- Home Equity Conversion Mortgage (HECM)
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A reverse mortgage program administered by FHA. See Reverse Mortgages.
- home equity line of credit
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A mortgage loan, usually in second position, providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home.
- homeowners' association
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A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
- homeowner's insurance
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An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
- homeowner's warranty
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Homeowner's warranty, commonly known as HOW, was developed by the Home Owner's Warranty Corporation and protects the original homeowner of a new home for a period of ten years against major structural defects. If such defects occur, the builder, and not the original buyer, is financially responsible for their repair. In a number of states, similar warranty protection is afforded by statute.
- joint tenancy
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A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
- jumbo loan
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A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
- leasehold estate
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A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
- lease option
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An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
- lender
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A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."
- liabilities
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A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
- liability insurance
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Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.
- lien
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The right to take and hold or sell the property of a debtor as security or payment for a debt or duty. A mortgage or first trust deed is considered a lien.
- life cap
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For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage.
- line of credit
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The maximum credit that a customer is allowed.
- liquid asset
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Assets in the form of cash (or easily convertible into cash).
- loan
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A sum of borrowed money (principal) that is generally repaid with interest.
- loan officer
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Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.
- loan origination
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How a lender refers to the process of obtaining new loans.
- loan servicing
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After you obtain a loan, the company you make the payments to is "servicing" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.
- loan-to-value (LTV)
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The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
- lock-in
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An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
- lock-in period
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The time period during which the lender has guaranteed an interest rate to a borrower.
- margin
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The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
- maturity
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The date on which a financial obligation must be repaid.
- modification
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Occasionally, a lender will agree to modify the terms of your mortgage without requiring you to refinance. If any changes are made, it is called a modification.
- mortgage
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A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
- mortgage broker
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A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
- mortgagee
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The lender in a mortgage agreement.
- mortgage insurance (MI)
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Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan.
- mortgage life and disability insurance
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A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
- multidwelling units
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Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
- negative amortization
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Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
- no cash-out refinance
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A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."
- no-cost loan
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Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
- note
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A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
- note rate
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The interest rate stated on a mortgage note.
- no-cost loan
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Almost all lenders offer loans at "no points." You will find the interest rate on a "no points" loan is approximately a quarter percent higher than on a loan where you pay one point.
- notice of default
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A formal written notice to a borrower that a default has occurred and that legal action may be taken.
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