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Home buying process

Real estate glossary

ABR

Accredited Buyer’s Representative

ABRM

Accredited Buyer Representative Manager

Acceleration Clause

Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

Adjustable Rate Mortgage (ARM)

A loan that adjusts on a regular schedule based on a national economic index and the lender’s margin. Also called ‘variable rate mortgage.’

Adjustment Interval

On an adjustable rate mortgage, it is the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

AHWD

At Home With Diversity®

Amortization

The process of paying off a loan with regular payments over a fixed time period, including accrued interest on the outstanding balance.

Annual Percentage Rate (APR)

The cost of borrowing money expressed as a yearly rate, which includes the interest, points, and other fees charged by the lender.

Appraisal

An estimate of the value of property, made by a qualified professional called an “appraiser.”

Appraisal Fee

A fee paid to the lender to cover the cost of a written report that estimates the monetary value of a property on the open market.

Appreciation

An increase in the value of a house due to changes in the market conditions, home improvement or other factors.

Arm’s Length Transaction

A transaction in which the two parties to the sale are equals, and independent of each other.

Assessed Value

The value placed on a house by a public tax assessor for the purpose of determining property taxes.

Assumption

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a mortgage is simply taking the loan over from the seller and becoming liable for the repayment. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charge will apply. The lender of record should be contacted. Lender approval is needed, and the seller may continue to have liability for the mortgage.

Balloon Payment Mortgage

A loan with fixed monthly payments based on a 30-year schedule of payments on which the entire balance of the loan comes due at the end of a set period, usually five, seven, or 10 years.

Bankruptcy

A legal proceeding declaring that an individual is unable to pay debts, which may release the person from repaying debts owed.

Bi-Weekly Mortgage

A loan in which you qualify for a 30-year schedule of monthly payments at current interest rates but make payments every two weeks to pay off the loan sooner and save money on interest charges.

Borrower

The person who obtains a mortgage loan. Also called a mortgagor.

BPOR

Broker Price Opinion Resource

Bridge Loan

A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.

Buy-Downs

Points a borrower pays in advance to lower the interest rate. Also called discount points.

Buyer’s Agent

A real estate broker who enters into a contract-of-agency relationship with the buyer and typically gets paid by splitting the sales commission with the listing (seller’s) agent. Also known as a buyer broker.

Cap

The maximum amount an interest rate can increase or decrease in a designated period of time or over the life of the loan on an adjustable rate mortgage.

CCIM

Certified Commercial Investment Member

CDPE

Certified Distressed Property Expert®

CFS

Certified Fund Specialist

CHS

Certified HAFA Specialist

CIAS

Certified Investor Agent Specialist™

CIPS

Certified International Property Specialist

Clear Title

A title that is free of liens and legal questions about the ownership of the property.

Closing

The final step in the transfer of ownership of a property from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded.

Closing Costs

Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3% to 6% of the mortgage amount.

Closing Date

The date of the final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded.

Closing Disclosure

This is a settlement statement form of final loan terms and closing costs.  Lenders are required to provide your Closing Disclosure three business days before your scheduled closing.  Compare this document with your Loan Estimate.

Closing Statement

See HUD-1 Settlement Statement

CNE

Certified Negotiation Expert

CNHS

Certified New Home Specialist™

Co-Signer

A person who agrees to share credit responsibilities and repays the debt if the borrower defaults.

Commission

The fee a real estate broker/agent is paid for assisting in the purchase or sale of a property. It is usually a percentage of the purchase price.

Commitment

An agreement, often in writing, between a lender and a borrower to lend money at a future date subject to the completion of paperwork or compliance with stated conditions.

Comparative Market Analysis (CMA)

A written analysis prepared by a real estate broker to establish the market value of a property. The CMA analyzes comparable homes currently offered for sale and comparable homes sold in the past six months.

Condominium

A home that is usually attached to other homes and shares common areas that everyone in the building or development owns together and maintains through a homeowners’ association fee.

Contingency

A condition that must be met before a contract is legally binding. Home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector. A contingency for financing specifies that if you do not get the mortgage financing you need to purchase the house at the terms you want, the offer is void and you will be refunded your deposit.

Conventional Loan

A mortgage made by for-profit lenders and not insured by FHA or guaranteed by the VA or Farmers Home Administration (FmHA).

Cooperative

A type of group ownership where all members own the property’s living units and common areas by owning shares in the property.

Counter-Offer

A response from a seller or buyer proposing a change to some of the terms of the original offer.

Covenant

A specific agreement or regulation, which is legally enforceable and is transferred with the deed to the new owner, governing the use of the property. Also called covenants, conditions, and restrictions (CC&Rs).

Credit Rating/Credit Score

A numerical value that ranks a borrower’s credit risk at a given point in time. Your credit score is based on all the information in your credit report. This information is converted into a number which lenders use to determine whether you are likely to repay your loan in a timely manner.

Credit Report

A report of an individual’s credit history, including open and fully repaid debt. The credit report is prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

Credit Report Fee

A fee paid for a report of an individual’s credit history, including open and fully repaid debt. The credit report is prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

CRS

Council of Residential Specialists

CSP

Certified Sales Professional

CSSN

Certified Short Sale Negotiator

Debt

Money owed. Also called liability. Obligation to pay.

Debt-to-income ratio

A debt-to-income (DTI) ratio is a calculation used by lenders during the underwriting of a loan application to determine the applicant’s capacity to pay back the loan. It measures the percentage of an applicant’s gross income that will be allocated toward the proposed housing payment (PITI) as well as minimum payments on other debt obligations.

Deed

A written instrument which when properly executed (signed) and delivered (accepted) conveys title to real property from one party the grantor to another party the grantee.

Deed of Trust

An alternative to a mortgage in some states, whereby a third party holds the deed of the property as security until the buyer repays the loan. Also called trust deed. Trust deeds are commonly used in Oregon.

Deed-in-lieu

Short for “deed in lieu of foreclosure,” this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and becoming a matter of public record.

Default

Failure to meet financial obligations within a specified period of time, which may result in the lender foreclosing on the loan.

Disclosures

Federal or state requirements to provide information about a property for sale, especially as they represent actual or potential defects or problems with the property. The making known of all material facts that may be hidden. You must disclose major physical defects in a house you are selling.

Down Payment

The amount of cash a borrower/buyer pays toward the purchase of a home and does not finance with a mortgage.

Dual Agent

A real estate broker who represents both the buyer and the seller in a single home purchase transaction.

Due-On-Sale Clause

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder (buyer) sells the home.

Duplex

A house divided into two living units.

e-PRO

e-PRO® real estate technology training for Realtors®

EA-Broker

Earth Advantage Broker

Earnest Money

In effect, a deposit, refundable under certain conditions, made by the potential home buyer to show that he or she is serious about buying the house, to show good faith in following through with the transaction.

Earnest Money Agreement

See Sales Contract. This should be explained by your Realtor and/or attorney.

Easement

A right of way giving people other than the owner access to or over a property.

EcoBroker

EcoBroker® Green Designation

Encumbrance

Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.

Equal Credit Opportunity Act (ECOA)

A federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

A homeowner’s financial interest in a property. The difference between the fair market value and current indebtedness also referred to as the owner’s interest. If you have a $100,000 mortgage on a property, but you can sell your home for $150,000, then your equity is $50,000.

Escrow

A neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or “closing.” The earnest money deposit is put into escrow until delivered to the seller when the transaction is closed. In Oregon, this neutral third party is typically a title company. Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments. See Impounds.

Excise Tax

A state, county, and/or municipal tax in the form of a percentage of the sales price charged an owner at the point of sale. Also known as a “transfer tax”. In the state of Oregon, it currently only applies to Washington County.

Fannie Mae

See Federal National Mortgage Association.

Farmers Home Administration (FmHA)

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation (FHLMC)

Also called Freddie Mac. A quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA)

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting mortgages, but does not lend money or plan or construct housing.

Federal National Mortgage Association (FNMA)

Also known as Fannie Mae. A Congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.

FHA Loan

A loan insured by the Federal Housing Administration open to all qualified home purchasers.

FHA Mortgage Insurance

Requires a small fee (up to 3.5 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA.

FICO

A FICO score is a credit score computed using proprietary formulas of the FICO Corporation (formerly called Fair Isaac). See: FICO Frequently Asked Questions.

First Mortgage

A legal document that is pledged as collateral for a loan that was recorded first giving it first priority and will be superior to all other liens or claims against the property except for taxes and bonded indebtedness.

Fixed-Rate Mortgage

A loan on which the interest rate is set for the term of the loan.

Fixture

Property, such as a hot water heater or plumbing fixture, that has become permanently attached to piece of real estate and goes with the property when it is sold. Or personal property that becomes real property when attached in a permanent manner to real estate.

Flood Insurance

A policy required by a lender if a buyer’s house is located in a flood zone. Compensates for physical property damage resulting from flooding.

Foreclosure

The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. The legal process used to force the payment of debt secured by collateral whereby the property is sold to satisfy the debt.

Freddie Mac

See Federal Home Loan Mortgage Corporation.

Good-Faith Estimate (GFE)

An estimate of closing costs that must be given with residential loans on one to four units under the Real Estate Settlement Procedures Act by a lender to a mortgage applicant within three days after the loan application based on the lender’s best estimate.

Graduated Payment Mortgage

A fixed-rate fixed-schedule loan. It starts with lower payments than a level payment loan; payments rise annually with the entire increase being used to reduce the outstanding balance. The increase in payments may enable the borrower to pay off a 30-year loan in 15 to 20 years or less.

GREEN

National Association of Realtors® GREEN Designation

GRI

Graduate, Realtor® Institute

Gross Income

The total income from a property before any expenses are deducted.

Gross Monthly Income

The total amount the borrower earns per month, before any expenses are deducted.

HCS

HOWNW.com® Certified Specialist

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is a form of revolving credit, similar to a credit card, which is secured by the equity in one’s home. Often times HELOCs carry variable interest rates that are based on the prime index. HELOCs typically carry a “draw period” for an initial number of years during which the borrower can borrow up to the limit of the line of credit and pay down the principal at will. At the end of the draw period the loan will usually amortize over the remaining term of the loan.

Home Equity Loan

A loan secured by a mortgage lien that allows an owner to use his or her residence as collateral for a loan which permits the draw of funds up to a preset amount to pay for repairs or other home improvements, refinance other debt or use for other purposes. This loan is also sometimes called a “line of credit.”

Home Inspection

A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value. A common expense for a homebuyer in a real estate transaction, and highly recommended.

Homeowner’s Insurance

A standardized insurance policy package to protect the homeowner against physical damage to a property from fire, wind, vandalism and other hazards. Also known as Hazard Insurance.

Housing Expenses-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans).

HUD-1

A final statement listing all the costs of the sale of a property and who pays for them. The form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the closing statement or settlement sheet.

Impound

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 or escrow.

Index

A published market index rate tied to an economic indicator that is used to calculate the interest rate of an adjustable rate mortgage at origination and at each adjustment period.

Interest

The cost of borrowing money.

Interest Rate Lock-In

A written guarantee that a buyer will receive a specified interest rate from a lender provided that the loan closes within a set period of time.

Joint Tenancy

A form of ownership in which two or more people have an equal and undivided interest in the property.

Land Lease

An arrangement in which a person owns a house and rents the land underneath it.

Land Sales Contract

A Land Sales Contract is an agreement between the seller and buyer stating the purchase price and how it is to be paid as well as other rights and duties of both parties regarding the payment of the purchase price. The buyer does not usually receive a deed to the property until all payments required by the contract have been made. Some forms of the contract also may permit recovery by the seller without court action.

Lien

A legal hold or claim of one person on the property of another as security for a debt.

Listing Agent

A real estate broker who has a contract with the seller of real estate to advertise the property for sale and represent the seller when offers are made. Also called the seller’s agent.

Loan Discount Points

A fee paid by the borrower at closing to reduce the interest rate on a mortgage. A point equals 1 percent of the loan amount.

Loan Origination Fee

The loan origination fee covers the administrative costs of processing the loan. It is often referred to as points. One point is 1 percent of the mortgage amount. An example: a 100,000 mortgage with a loan origination fee of 1 point would be a fee of $1,000.

Loan-To-Value Ratio (LTV)

The ratio of the loan balance to the appraised value of the home.

Manufactured Home

A factory-built home that meets certain federal standards put into effect in 1976 and which has a structural frame, or chassis, that supports the complete unit of walls, floor and roof. If built before regulations went into effect, called a mobile home.

Market Value

The value that is established for a piece of real estate when it is sold on the open market in an “arm’s length” transaction.

Mortgage

In its strictest sense, a legal document that pledges a property to the lender as security for payment of a debt. The mortgage gives the lender the right to collect payment on the loan and foreclose (take back the property) if loan obligations are not met. Term commonly used to refer to any loan obtained for the purchase of a house or other real property.

Mortgage Broker

A company or individual that, for a fee, matches borrowers with lenders.

Mortgage Insurance

Policy paid for by a buyer to insure the mortgage in case of buyer default, it is generally imposed when the down payment is less than 20 percent. See Private Mortgage Insurance or FHA Mortgage Insurance.

Mortgage Loan Application

Lenders use the information you provide on the loan application to evaluate whether or not they can give you a loan, and if so, the amount of money they can lend you.

Mortgage Payment

The monthly payment to your lender that in most circumstances reduces the debt once a month. It may include four components. Principal (P) refers to the portion that reduces the remaining balance of the mortgage. Interest (I) is the fee charged for borrowing money. Taxes and insurance (T & I) refer to the amounts that are paid into an escrow account each month for property taxes, and also for mortgage and hazard (property) insurance. Not all loans are set up to include T & I.

Mortgagee

The lender.

Mortgagor

The borrower or homeowner.

Multiple Listing Service (MLS)

A service within a certain area that allows real estate professionals to submit listings, attempt to sell such listed properties, and agree to pay commissions on a cooperative basis.

Negative Amortization

Occurs when a borrower’s monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The risk of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

Non-Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage (that is, allowing a new owner to take on the current loan payments) without the prior approval of the lender.

Non-Traditional Credit History

A record of credit performance shown with receipts and check stubs from payments to landlords, utility companies, etc., for loan applicants without a credit history from loans and other forms of credit.

Note

A document signed by the borrower of a loan that states the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note serves as the evidence of debt.

Occupancy Date

The date that the new owner of a piece of real estate is entitled to exclusive use of their new property. See Possession Date.

Offer

The process of making a formal bid to buy a piece of real estate; it is a written contract between buyer and seller that includes the terms, conditions and timelines of the sale.

Origination

The process by which a lender provides a borrower with a loan.

Origination Fee

The fee charged by a lender to prepare a new mortgage for a buyer, usually computed as a percentage of the value of the loan.

Personal Property

Any property that is not real property; for example, furniture. In general, personal property is not fixed or attached to the property.

PITI

Principal, interest, taxes, and insurance. Also called monthly housing expense. See Mortgage Payment.

Planned Unit Development (PUD)

A subdivision created with the approval of a local planning or zoning commission, in which the subdivision doesn’t have to comply with all zoning regulations. An example of a PUD would be a combination of residential and non-residential buildings with open areas for shared use, Orenco in Washington County is an example of a PUD in Oregon.

Plat

A map of a piece of land showing boundary lines, streets, actual measurements and easements.

Plot

Area of ground designated for a specific use or ground on which an improvement is to be made.

PMN

Women’s Council of Realtors®’ Performance Management Network

Points

See Loan Discount Points.

Possession Date

The date in a residential real estate contract defining when the buyer will take possession and/or move in to the property; also referred to as occupancy date. In most cases, the dates of possession and closing will be the same, with the specific time of transfer no later than 5 p.m.

Power of Attorney

A legal document authorizing one person (attorney-in-fact) to act on behalf of another person (principal). Power of Attorney can be general or specific and implementation varies by state.

Pre-Approval

Indicates that a lender has conditionally approved the borrower for a loan to purchase a property up to a specific amount. It is contingent on the borrower being able to meet additional guidelines and is not a guarantee of financing but an indication of credit worthiness.

Predatory Lending

Deceptive and sometimes-fraudulent sales tactics used when a party is taking out a mortgage or home equity loan.

Prepaid Interest

Paying of interest before it is due. Mortgage interest is paid for the previous month. Buyers may have to pay interest at closing for that month, and not be required to make a mortgage payment until the beginning of the second month following the closing.

Prepaids (Prepaid Items)

Expenses necessary to create an escrow account or to adjust the seller’s existing escrow account. May include taxes, hazard insurance, private mortgage insurance and special assessments. Usually paid by buyer at signing, prior to closing, but may be paid by seller based on mutual agreement of both parties.

Prepayment

1) Paying more each month than the amount of the regular mortgage payment to pay off the loan sooner and save money on interest charges. 2) Paying off the entire loan balance ahead of the original payment schedule.

Prepayment Penalty

Money charged by the lender for an early repayment of debt. Buyers should find out before signing whether their loan carries this kind of penalty.

Principal

The amount of debt, not counting interest, left on a loan.

Principal Broker

In Oregon, a real estate broker qualified to manage other brokers, or work as a sole practitioner.

Private Mortgage Insurance (PMI)

A type of insurance paid by borrowers who put down less than a specific down payment, usually 20%. Paid either as an additional cost at closing, or via a monthly fee added to the mortgage payment, or both. Other low-down-payment alternatives do not involve PMI. In many cases borrowers can petition their lenders to cancel the PMI once their equity in the property reaches the 20% threshold.

Promissory Note

See Note.

Property Tax

A tax charged by a local government based on the assessed value of the property and used to fund a variety of services such as schools, police and government operations.

Purchase and Sale Agreement

See Sales Contract.

QSC

Quality Service Certification®

RCC

Residential Construction Certified™

Real Estate Broker

A person licensed to negotiate and transact the sale of real estate on behalf of either the buyer or the property owner, or under certain conditions, more than one party to a transaction.

Real Estate Settlement Procedures Act (RESPA)

Real Estate Settlement Procedures Act; a Federal law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships. FAQs about RESPA.

REALTOR

A licensed real estate professional holding active membership in a local real estate board affiliated with the National Association of REALTORS®. REALTORS® adhere to a Code of Ethics, which is based on professionalism and protection of client interests.

Recision (also spelled Rescission)

The cancellation of a contract. With respect to mortgage refinancing, the law gives the homeowner three days to cancel a contract in some cases once it is signed, if the transaction uses equity in the home as security.

Recording Fees

Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Refinance

Paying off an existing loan with the proceeds from a new loan using the same property as security. Usually done to lower the interest payment or to take cash from the equity in the property. Often referred to as a refi.

Reserves

Money set aside for emergencies or repairs, or for specific expenses such as taxes or insurance.

Reverse Annuity Mortgage (RAM)

A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as security. Usually called a reverse mortgage.

Sales Contract

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. In Oregon, commonly referred to as an earnest money agreement, or EMA.

Schedule of Payments

The day of the month, timing, number and dollar amount of payment due over the entire course of the loan.

Second Mortgage

A home loan with rights subordinate to the rights of the first mortgage; that is, will be repaid only after the first mortgage in case of foreclosure.

Servicing

All operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes and insurance, etc. Contrast with Origination.

Settlement Statement

See HUD-1.

Settlement/Settlement Costs

See Closing/Closing Costs.

SFR

Short Sales and Foreclosure Resource Certification

Shared Appreciation Mortgage (SAM)

A mortgage in which a borrower receives a below-market interest rate, or some other beneficial term and/or condition, in return for which a lender (or another investor, a co-borrower, or non-profit organization) receives a portion of the future appreciation in the value of the property.

Short Sale

The sale of property in which the sales price of the property is less than the mortgage debt owed to the lender under a mortgage or trust deed. A short sale contract must be approved by the seller’s lender(s). The lender(s) can forgive the amount of debt which the seller is unable to pay from proceeds, which may be considered as income to the seller by the IRS.

Single-Family Home

A type of house, usually detached, owned by one person or family, including the land upon which it sits.

SRES

Seniors Real Estate Specialist®

Survey

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and in some cases the location and dimensions of any building.

Tax Abatement

A reduction or decrease in one’s property taxes due to a recognized status of the property owner recipient. In Portland, it may be granted to eligible purchasers for eligible properties in eligible areas.

Term Mortgage

See Balloon Payment Mortgage.

Title

The evidence that one has the right of possession of property.

Title Insurance

Insurance to protect the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over the ownership of a property. In Oregon, it is common for the seller of a property to purchase a policy to protect the buyer, and the buyer, in turn, to purchase a second policy to protect the lender.

Title Search

An examination of public records, usually performed by a title company, to determine the legal ownership of property.

Total of Payments

The total dollar cost of the loan to you, assuming all payments are made on time.

TRC

Transnational Referral Certification

TRID

In November 2013, the Consumer Financial Protection Bureau (CFPB) integrated the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. Any transaction involving a mortgage will use new CFPB disclosure forms. The new TRID (TILA-RESPA Integrated Disclosure) rules and forms took effect on October 3, 2015.

Truth in Lending Act (TILA)

A federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs so the borrower can make informed choices about credit. Five terms must be disclosed: Finance Charge, Annual Percentage Rate (APR), Amount Financed, Schedule of Payments and Total of Payments.

Underwriting

The decision-making process by a lender regarding whether to make a loan to a potential homebuyer based on credit, employment, assets and other factors, and the matching of this risk to an appropriate rate, term and/or loan amount.

Up-front Fees

Fees collected either prior to close of escrow at the time of service, or at closing. Examples include home inspections, appraisal, transfer taxes, escrow, underwriting, credit report, HOA transfer, tax service, government lien search, lender’s title policy, and real estate commission. Not all fees will apply to both buyer and seller.

VA Loan

A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee

A premium of up to 2% (depending on the size of the down payment) paid on a VA-backed loan.

Variable Expense

An expense that changes from period to period, such as utilities, food, clothing or entertainment.

Variable Rate Mortgage (VRM)

See Adjustable Rate Mortgage.

Verification of Deposit (VOD)

A document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)

A document signed by the borrower’s employer verifying his/her position, salary and length of employment.

Walk-Through

A buyer’s final inspection of the property, usually conducted right before closing, to determine that the property is as described in the purchase agreement.

Wraparound (Mortgage)

A loan with which a seller finances a new mortgage, which “wraps around” his or her previous mortgage, and the buyer repays to the seller.

Yield Spread Premium

The commission a mortgage broker receives from a lender for matching a borrower with one of its loans.

Zoning

Government laws and/or regulations describing how properties can be used in specific areas (such as residential neighborhoods, commercial development, etc.).

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