The term 'Accelerate (A Debt)' refers to invoking the acceleration clause in a loan agreement, making the full amount of the loan debt due immediately upon a borrower's default or other specified triggers.
An acquisition loan is a type of loan used specifically for the purchase of real estate properties. These loans are generally utilized by buyers to acquire commercial, residential, or undeveloped land.
An Acquisition, Development, and Construction (ADC) Loan is a specialized type of loan used to fund the acquisition of land, the development of building sites, and the construction of residential or commercial properties.
An advance in real estate is a form of loan disbursement given to real estate developers or builders. This is sometimes referred to as a 'draw,' where funds are released based on the completion of certain stages within a real estate project.
An advance commitment is a promise to take specific action at a future date with predefined terms. It's commonly used in real estate to secure financing for projects, often before completion. Understanding different types of advance commitments can be crucial for developers and investors.
An All-Inclusive Deed of Trust (AITD), also known as a Wraparound Mortgage, is a financial arrangement in real estate where a new mortgage includes the balance of an existing mortgage. This type of arrangement is utilized as a creative financing option to facilitate the sale or refinancing of property, particularly in environments where traditional financing methods are less accessible or less advantageous.
Any mortgage other than a fixed-interest-rate, level-payment amortizing loan. AMIs provide unique approaches to mortgage lending, often accommodating borrowers with non-traditional income streams or financial situations.
Alternative Mortgage Instrument (AMI) refers to a range of non-traditional mortgage products that offer flexible terms and varied payment structures to borrowers, often catering to those who need alternatives to standard fixed-rate or adjustable-rate mortgages.
Amortization of Deferred Charges refers to the procedure that allocates the cost of intangible assets to accounting periods, similar to how depreciation handles tangible assets. This concept is especially relevant for costs incurred to arrange loans and leases, which are typically written off over the term of the agreement.
An amortized loan is a type of loan where the borrower makes regular, scheduled payments that include both principal and interest, gradually reducing the balance over the loan's term.
Annual cap is a limitation on the amount by which the interest rate on an adjustable-rate mortgage (ARM) can increase or decrease over a one-year period, protecting borrowers from significant fluctuations in their monthly mortgage payments.
Annual Debt Service refers to the total annual amount of principal and interest payments required to repay a loan.
The Annual Mortgage Constant is a ratio that quantifies the total annual mortgage payments, including both principal and interest, compared to the initial loan principal. It is used by lenders and borrowers to determine the yearly cost of a mortgage and assess its affordability.
An assignment of rents is a legal agreement transferring the right to collect rent or income generated by a property from the borrower to the lender in the event of a default on the mortgage.
An assumed mortgage, also known as an assumption of mortgage, occurs when a homebuyer takes over the seller’s existing mortgage, maintaining the original terms and conditions of the loan.
Automated mortgage underwriting involves processing mortgage applications primarily or entirely through computerized systems which evaluate eligibility and creditworthiness based on predefined criteria.
The back-end ratio is one of several criteria used to qualify homebuyers or owners for mortgage loans. It takes into account existing long-term debt of the loan applicant, contrasting with the front-end ratio.
Bad Boy Carve-Outs refer to provisions in nonrecourse loans which hold the borrower or guarantor liable for the loan under specific circumstances. These carve-outs include misappropriation of funds, environmental violations, waste, and voluntary bankruptcy.
A balloon mortgage is a type of loan that does not fully amortize over its term, leaving a balance due at the end of the period in a balloon payment. This large, lump-sum payment can be a surprise for borrowers who are not prepared or aware of this structure.
A balloon payment is the final and often significantly large payment on a loan, typically required after a series of smaller installment payments. It clears the remaining debt owed on the loan.
A biweekly loan is a mortgage that requires principal and interest payments at two-week intervals, leading to faster amortization and potentially significant interest savings compared to traditional monthly payments.
A blanket mortgage is a type of financing that covers multiple properties under a single mortgage, making it a useful tool for real estate investors and developers.
A blended rate is an interest rate applied to a refinanced loan that is higher than the rate on the old loan but lower than the rate offered on new loans. It is generally offered by the lender to induce homebuyers to refinance existing low-interest rate loans as an alternative to assuming the existing loan.
A bond in real estate refers to a certificate representing a debt obligation that specifies the repayment terms and conditions under which the debt is undertaken.
A Bridal Registry Mortgage is a unique financial tool, sponsored by the Federal Housing Administration (FHA), enabling soon-to-be-married couples to establish a registry where friends and family can contribute funds. These contributions can be used toward the down payment for an FHA-insured mortgage.
A Budget Mortgage is a mortgage structure which includes monthly payments for taxes and insurance, in addition to the standard interest and principal. This type of mortgage ensures that homeowners set aside the necessary funds for property tax and insurance premiums.
Builders and Sponsors Profit and Risk Allowance (BSPRA) is an amount above the cost of apartments that is allowed to be included in the project cost for purposes of determining the loan amount in certain government-sponsored programs.
A Building Loan Agreement, also known as a Construction Loan Agreement, is an agreement whereby a lender advances money to a property owner at specified stages of a building project, such as completion of the foundation, framing, and other significant milestones.
A bullet loan is a type of loan in which the whole principal amount is paid back at the end of the loan term rather than through periodic payments. These loans typically have a short to medium-term duration, usually between 5 to 10 years, and can pose significant risk if the borrower cannot refinance or repay the loan principal as per the agreement.
Carry-back financing, also known as seller financing, occurs when the seller of a property provides a loan to the buyer to complete the property purchase. This arrangement can be beneficial in situations where traditional mortgage financing is difficult to secure.
A Cash Flow Mortgage is a unique debt instrument where almost all income from property rental is used to pay the lender, typically with no interest rate specified.
A Certificate of Reasonable Value (CRV) is a document issued by the Department of Veterans Affairs (VA) which sets a ceiling on the maximum VA mortgage loan amount based on an approved appraisal.
A 'Closed Period' is a term in a mortgage agreement that prevents the borrower from prepaying the mortgage before the agreed-upon time period. This is commonly seen in commercial real estate mortgages but rarely in residential mortgages.
A co-mortgagor is an individual who signs a mortgage contract along with other parties, making them jointly responsible for repaying the loan and often granting them part ownership in the encumbered property.
The Cost of Funds Index (COFI) is a commonly used benchmark for adjusting interest rates on adjustable-rate mortgages (ARMs) in the United States. It reflects the average cost of funds deriving from savings institutions in Western 11th Federal Reserve District, including California, Arizona, and Nevada.
A commercial mortgage banker is a professional in the business of originating commercial mortgage loans, typically earning a commission based on a small percentage of the loan amount.
A Commercial Mortgage Loan is a loan secured by real estate that generates business or rental income, typically used in transactions involving commercial properties like office buildings, shopping centers, or warehouses.
A commitment fee is a charge required by a lender to lock in specific terms on a loan at the time of application, ensuring that the terms agreed upon will be honored and the funds will be available when needed.
A compressed buy-down is a variant of the traditional buy-down mortgage where the extent of the rate reduction changes at 6-month intervals. This type of buy-down features accelerated rate adjustments compared to the more common annual adjustments seen in gradual buy-downs.
A computer-based network of lenders that allows affiliated real estate brokers, builders, or advisors to originate loans at the site of the home. Provides a streamlined process whereby a person can buy a home and apply for a loan at the same place and time.
A conforming loan is a mortgage that adheres to the guidelines set by government-sponsored entities Fannie Mae and Freddie Mac, including loan limits, borrower credit score, down payment, and debt-to-income ratio requirements.
The Constant Annual Percent, also known as the Mortgage Constant, is the ratio of the annual debt service (which includes both principal and interest payments) to the original loan amount.
A constant payment loan is a type of loan structured with equal periodic payments that ensure the loan is paid off by the end of its term. This type of loan is often used in mortgage financing.
Construction lenders specialize in providing construction loans, which are short-term loans used to finance the building or renovation of real estate projects. They differ from permanent lenders who provide long-term financing solutions once a project is completed.
A Contract for Deed, also known as a Land Contract, is a financing arrangement wherein the seller retains legal title to a property until the buyer completes all payment obligations.
Creative financing refers to any financial arrangement utilized to purchase real estate that deviates from the traditional mortgage offered by third-party lending institutions.
The Debt/Equity Ratio is a measure used to evaluate a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity.
A Deed of Trust is a legal instrument used in many states instead of a mortgage to secure the repayment of a loan. Legal title to the property is vested in one or more trustees, who hold it as security for the loan.
A development loan is a type of commercial loan designed to finance the construction or renovation of buildings primarily for commercial use. It is sometimes interchangeably referred to as a construction loan.
A Direct Reduction Mortgage is a type of fixed-rate mortgage where both interest and principal are repaid with each payment, ensuring that the loan is fully amortized over its term.
Discount points are fees paid directly to the lender at the time of the loan origination to reduce the interest rate and lower monthly mortgage payments. Frequently used in conventional, FHA, and VA loans, they offer borrowers flexibility in managing loan costs.
A Dry Mortgage, also known as a Nonrecourse Mortgage, is a type of financing where the borrower is not personally liable beyond the collateral securing the loan. In these agreements, the lender can seize the property used as collateral to satisfy the loan, but cannot pursue the borrower for any remaining balance if the collateral does not cover the full liability.
The EB5 VISA program provides a pathway to U.S. permanent residency for foreign investors who make substantial monetary investments in U.S. businesses, particularly in real estate projects that create jobs.
In real estate, 'entitlement' refers to the legal rights granted to a developer for the approval of certain land uses, as well as the term associated with the VA loan guarantee available to eligible veterans.
An equity loan, often referred to as a home equity loan or second mortgage, allows homeowners to borrow money by leveraging the equity in their homes. It is a type of loan in which the borrower uses the equity of their home as collateral.
Equity sharing is a financing arrangement where the property owner and lender both hold stakes in the property's future value, meaning the lender is entitled to a portion of any resale profits, usually resulting in a lower interest rate for the property owner.
The Federal Housing Administration, or FHA, is a U.S. government agency within the Department of Housing and Urban Development that administers various loan programs, loan guarantees, and loan insurance programs designed to make homeownership more accessible.
Federal Land Banks are specialized, government-sponsored lenders under the Federal Farm Credit System that provide loans for purchasing, refinancing, and renovating rural real estate, aiming to alleviate the shortage of real estate credit in non-urban areas.
The FHA 203(K) program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan.
A floor loan is the minimum amount of money that a lender is willing to advance to a borrower during the initial stage of a financing agreement. It is commonly used in real estate development contexts for construction loans to manage risks until certain conditions are met.
Form 1098 is a form that lenders are required by the Internal Revenue Service to send to mortgage borrowers, showing the amount of interest paid during the past year.
A fully amortized loan is a type of loan repayment structure where regular payments of both principal and interest are made over the course of the loan term, resulting in the total loan being paid off by the end of the term.
Funding a loan involves the process of supplying the agreed-upon amount of money for a loan. After loan approval and commitment, the lender forwards the necessary cash at the closing stage.
A gap loan, also known as a bridge or swing loan, fills the difference between a floor loan and the full amount of a permanent loan, providing temporary financing until the borrower meets certain conditions necessary for permanent loan funding.
A Graduated-Payment Mortgage (GPM) is a type of fixed-rate mortgage where the initial payment starts low and then increases at regular intervals over a set period, after which it stabilizes for the remaining loan term.
A Growing Equity Mortgage (GEM) is a type of fixed-rate mortgage where monthly payments increase over time according to a set schedule, leading to faster repayment and reduced interest cost over the life of the loan.
A Growing-Equity Mortgage (GEM) is a type of mortgage loan where the payment increases by a specific amount each year, with the extra payment amount applied toward reducing the principal balance, thereby shortening the loan's maturity period compared to a traditional fixed-payment mortgage.
The remaining balance of a loan when the term of the loan exceeds the term of a lease.
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity of their home, typically used for major expenses, home improvements, or paying off high-interest debts.
A high-ratio mortgage is a loan that requires a smaller percentage of down payment, typically covering more than 80% of the property's value. Such loans often necessitate mortgage insurance to mitigate risk.
A home loan, often synonymous with 'mortgage', is a type of loan specifically used for purchasing real estate property. The borrower is required to pay back the loan over time, typically with interest, and the property usually serves as collateral.
Hypothecating is the act of pledging an asset as collateral to secure a loan without transferring the title or the asset itself to the lender.
An impound account, also known as an escrow account, is a type of savings account set up by a mortgage lender to pay property taxes and insurance premiums on behalf of the borrower.
Income participation, also known as a participation mortgage, describes a loan where the lender is entitled to a portion of the income produced from the real estate property in addition to receiving interest payments. This shared income could come from property rents or the sale of the property.
An installment contract, also known as a land contract, is a legal agreement in real estate transactions where the buyer agrees to make regular payments to the seller in exchange for the right to occupy and use the property, with full ownership transferred only after all payments have been made.
Installments are parts of the same debt, payable at successive periods as agreed. These payments are typically structured to reduce a mortgage or potentially another form of financial obligation over time.
Insurance (Mortgage) is a service, generally purchased by a borrower, that indemnifies the lender in case of foreclosure of the loan. Indemnification is generally limited to losses suffered by the lender in the foreclosure process.
Interest in real estate can refer to both the cost associated with borrowing money to finance real estate transactions and the extent of ownership in a property.
An interest-only loan is a type of mortgage where the borrower is obligated to pay only the interest on the principal balance for a set period, usually between 5 to 10 years.
A junior lien, also known as a subordinate lien, refers to any lien that will be paid after earlier liens have been paid. It denotes the secondary position of the lien in order of payment priorities.
A junior mortgage is a type of mortgage that rises behind a prior mortgage in lien priority, which means in case of default, the primary mortgage get paid first before the junior mortgage is addressed.
A kicker is a payment required by a mortgage, in addition to normal principal and interest, often linked to a borrower’s financial performance metrics such as gross sales or profits.
A Land Contract is a real estate installment sale arrangement whereby the buyer can use, occupy, and enjoy the land, but the seller retains the deed and title until all or a specified part of the purchase price has been paid.
A Leaseback, often referred to as a Sale-Leaseback, is a financial transaction in which a property owner sells their asset and leases it back from the buyer. This allows the original owner to continue using the property while freeing up liquid capital.
A lender is a party that originates or holds loans. They can include entities such as commercial banks, thrifts, credit unions, mortgage bankers, and mortgage brokers.
Lender participation refers to the scenario where multiple lenders jointly provide financing by sharing the credit risk and loan proceeds of a single transaction, commonly seen in participation mortgage structures.
A level-payment mortgage is a type of mortgage that requires the same payment each month (or other period) for full amortization. This means that the amount paid in monthly installments remains constant over the life of the loan.
A lienholder is an individual or entity that holds a lien on a property, thus having a legal right or claim against the property as a security for a debt or obligation.
A decision by a lender to extend credit in a specified amount, often accompanied by a loan commitment outlining the terms and conditions. Also referred to as Loan Preapproval when provided before formal loan application.
A Loan Correspondent, also known as a Mortgage Correspondent, serves as an intermediary between borrowers and lenders, primarily offering mortgage products from various financial institutions to clients.
The Loan Coverage Ratio (LCR), also known as the Debt Coverage Ratio (DCR), is a key financial metric used to assess a property's ability to generate enough income to cover its debt obligations. It is widely used by lenders to evaluate the financial health and viability of real estate investments.
A loan origination fee is a service charge collected by lenders for processing new loan applications. This fee can cover various administration tasks such as application processing, underwriting, and funding the loan.
A Loan Package is a comprehensive collection of documents that are associated with a specific loan application. This package includes all necessary information required by the lender to evaluate and process the loan request.
Loan points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also referred to as 'buying down the rate.'
Loan proceeds refer to the net amount of money disbursed by a lender to a borrower after all the lender’s fees and other charges have been deducted. It is the actual amount received by the borrower for the intended purpose, such as purchasing real estate.
Loan processing encompasses the various steps taken by a lender to approve a loan, from the initial application to the closing of the loan. It involves verifying the borrower's information and fulfilling necessary requirements to ensure the legality and financial viability of the loan.
The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. Typically expressed as a percentage, LTV ratios are used to assess the risk involved in a mortgage or loan agreement.
The Loan-to-Value (LTV) ratio is a critical financial metric in real estate and lending that compares the loan amount to the appraised value of the property, influencing mortgage terms, interest rates, and approval processes.
The Loan-To-Value (LTV) Ratio is a financial term and calculation that lenders use to express the ratio of a loan to the value of an asset purchased. It plays a crucial role in the assessment of risk associated with lending, especially in real estate.
The locked-in interest rate is a promise from the lender to provide a specific interest rate for a mortgage or loan, valid for a predefined period, regardless of market rate fluctuations during that period.
