Morgage Glossary of Common Loan Terms   O Offer An expression of willingness to purchase a property at a specified price. Offeree One who receives the offer. When the buyer makes an offer to the seller the seller is an offeree. Offeror One who makes the offer. When the buyer makes an offer to the seller the buyer is an offeror. Office of Comptroller Currency The oldest federal financial regulatory body that oversees the nation's federally chartered banks. Office of Thrift Supervision The OTS charters federal thrift institutions and is the primary regulator of all federal and many state-chartered thrift institutions. Open-end Mortgage A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions. Open House A method of showing a home for sale to prospective buyers where the home is left open for inspection by those who may be interested in making a purchase. Option Arm The Option Arm loan program, commonly referred to as the negative amortized loan, has a low starting payment rate. Typically the starting rate is 1 to 2 percent. The initial monthly loan payment is calculated based on the starting rate, but the note rate will adjust to the Index plus the Margin after the first one to three months. The payment remains the same for the entire year, and is only adjusted yearly on the anniversary date. Since the interest charges may exceed the monthly payment, the interest that is not paid is added to the loan balance. This increases the loan amount, rather than decreasing the loan balance as in a fully amortized loan. Thus we have a negative amortization, or increasing loan balance, during the initial years of this loan. Optionee One who receives or purchases an option. Optionor One who gives or sells an option. Oral Contract A verbal agreement. Verbal agreements for the sale or use of real estate are normally unenforceable. Origination Fee See Loan Origination Fee. Owner Financing A property purchase transaction in which the property seller provides all or part of the financing. Owner of Record The individual named on a deed that has been recorded at the county recorders office. Owner Occupant A tenant of a residence who also owns the property. P Package Mortgage Mortgage covering both real and personal property. Paper A mortgage, deed of trust or land contract provided in lieu of cash. Partial Release A provision in a mortgage that allows some of the property secured to be freed from serving as collateral. Participation Mortgage A mortgage that allows the lender to share in part of the income or resale proceeds. Pass-through Certificates Interests in a pool of mortgages sold by mortgage bankers to investors. Money collected as monthly mortgage payments is distributed to those who own certificates. Permanent Loan or Mortgage A mortgage for a long period of time. Often referred to as the mortgage that pays off a construction loan on a completed property. Permit A document issued by a government regulatory authority that allows the bearer to take some specific action. An occupancy permit allows the owner of a building to occupy or rent the building. Phishing Email phishing, also referred to as brand spoofing or carding, is a variation on “fishing,” the idea being that bait is thrown out with the hopes that while most will ignore the bait, some will be tempted into biting. An example of receiving this kind of spam email is “We have been trying to contact you regarding your loan request. Your loan is approved. Click here to complete your loan application.” Another example is a request for information using a bank’s website header, so it looks like it’s coming from the bank, but is actually a fake. PITI Principal, Interest, Taxes and Insurance. Your mortgage loan payment usually includes the principal and interest amounts. When you borrow more than 80 percent of the value of your home, lenders usually require that you also pay the taxes and insurance payments with your loan payment. Planned Unit Development (PUD) A zoning classification that allows flexibility in the design of a subdivision. PUD's include individually owned units as well as some common space that is jointly owned. Plat A plan or map of a specific land area. Plat Book A public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. Pledged Account Mortgage (PAM) When the borrower places money in a pledged savings account, and these funds, plus interest earned, are gradually used to reduce mortgage payments. Points Fees paid to lenders. 1 point = 1 percent of the loan amount. On a $100,000 loan 1 point is $1000. Points may be further classified into origination points or discount points. Portfolio Loan A loan that is held as an investment by a bank or savings and loan, and NOT sold on the secondary market to investors. Power of Attorney A written document authorizing a person to act on the behalf of another person. That person does not have to be an attorney. See Attorney-In-Fact. Prepaid Interest Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest. Prepayment Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan. Prepayment Penalty Fees paid by the borrower if they pay the loan before its due date. Pre-Qualification The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan. Primary Mortgage Market Companies that originate and service mortgage loans (banks, savings & loans, credit union, mortgage bankers, institutional lenders) make up the primary mortgage market. See also secondary mortgage market. Prime Rate The rate offered to a bank's best customers. Principal The outstanding balance on a loan. Private Mortgage Insurance (PMI) In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 2 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance payments are normally made annual or monthly. An impound account may be required. Probate Court process to establish the validity of the will of a deceased person. Property Tax A government levy based on the market value (as assessed by the county assessor's office) of the property. Public Sale An auction of property with notice to the general public. Purchase Agreement A real property agreement between a buyer and seller specifying the price and terms of the sale. Purchase Money Mortgage A mortgage used to finance the purchase of a property. Q Qualification Rate Rate of interest used to calculate whether or not a borrower qualifies for a mortgage. Qualification Requirements Guidelines used by lenders to decide whether to loan money to an applicant. Qualified Acceptance, Conditional Acceptance Acceptance for a loan (or other contract) provided that certain conditions are met. Qualified Buyer A person who has been pre-approved for a mortgage loan. 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. Quiet Title (Action) A court action to settle a title dispute. Quit Claim Deed A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. R Radon A radioactive gas which seeps up from the ground and can cause health problems. A radon test is often part of the home inspection. Real Property Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof. Realtor A real estate professional who is a member of the National Association of Realtors. Real Estate Broker An individual who often owns a real estate company or is in a management position, and who is licensed to represent a buyer or a seller in a real estate transaction. Real Estate Settlement Procedure Act (RESPA) A law that states how mortgage lenders must treat those who apply for real estate loans on property with one to four units. Example : A lender is required to provide a good faith estimate of closing costs within three days of an application being filed. Recapture tax Some government sponsored or insured programs, like HUD Low Income Housing programs, require that the buyer occupy the property and retain ownership for a specific period of time. If the buyer sells the property and in some cases moves out of the property, the tax benefits or subsidies received are recaptured, meaning charged to the homeowner. This is a penalty assessed for selling the house too early. Recession A recession is usually defined as a fall of a country’s real Gross National Product in two or more successive quarters of a year. A recession may also involve falling prices, which can lead to a depression. In a free market economy, recessions come and go at fairly regular intervals, often five to ten years, in what is known as the business cycle. Reconveyance When a mortgage is paid in full, the lender conveys the property back to the owner. Recording The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property. Recording Fees Money paid to the lender for recording a home sale with local authorities, making it public record. Recision The cancellation of a contract. When refinancing a mortgage on a principal residence the law gives the homeowner three days to cancel the contract. Recourse The right of the holder of a note secured by a mortgage or deed of trust to claim money from the borrower in default in addition to the property pledged as collateral. Redlining The practice of refusing to provide loans or insurance in a certain neighborhood. Refinance Obtaining a new mortgage loan on a property already owned, often to replace existing loans. Regulation Z (Reg Z) A federal regulation requiring creditors to provide full disclosure of the terms of a loan including the terms of the loan and the annual percentage rate (APR). Real Estate Investment Trusts (REIT) A trust that uses investors' money to purchase and manage real estate. Investors realize some of the tax advantages in owning real estate. Restrictive Covenants Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. Reverse Annuity Mortgage (RAM) A mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral. Reverse Mortgage A mortgage used by the elderly that provides income as long as they live in exchange. Payments made cause the loan principal to increase. Right of First Refusal A portion of an agreement that requires a property owner to give one party the opportunity to buy or lease the property before the property is made available to other potential buyers. Right of Ingress or Egress The right to enter or leave designated premises. Right of survivorship The right of a surviving joint tenant to acquire the interest of a deceased joint owner. Rollover Loan A loan that is amortized over a long period of time (e.g., 30 yrs) but the interest rate is fixed for a short period (e.g., 5 yrs). The loan may be extended or rolled over, at the end of the shorter term, based on the terms of the loan. 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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