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Acceleration Clause
A clause that most mortgages contain. It means that the entire outstanding balance is due, usually at the time of sale or transfer of the property. Also called a Due-on-Sale, Alienation, or Call Provision clause. A mortgage with an Acceleration Clause can only be assumed with written permission.

Adjustable-Rate Mortgage (ARM)
A mortgage where the payment is based on an Interest Rate which can fluctuate up or down depending on the Index that the mortgage is tied to. The Interest Rate, for this type of mortgage, is the sum of the Index and the Margin. This type of mortgage is also called Variable Rate Mortgage.

Adjustment Date
The date of the adjustment for an Adjustable-Rate Mortgage. This date marks the end of the Adjustment Period. It may occur every six months, every year or however often you and the lender agree.

Adjustment Period
The time period between adjustments for an Adjustable-Rate Mortgage. Typically, Adjustment Periods range from one month to five years. Of course, the longer the Adjustment Period, the better it is for you.

Alienation Clause - see Acceleration Clause

ALTA (American Land Title Association)
The form of Title Insurance that is more thorough and complete than other types of Title Insurance.

Amortization
The paying back of a loan over time with equal payments. The payment stays the same; however, the ratio of Principal-to-Interest changes over time. At the beginning, most mortgage payments pay primarily Interest. At the end, they pay primarily Principal.

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.

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

Annual Interest Rate Cap
The most that the Interest Rate on an Adjustable-Rate Mortgage can change at each annual change date.

Annual Percentage Rate (APR)
The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes certain up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Application
An initial statement of personal and financial information which is required to approve your loan.

Application Fee
Fees that are paid upon application. An application fee may frequently include charges for property appraisal and a credit report.

Appraisal
A fee charged by an appraiser to render an opinion of market value as of a specific date. Required by most lenders to obtain a loan.

Appreciation
The amount by which the value of your property has increased since its purchase. The opposite of depreciation.

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

Assignment of Mortgage
Your lender can sell your mortgage to a different lender at any time. Most lenders sell to Fannie Mae, Ginnie Mae, Freddie Mac or the state housing finance agency. The transfer is called an Assignment of Mortgage.

Assumption
To assume an existing mortgage. Utah Housing loans can be assumed by qualified buyers. Only a few Fixed Rate Mortgages are assumable. Most Adjustable-Rate Mortgages are assumable although it is often undesirable for the buyer to assume this type of mortgage. An assumable loan with a below-market interest rate can make your home more attractive to buyers when you want to sell.

Balance Sheet
A financial statement that shows assets, liabilities and net worth as of a specific date.

Balloon Payment
A lump sum payment for the unpaid balance of the loan.

Basis Point
One hundredth of a Point.

Beneficiary
The person designated to receive the income from a trust, estate or deed of trust.

Bi-Weekly Mortgage
A mortgage to which you make payments every two weeks. Since there are 52 weeks in a year, this works out to 26 payments a year. The payment is usually calculated by dividing the monthly mortgage payment by two. It works out to roughly the equivalent of prepaying one extra monthly payment each year. This saves a significant amount of Interest over the term of the mortgage, as well as shortening the time to pay it off. Some banks offer this type of mortgage but you can get similar results by making an extra mortgage payment each year on a monthly mortgage or by making consistent extra-principal payments.

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Budget
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

Buydown
Permanent Buydown-A way to reduce the Interest Rate that a bank is charging you and qualify for a more expensive home. The bank is willing to do this for a lump sum fee, usually at the beginning of the mortgage. This may be a very smart way for you to reduce the Interest that you will have to pay over the life of the mortgage. Builders also Buy Down mortgages, usually so that they can entice new homebuyers with the attraction of below market rates. They simply add the cost of the Buy Down onto the price of the new home.
Temporary Buydown-A way to reduce monthly payments at the beginning of a loan. Either the seller and the buyer must deposit a lump sum with the lender. See also Interest Rate Buydowns.

Call Provision - See Acceleration Clause

Cap
The limits for an Adjustable Rate Mortgage. The most common caps limit the following:

1. How much the rate can change per year.
2. How much the rate can change during the life of the loan.

Cash Out
Receiving money back when refinancing your present mortgage.

Ceiling
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Closing
The time when the Title of the home changes hands from the seller to the buyer and the time when the buyer makes full payment to the seller, including financing for the home. The Closing often takes place at the title company's office.

Closing Costs
Costs the buyer must pay at the time of closing in addition to the down payment. Cost include such items as points, origination fees, an escrow fund for taxes and homeowners insurance, charges for title insurance, mortgage insurance premium, appraisal fee, recording fees and so forth. Closing costs average 3%-4% of the loan amount.

Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Commitment
The lender's written promise to give you a mortgage for a specific loan amount (Principal), Interest Rate and Closing Costs. This promise is usually limited to a 30 to 60 day period. Since the lender ties up the money for this time period, the lender might charge if you don't sign the mortgage.

Common Areas
Those portions of a building, land and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association. All of the unit owners share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts and other recreational facilities as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Condominium
A real estate project in which each unit owner has title to a unit in a building, and undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Construction Loan
A short tem loan given to you by a builder for financing the cost of construction. The loan comes due after the construction work is completed. Payments are not made until the balance is due in one lump sum (balloon), usually these payments are Interest only (see Balloon Payment).

Consumer Reporting Agency (or Bureau)
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contingency
A condition included in an offer to buy a home such as the prospective buyer needing to complete the sale of his or her present home before completing the purchase of another home.

Conventional Loan
A loan that is not an FHA or a VA loan. A Conventional Loan is neither insured by the government nor guaranteed by the government. It usually requires a 3% down payment and may be backed by private mortgage insurance (PMI).

Contract of Sale - see Real Estate Purchase Contract

Cosigner
If you can't qualify for a mortgage you may need a Cosigner to help you obtain the mortgage. A Cosigner is usually a close relative who is willing to sign the mortgage with you and is equally responsible for repaying the loan. A good cosigner is generally someone with an excellent credit/payment history and/or more-than-sufficient available funds and income to be able to make the payment if you are unable to for any reason.

Credit History
A record of an individual's open and fully repaid debts together with a list of credit grantors who have recently inquired about your credit history. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report
Your lender can request your credit history in the form of a Credit Report. You have to pay for this report. This report shows the lender whether you have been diligent in making all your debt payments over the last seven years.

Credit Score
A numeric score from 500 - 800 that reflects the success of your use of credit. Higher scores generally indicate lower risk to lenders and can mean a better interest rate and lower payments.

Debt Service
The total amount of monthly payments required for credit card, auto loans, mortgage loans and all other debt.

Deed
The legal document conveying title to a property.

Deed of Trust
A document similar to a mortgage. If you default on your obligations, your lender can request that the Deed of Trust be foreclosed through a more streamlined process that saves the lender from having to take court action to foreclose on the property.

Default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

Deficiency Judgment
A court order which would allow your lender to take possession of your personal assets in order to recover any loss which was caused by having to foreclose on your property.

Delinquency
Failure to make payments on an obligation when payments are due.

The amount of cash that you will need to pay up-front on a house. Basically, you are reducing, or "paying down" the amount of money you will need to borrow. The mortgage amount plus your cash Down Payment is equal to the selling price of the house. Keep in mind that there are numerous other Closing expenses for which you will need to pay.

Due-on-Sale Clause - see Acceleration Clause

Earnest Money
Funds submitted with an offer to show "good faith", or "earnest intention" to follow through with the purchase. Earnest money is placed by the broker in an escrow/trust account until closing, when it becomes part of the down payment and closing costs.

Easement
A right of way giving persons other than the owner legal access to or through another person's property.

Effective Gross Income
Normal annual income 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 stable and has a 2-year history.

Effective Interest Rate
The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

Encroachment
An improvement that intrudes illegally on another's property.

Encumbrance
A claim against a property by another party. It will usually affect the ability to transfer free and clear ownership of the property.

Equity
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow Account
The account in which a mortgage servicer holds the borrower's tax or insurance payments.

Escrow Analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

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.

Fannie Mae
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Firm Commitment
A lender's agreement to make a loan to a specific borrower on a specific property.

First Mortgage
A mortgage which is in first lien position and takes priority over all other mortgages.

First Time Homebuyer
A person who has not owned his or her personal residence during the past three years.

Fixed Rate
An interest rate which is fixed for the term of the loan. Payments for principal and interest are also fixed.

FHA Loan
More appropriately termed "FHA Insured Loan". A loan for which the Federal Housing Administration insures the lender against part of the losses the lender may incur due to your default.

Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.  

Foreclosure
If you are not making your mortgage payments and are in default, your lender can foreclose on your property and resell the home in order to pay the mortgage.

Good Faith Estimate
A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Government Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with Conventional Mortgage.

Grace Period
A period of time during which a loan payment may be paid after its due date but not incur a late penalty.

Gross Income
For qualifying purposes, the income of the borrower before taxes or any expenses are deducted.

Hazard Insurance
A contract (policy) between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.). Also known as a homeowners insurance policy.

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 valued 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 loan providing you with the ability to borrow funds at the time and in the amount that you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan
A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to consolidate consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser because the appraisal does not protect the buyer.

Homeowners Association
A nonprofit association that manages the common areas of a planned unit developmnt (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it may hold title to the common elements.

Homeowners Insurance
Insurance that protects the homeowner from "casualty" (losses or damage to the home or personal property) and from "liability" (damages to other people or property). It is required by the lender and the premium is usually included in the monthly mortgage payment.

Homeowner's Warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is often provided by the builder or property seller as a condition of the sale.

Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing expenses.

HUD I Settlement Statement
A form utilized at loan closing to itemize the costs associated with purchasing the home. Used universally by mandate of HUD (the Department of Housing and Urban Development).

Index
An independent measure of the current Interest Rate used as a basis for the interest rate of an Adjustable-Rate Mortgage. Different Adjustable-Rate Mortgages are tied to different Indexes. Some of the more popular Indexes are the Treasury Bill and the 11th District Cost of Funds. Your Interest Rate is calculated by adding the Margin to the Index.

Insurance Binder
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lessor of the loss incurred or the insured amount.

Interest
The dollar cost of borrowing a given amount of money for a period of time. If your mortgage Principal is $100,000 and the Interest Rate is 8.00%, then the Interest for one month is calculated as follows: ($100,000 X 0.08) ÷ 12 = $666.67

Interest Rate
The percentage cost of borrowing a given amount of money (Principal) for a period of time.

Interest Rate Buydown See Buydown.

Joint Tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.

Judgment
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.

Late Charge
The penalty a borrower must pay when a payment is made more than a stated number of days (usually 15) after the due date.

Lease-Purchase Mortgage Loan
An alternative financing option that allows low- and moderate-income homebuyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.

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

Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Lien
If you don't pay your taxes or pay for the construction work on your property, the tax agency or the construction company can file a lien against your home. Until you pay these bills you won't be able to refinance or sell your property without eliminating the lien.

Lifetime Interest Rate Cap
The most that the interest rate on an Adjustable-Rate Mortgage can ever change over the life of the loan.

Loan
A sum of borrowed money (principal) that is generally repaid with interest.

Loan to Value Ratio (LTV)
A ratio expressed as a percentage determined by dividing the sales price or appraised value into the loan amount. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%. Loans with an LTV over 80% may require Mortgage Insurance.

Lock or Lock In
A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you apply for a loan and subsequently close the loan.

Margin
A fixed amount that is added to the Index which the mortgage is tied to, to calculate the Interest Rate that you will pay for an Adjustable-Rate Mortgage. If, for example, the Index is 6% and the Margin is 2%, the Interest Rate for that period is 8%. The Margin is the same throughout the life of the mortgage.

Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Mortgage Banker
A Company that originates mortgage loans and uses their funds to close the loan in their name.

Mortgage Broker - see Broker

Mortgage Insurance (MIP or PMI)
Insurance purchased by the borrower to insure the lender against loss should you default. MIP, or Mortgage Insurance Premium, is paid on government-insured loans (FHA or VA loans) regardless of your LTV (loan-to-value ratio). PMI, or Private Mortgage Insurance, is paid on those loans which are not government-insured and whose LTV is greater than 80%. When you have accumulated 20% of your home's value as equity, your lender may waive PMI at your request. Please note that such insurance does not constitute a form of life insurance which pays off the loan in case of death.

Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage Loan
A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of you loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

Mortgagee
The lender in a mortgage loan transaction.

Mortgagor
The borrower in a mortgage loan transaction.

Negative Amortization
Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.

Net Worth
The value of all a person's assets, including cash, minus all liabilities.

Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Note Rate
The interest rate stated on a mortgage note.

Notice of Default
A formally written notice to a borrower that a default has occurred and that legal action may be taken.

Original Principal Balance
The total amount of principal owed on a mortgage before any payments are made.

Origination Fee
The lender's charge for evaluating, preparing, processing and submitting a mortgage.

Owner Financing
A property purchase transaction in which the property seller provides all or part of the financing.

Partial Payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.

PITI
Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Personal Property
Items that do not go with the real estate. See details under Real Property.

Planned Unit Development (PUD)
A project or subdivision that has a homeowners' association and includes common property for the benefit and use of the individual PUD unit owners.

Point
One Point equals one percent of the loan amount. If a particular mortgage required you to pay 2 Points, and you were getting a $100,000 mortgage, you would have to pay $2,000 at the Closing.

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.

Preforeclosure Sale
A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.

Pre-Qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before he or she applies for a loan.

Previous Home Ownership
Using the Federal definition, a previous home owner is a person who owned their personal residence during the past three years.

Principal
The mortgage amount on which Interest is calculated.

Principal Balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges.

Prepayment Penalty
A fee paid to the lending institution for paying a loan prior to the scheduled maturity date. Prepayment penalties are not allowed for Utah Housing loans. 

Private Mortgage Insurance - see Mortgage Insurance