FED Is Easing:
Exactly the opposite of Fed tightening. The Federal Reserve feels that the economy is not growing at the desired level and eases credit conditions by lowering interest rates to help stimulate the economy. Bond Market Moves Up In Price.
FED Is Tightening:
This term refers to efforts by the Federal Reserve to curb excessive growth in the money supply. This can be accomplished by their raising the discount rate and/or increasing the federal funds rate. Bond Market Moves Down In Price.
Government National Mortgage Association:
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
Grantee:
The person to whom an interest in real property is conveyed.
Grantor:
The person conveying an interest in real property.
Gross National Product (GNP):
The Gross National Product is the broadest measure of the nation's production. It measures the market value of all newly produced goods and services in the United States. When GNP is down, it shows a slowing down in the economy. To counteract this, the Federal Reserve may loosen money by lowering interest rates. Bond Market Moves Up In Prices.
Ground Rent:
The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.
Hazard Insurance:
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Home Equity Conversion Mortgage (HECM:
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
Home equity line of credit:
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
Index:
A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM.. This interest rate is subject to any caps that are associated with the mortgage.
Industrial Production Index:
The industrial production index measures the monthly level of the physical output of the manufacturing, mining, and gas and electric utility industries. When industrial production is down, it indicates a slowing of economic growth and, therefore, the Federal Reserve is inclined to allow interest rates to drop to stimulate the economy. Bond Market Moves Up In Price.
In-file credit report:
An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
Inflation:
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
Initial interest rate:
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."
Judgement:
A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
Judgement Lien:
A lien on the property of a debtor resulting from the decree of a court.
Judicial foreclosure:
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Jumbo loan:
A loan that exceeds Fannie Mae’s legislated mortgage amount limits. Also called a nonconforming loan.
Legal description:
A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Liability:
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Liability insurance:
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
Leading Economic Indicators:
This index is a composite of 11 statistics designed to foretell economic activity 6 to 9 months hence, (i.e. building permits, new orders for consumer goods and materials, the average workweek, index of consumer expectations).
Master association:
A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.
Maturity:
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Maximum financing:
A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.
Merchandise Trade Balance:
Released monthly, this figure measures the difference between imports and exports. When exports are higher than imports, there is a surplus in the balance of trade. When imports are higher than exports, there is a deficit. The import-export differential is referred to as the trade gap.
Money Supply:
The amount of money in circulation. M1 = cash + regular demand deposits + other check-type deposits. M2 = M1 + savings and small denomination time-deposits. When the money supply figure is up, it is an inflationary factor and, therefore, generates concern that the Federal Reserve will tighten money growth by allowing short-term interest rates to rise. Bond Market Moves Down In Price.
Negative amortization:
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
Net cash flow:
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
Net worth:
The value of all of a person's assets, including cash, minus all liabilities.
Non-Farm Payroll:
The non-farm payroll figure is a component of total civilian employment and measures the number of people employed in all activities except agriculture.
Original principal balance:
The total amount of principal owed on a mortgage before any payments are made.
Origination fee:
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
Owner financing:
A property purchase transaction in which the property seller provides all or part of the financing.
PITI reserves:
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Point:
A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
Power of attorney:
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prearranged refinancing agreement:
A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.
Producer Price Index (PPI):
The monthly producer price index measures the level of prices for all goods produced and imported for sale in the primary marketplace. Increase in the PPI tend to lead other measures of inflation. Bond Market Moves Down In Price.
Qualifying ratios:
Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
Quiteclaim deed:
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
Rate-improvement mortgage:
A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.
Rate lock:
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.
Retail Sales:
Key components of retail sales include automobiles, building materials, furniture, department store sales, food stores, gasoline, clothing, restaurants and drugstores. High retail sales are an indica- tion of economic growth and an expanding economy. Bond Market Moves Down In Price.
Secured loan:
A loan that is backed by collateral.
Security:
The property that will be pledged as collateral for a loan.
Seller take-back:
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
Survey
A drawing or map showing the precise legal boundaries of a property and the location of improvements, easements, rights of way, encroachments, and other physical features.
Tenancy by entirety
A type of joint ownership of property that provides rights of survivorship and is available only to a husband and wife.
Tenancy in common
A type of joint ownership in a property without rights of survivorship.
Title
A legal document evidencing a person's right to or ownership of a property.
Title company
A company that specializes in examining and insuring titles to real estate.
Title insurance
Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property.
Title search
An examination of the public records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
Transfer tax
State or local tax payable when title passes from one owner to another.
Truth-in-Lending Act
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges.
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's creditworthiness and the quality of the property itself.
VA loan
A loan that is guaranteed by the U.S. Department of Veteran Affairs. Also referred to as a "government" mortgage.
Unemployment Rate:
This is the percent of the civilian labor force currently unemployed. If unemployment figures are up, it indicates a lack of expansion within the economy and is, therefore, good for the bond market. Conversely, a big gain in employment would be an obvious cue for the Federal Reserve to tighten (raise) either the federal funds rate or the discount rate. Bond Market Moves Up In Price.
What-if analysis:
An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.
What-if scenario: 
A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.
Wraparound mortgage: 
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.