Morgage Glossary of Common Loan Terms   I Impound Account That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves. Improvements Additions to raw land such as buildings, streets, etc. that add value to the land. Income (Capitalization) Approach An appraisal method used for the valuation of income-producing property in which net income is capitalized. Income Property Real estate that generates rental income. Examples: apartment buildings, office buildings and shopping centers. Index A statistic that indicates some current economic of financial condition. Indexes are used to make adjustments in variable rate loans. Inflation In economics, inflation is an increase in the general level of prices of a given kind. General inflation is a fall in the market value or purchasing power of money within an economy, and is referred to as a rise in the general level of prices. Ingress and Egress The right to pass through a piece of property. See Easements. Installment Sale 1. Re. Taxation: When selling real property and receiving one or more payments in subsequent years, the taxpayer may report the sale as an installment sale. This allows the taxpayer to defer the recognition of gain over many years and save taxes. 2. Installment sale land contract. See Conditional Sales Contract. Interest Only An interest-only loan program is a loan program that has an interest-only payment option. The loan can be a fixed rate or variable rate program. The interest only monthly payment is the amount of the interest rate times the original loan amount divided by twelve. No principal is paid, and the loan balance does not decrease. You may pay the interest only payment amount or pay the fully amortized payment amount. The interest only payment option is only available in the initial years of the loan term. Conforming loan programs have the interest only term for ten to fifteen years. Jumbo programs vary from three years up to ten years. ISP Internet Service Provider, a company that provides access to the Internet. For a monthly fee, the service provider gives you a software package, username, password and access phone number. You can then log on to the Internet and browse the World Wide Web, and send and receive e-mail. J Joint and Several Liability A creditor can demand full repayment from any and all of those who have borrowed. Each borrower is liable for the full debt, not just the prorated share. Joint Tenancy Ownership of a property by two or more people, each of whom has an undivided interest with the right of survivorship. Example: John and Mary own a house in joint tenancy. Each owns half of the entire (undivided) property. If John dies, Mary will own the entire property and vice versa. Judgment The decision of a court of law stating that one individual is indebted to another and fixing the amount of indebtedness. Judgments, when recorded, become a lien on real property owned by the defendant. Judgment Lien The claim on the property of a debtor resulting from a judgment. 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 Loan size that is larger than the conforming loan limit established by the Fannie Mae or Freddie Mac. Junior Mortgage A mortgage subordinate to another mortgage. In the case of a foreclosure a senior mortgage will be paid prior to a junior mortgage. K Kicker A payment required by a mortgage in addition to normal principal and interest. Sometimes known as a participation loan. L Land Contract See Conditional Sales Contract Late Charge The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date. Lease A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent. Leasehold Estate Tenant's right of possession for a specific period of time under a lease agreement. Lease with Option to Purchase A lease under which the lessee has the right to purchase the property. The option may run for a portion or for the full length of the lease Legal Description Legally acceptable identification of real estate by one of the following: the government rectangular survey metes and bounds recorded plat (lot and block number) Lessee A person to whom property is rented under a lease. (Tenant) Lessor A person who rents property to another under a lease. (Landlord) Libor London Interbank Offered Rates. Average London Eurodollar rates. The Libor Index rate is used in many variable loan programs. Life Estate An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party. Lien A claim against the property for the payment of a debt, judgment, mortgage or taxes. Example : Unpaid contractors may file a mechanic's lien. Line of Credit An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit. Lis Pendens Latin for "lawsuit pending." Recorded notice that litigation is pending on a property. Most lenders will require the clearance of the Lis Pendens prior to closing. Listing Real Estate properties for sale are usually considered listed when a real estate agent is contracted to sell the property, using a listing agreement, and the property is posted in the multiple listing service, MLS, for that local region. It can also be in an Internet listing service online, which can be done directly by the homeowner. Liquid Asset A cash asset or an asset that is easily converted into cash. Loan Application A document required by a lender prior to loan approval. The application includes detailed information about the borrower and the property. Loan Origination Fee or Points Charge by a lender or broker connected with originating a loan. This is different from discount points which are used to buy down the rate of interest. Loan Servicing The act of collecting loan payments, handling property tax and insurance escrows, foreclosing on defaulted loans and remitting payments to the investors. Loan to Value Ratio (LTV) The loan amount divided by the value of the property. Lock-in A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing. Lock-in period The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in. M Margin A fixed number added to the index to compute the rate on an adjustable rate mortgage. Marketable Title Title that is free of liens, clouds and other legal defects and hence is readily acceptable by a buyer. Market Value The highest price that 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. 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. Mechanics Lien The right of an unpaid contractor or subcontractor to file a lien against property to recover the amount due to him/her. Merged Credit Report A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of your credit. Modification The act of changing any of the terms of the mortgage. Mortgage A written instrument that creates a lien upon real estate as security for the payment of a specified debt. Mortgage Backed Security (MBS) A bond or other financial obligation secured by a pool of mortgage loans. Mortgage Banker Specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them. Mortgage Broker Arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when a loan closes. Mortgage Life Insurance A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. Mortgagee The lender. Mortgagor The borrower. Mortgage Insurance See private mortgage insurance (PMI) Mortgage Note A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment. Multidwelling Units Properties that provide separate housing units for more than one family, although they secure only a single mortgage. Multifamily Mortgage A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex. N Negative Amortization An increase in principal balance which occurs when the monthly payments do not cover all of the interest cost. The interest cost which is not covered by the payment is added to the unpaid principal balance. Net Effective Income The borrowers gross income minus federal income tax. No-Doc Loan A loan requiring very little loan documentation. These loans usually require large (25%) down payments. Nonconforming loan Loans that do not comply with Fannie Mae or Freddie Mac guidelines. Notary Public One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages. Note The Note is a promissory note, which is signed with loan documents and states the loan amount, interest rate and loan terms. Notice of default A letter sent to the defaulting party as a reminder of the default. Use our detailed glossary to familiarize yourself with many of the terms that will be used through out the process of obtaining a loan. The key to being a successful 'borrower' is by making the best decision based on the information available to you. With that in mind we offer this glossary to help you become a more informed 'borrower'.

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