Mortgage Glossary


Every industry has its own terminology and buzzwords that make sense to anyone within that industry. Sometimes, however, they tend to confuse those on the outside. We've put together a list of commonly used mortgage related words in case you run across something that doesn't make sense to you.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Acronyms

 

Negative Amortization: Occurs when the monthly payments on the mortgage do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance.

 

Origination Fee: The fee charged by a lender to prepare loan documents, process, underwrite, make credit checks, inspect and sometimes appraise a property (lenders profit is also included).

 

PITI: Principal, Interest, Taxes and Insurance are the components of a mortgage payment.

Point: A dollar amount paid to a lender for making a loan. A point is one percent of the loan amount. Also called discount points. Power of Attorney: A legal document authorizing one person to act on behalf of another.

Prepaids: Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment: A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment penalty: Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Pre-qualification: Qualifying a borrower for a loan amount before looking for a home. Final approval subject to appraisal of property.

Principal: The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest.

Purchasing: Obtaining a mortgage loan for the acquisition of a property, usually a home.

 

Rate: A percentage of the monthly mortgage payment paid to the lender.

Real Estate Broker: The seller of the house pays the real estate broker to attract potential buyers and help negotiate the contract between the seller and the buyer. The broker identifies available properties for buyers and shows them homes that meet their criteria.

Real Estate Settlement Procedures Act (RESPA): Short for the Real Estate Settlement Procedures Act. RESPA is a federal law, which in part allows consumers to review information on known or estimated settlement costs, once after application and once prior to or at a settlement.

Realtor: A member of the National Association of Realtors.

Refinance: Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.

RESPA: Real Estate Settlement Procedures Act. RESPA is a federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs.

 

Second Trust: A mortgage made subsequent to another mortgage and subordinate to the first one.

Servicer: After a mortgage loan closes, the loan servicer collects the payments, manages escrow accounts, pays escrow taxes and insurance, and manages delinquent payments. Lenders often "release" servicing to another business, which means that a home buyer will not necessarily send house payments to the original lender.

Settlement: The closing of a mortgage loan.