Abstract of Title
A historical summary provided by a title insurance company of public records affecting the title to a property.

Acceleration Clause
Allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.

Adjustment Interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically six months, one, three, or five years, depending on the mortgage terms.

Adjustable Rate Mortgage (ARM)
A variable or flexible rate mortgage with an interest rate that adjusts periodically according to the financial index it is based upon plus a margin. To limit the borrower’s risk, the ARM may have a payment or rate cap.
See also: Cap

Amortization
The reduction of a debt by regular, usually monthly, installments of principal and interest. An amortization schedule is a table showing the payment, the amounts applied to interest and principal and the unpaid balance.

Annual Percentage Rate (APR)
The cost of credit expressed as a yearly rate, taking into account interest, points, and other finance charges. Disclosure of the APR is required by the federal Truth-in-Lending Act and allows borrowers to compare the costs of different mortgage loans.

Appraisal
An estimate of a property’s value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost the sales of comparable properties or the property’s ability to produce income.

Appreciation
A property’s increase in value due to inflation or economic factors.

Assessment
Charges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.

Assignment
A means of transferring a contract right or other asset to another person or entity.

Assumption
An agreement between a buyer and a seller which may require lender approval, where the buyer takes over the payments for a mortgage and accepts the liability. Assuming a loan can be advantageous for a buyer because there are no closing costs and the loan’s interest rate may be lower than current market rates. Depending on the terms of the mortgage deed of trust, the lender may raise the interest rate or require the buyer to qualify for the mortgage.

Balloon Mortgage
A mortgage that has level monthly payments which are insufficient to amortize the loan so that a balloon, or lump sum payment is due at the end of the term. Frequently, balloon mortgages contain an opportunity to refinance when the balloon payment is due.

Bankruptcy
A proceeding in a federal court in which a debtor (who owes more than his/her assets or cash flow) is relieved from the payment of debts. This can affect the borrower’s personal liability or the mortgage debt but not the lien of a mortgage.

Basis Points
Used to describe mortgage yield, one basis point equals one 100^th of 1% or 0.01%. A mortgage yield increase from 9.50 to 9.75% is an increase of 25 basis points.

Biweekly Mortgage
A loan requiring payments of principal and interest at two week intervals. Each biweekly payment is half the amount of a monthly payment. The borrower makes the equivalent of 13 monthly payments each year. As a result, this type of loan amortizes much faster than monthly payment loans.

Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage.

Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Bridge Loan
A loan, usually a second mortgage, that is collateralized by the borrower’s present home (that is usually for sale).

Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive commission for their service.

Buy-Down
Where the buyer pays additional discount points in return for a below market interest rate; or the buyer or seller deposits sufficient funds with the lender to reduce the rate during the first one to three years of the loan; or pays closing costs such as the origination fee. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.

Cap
A limit on how much an adjustable rate mortgage’s monthly payment or annual interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of- loan cap or periodic cap. A payment cap is a limit on the monthly payment. An interest cap is a limit on the amount of the interest rate. A life-a-loan cap restricts the amount the interest rate can increase over entire term of the loan. A periodic cap limits the amount the interest rate can change each interest rate adjustment date.

Certificate of Occupancy (CO)
Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be inhabited; not to be confused with "Notice of Completion."

Certificate of Reasonable Value (CRV)
A Veteran’s Administration appraisal that establishes the maximum VA mortgage loan amount for a specified property.

Certificate of Title
Document rendering an opinion on the status of a property’s title based on public records.

Closed End Mortgage
A mortgage principal amount that is fixed and cannot be increased during the life of the loan.

Closing
The meeting between the buyer, seller and lender or their agents where the property and funds legally changes hands. Also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search, and insurance, survey, taxes, deed recording, credit report charge and other costs assessed at settlement. The costs of closing usually are about three to six percent of the mortgage amount. Commitment and agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Closing Costs
Costs payable by either the something of value pledged as security for a loan, seller or buyer at the time of settlement when the purchase of a property is finalized, or by the borrower when a loan is refinanced. They include expenses such as points, taxes, title insurance, mortgage insurance and attorneys’ fees. You will receive more specific information about types and amounts of closing costs applicable to your transaction and the state where your property is located when you apply for a loan.

Cloud
A claim to the title of a property that, if valid, would prevent a purchaser from obtaining a clear title.

Co-Borrower
One who is individually and jointly obligated to repay a mortgage loan and may or may not share ownership of the property with one or more of the borrowers.
See also: co-signer.

Co-Operative
A co-op is a form of ownership in which a corporation or business entity holds title to a property and grants the occupancy rights to particular apartments or units to shareholders by means of proprietary leases or similar arrangements. A loan granted for a co-op is collateralized by an assignment of the proprietary lease and a pledge of the shares of stock allocated to the unit.

Co-Signer
A person who agree to assume a debt obligation if the principal borrower defaults on the payments. A cosigner is not on the security instrument and is only responsible for the debt.
See also: co-borrower.

Collateral
Something of value pledged as security for a loan. In mortgage lending, the property itself serves as collateral for a mortgage loan.

Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgage from a lender with specific terms or conditions.

Commitment Fee
A fee charged when an agreement is reached between a lender and a borrower for a loan on specific terms and conditions. Rate and points may be locked-in or may be "floating".

Common elements/areas/ground
Those portions of a building, land, and amenities of a PUD, condo or co-op that are used by all the unit owners, who share in the common expense of their operation and maintenance. Common areas usually include swimming pools, tennis courts, or other recreational facilities, as well as common corridors of buildings, parking lots, etc.

Condominium
A form of ownership where the dwelling units are individually owned and home owners share ownership of common areas such as grounds, the parking facilities and the tennis courts.

Conforming loan
A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. (Currently, first loans under $240,000)
See also: non-conforming loan / Jumbo Loan.

Construction loan
A short-term loan financing improvements to real estate, such as the building of a new home. The lender advances funds to borrower as needed while construction progresses. Upon completion of the construction, the borrower must obtain permanent financing or pay the construction loan in full.

Contract sale or deed
A contract between the purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Consumer Handbook on Adjustable Rate Mortgages
A disclosure required by the federal government to be given to any borrower applying for an adjustable rate mortgage (ARM).

Conventional loan
A mortgage loan that is not insured, guaranteed or funded by the Veterans Administration (VA), the Federal Housing Administration (FHA), or Rural Economic Community Development (RECD), (formerly Farmers Home Administration).

Convertible Mortgage
An adjustable rate mortgage (ARM) that allows a borrower to switch to fixed-rate mortgage during a specified period.

Covenants
Rules and restrictions governing the use of property.

Credit bureau repositories
An organization that complies credit history data directly from lenders and creditors to build in-file credit reports for individuals; the main repositories are Experian, Transunion, & Equifax.

Debt-To-Income Ratio
The ratio of the borrower’s total monthly obligations, including housing expenses and recurring debts, to monthly income. It is used to determine the borrower’s capacity to repay the mortgage and all other debts.

Deed of Trust
A document used in many states in place of a mortgage, whereby title to the property is held by a trustee pending repayment of the loan.

Default
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid principal balance of the loan. Also called negative amortization. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

Delinquency
Failure to make payments on time. This can lead to foreclosure.

Department of Housing and Urban Development
The U.S. government agency that administers FHA, GNMA and other housing programs.

Discount
The amount by which the sales price of a note (or financial instrument) is below or less than its face value. The purpose of a discount is to adjust the yield upward either in lieu of interest or in addition to interest. Discount points are payable to the lender by the borrower or seller to increase the lender’s effective yield. One point is equal to 1% of the loan.

Down payment
The difference between the purchase price and mortgage amount. The down payment becomes your property equity. Typically it should be cash savings, but it can also be a gift that is not to be repaid or a borrowed amount secured by assets.

Due-on-Sale
A clause in a mortgage or deed of trust allowing a lender to require immediate payment of the balance of the loan if the property is sold.

Earnest money
Cash given to a seller by a buyer as good faith assurance that the buyer intends to go through with the purchase of a property.

Easement
The right one party has in regard to the property of another, such as the right of a public utility company to lay lines.

Economic obsolescence
The loss of value due to changes outside the particular property affected (e.g., high power lines, busy streets, proximity to an airport or any other structure perceived to be less than desirable); also called economic depreciation.

Environmental hazard
Natural or man made forces that may be hazardous to the health or safety of the homeowner. Examples include: hazardous wastes, toxic substances, radon gas and materials containing asbestos. These types of hazards can adversely affect the value and marketability of the property.

Equal Credit Opportunity Act
A federal law prohibiting lenders and other creditors from discriminating based on race, color, sex, religion, national origin, age, martial status, receipt of public assistance or because an applicant has exercised his or her rights under the Consumer Credit Protection Act.

Equity
The value of a property beyond any liens against it. Also referred to as owner’s interest.

Escrow closing
In certain regions, an escrow agent holds in escrow funds as well as documents to be signed by both buyer and seller. Once all conditions of the closing have been satisfied, the documents and the funds are distributed by the escrow agent to the interested parties.

Escrow funds
Money held by the lender for payment of the taxes and insurance on your home.

Fair market value
The price established in a free market between a buyer and seller in an arms-length transaction where neither one is compelled to buy or sell. In an appraisal, this is the final value derived after examining the Sales Comparison, Cost, and if applicable, Income approaches; sometimes referred to as "Market Value."

Fannie Mae
Nickname for Federal National Mortgage Association (FNMA).

Farmer’s Home Administration
The government agency that guarantees mortgages secured by residential properties located in rural areas, concentrating on borrowers with income less than HUD’s local median income for the area in which they reside. FmHa is now known as Rural Economic and Community Development.

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A quasi-governmental, federally sponsored organization that acts as a secondary market investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.

Federal Housing Administration (FHA)
An agency within the Department of Housing and Urban Development that sets standards for underwriting and insures residential mortgage loans made by private lenders. One of FHA’s objectives is to ensure affordable mortgages to those with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of up to 3.8 percent of the loan amount to be paid either at closing or added to each monthly payment, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

Federal National Mortgage Association (FNMA or Fannie Mae)
A private corporation that acts as a secondary market investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.

Fee simple
The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner’s designed heirs. Also known as fee simple absolute.

FHA
See: Federal Housing Administration.

FHLMC
See: Federal Home Loan Mortgage Corporation.

Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages through out the term of the mortgage for the original borrower.

FmHA
See: Farmer’s Home Administration.

FNMA
See: Federal National Mortgage Association.

Foreclosure
The legal process by which a borrower in default under a mortgage or deed of trust, loses his/her interest in the mortgaged property; this process usually involves a forced sale of property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac
Nickname for Federal Home Loan Mortgage Corporation.

Gift funds
Funds donated to the borrower from certain eligible sources to assist the borrower in meeting closing costs. Generally, eligible sources are: a relative, church, municipality, or nonprofit organization.

Ginnie Mae
Nickname for Government National Mortgage Association (GNMA).

Government National Mortgage Association
A government organization that participates in the secondary market, buying, selling and guaranteeing FHA and VA loans.

Graduated Payment Mortgage (GPM)
A mortgage that has initial monthly payments set at an amount lower than that required for full amortization of the debt. The payments are then increased by a specified percentage each year during the graduated payment period. At the end of the period, payments are in an amount that will fully amortize the mortgage.

Guaranty
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hazard insurance
A form of insurance that protects the insured property against physical damage such as fires, tornadoes, earthquakes, etc. Mortgage lenders often require a borrower to maintain an amount of the mortgage loan.

Home equity line of credit (HELOC)
A real estate loan, usually in a subordinate position, that allows a borrower to borrow against equity in real estate owned with specific limitations. This is an open-end loan that permits the borrower to repay and reborrow the funds available.

Home equity loan
A mortgage on the borrower’s principal residence, usually for the purpose of making home improvements or debt consolidation. This is closed-end loan repayable in accordance with a fixed schedule.

Homeowner’s Association (HOA)
A non-profit association, whose directors and officers are elected by the unit owners of a condominium or PUD project; primary responsibilities are to manage the common areas, expenses and services of the project.

Housing and Urban Development (HUD)
The U.S. government agency that administers FHA, GNMA and other housing programs.

Housing debt-to-income ratio
The sum of all monthly housing mortgage expenses such as principal, interest, taxes and insurance (PITI), Homeowners dues, private mortgage insurance and any special assessments as a percentage of gross qualifying income.

HUD
See: Housing and Urban Development

Impound
That portion of a borrower’s monthly payment 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.

Index
A published interest rate complied from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARM’s).

Installment debt
Borrowed money that is repaid in successive payments, usually at regular intervals.

Interest rate
The simple interest rate, stated as a percentage, charged b a lender on the principal amount of borrowed money.
See also: Annual Percentage Rate

Interim financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Investor
A money source for a lender.

Jumbo loan
A loan that is for a larger dollar amount than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. (Currently, First loans over $240,000)

Keogh
A retirement plan for self-employed individuals. Similar to an IRA, contributions may be deductible and the tax liability is deferred until the funds are withdrawn.

Lien
A claim against a property for the payment of a debt. A mortgage is a lien; other types of liens a property might have include a tax lien for overdue taxes, or a court judgement lien, or a mechanics lien for unpaid debt to a contractor.

Liquidity
Cash or cash equilvents that a borrower has accumulated or the ability to readily convert other assets or investments into cash; a.k.a. cash reserves.

Loan discount
See: points

Loan Origination fee
See: origination fee

Loan-to-value ratio
The relationship, expressed as a percentage, between the amount of the proposed loan and a property’s appraised value or purchase price. For example, a $75,000 loan on a property appraised at $100,000 is a 75% loan-to-value.

Lock-in
The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders will charge a fee for locking in an interest rate.

Margin
The amount a lender adds to the index of an adjustable rate mortgage to establish an interest rate. For example, a margin of 1.50 added to a 7 percent index establishes an interest rate of 8.50 percent. The margin remains the same throughout the loan.

Market value
The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.

MIP: Mortgage Insurance Premium
MIP is one-half percent borrowers pay each month on FHA insured mortgage loans.
It is insurance from FHA to the lender against incurring a less due to the borrower’s default. On September 1, 1983 the MIP was changed to a one-time charge to borrowers.

Mortgage
A legal instrument in which a lien on real property is granted as security for the repayment of a loan. In some states, a deed of trust is used rather than a mortgage.

Mortgage broker
An intermediary between a borrower and a lender. A broker’s expertise is to help borrowers find financing that they might not otherwise find themselves.

Mortgage insurance (MI)
Insurance that protects a mortgage lender against loss in the event of default by the borrower. This insurance allows lenders to make loans with lower down payments (LTVs above 80%, in most cases). The cost is usually borne by the borrower.

Mortgagee
The lender.

Mortgagor
The borrower.

Negative amortization
A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan’s principal. The borrower may end up owing more than the original amount of the mortgage.

Net effective income
The borrower’s gross income minus federal tax.

Net rental income
The remaining income generated by an investment property after deducting all mortgage related expenses, including HOA fees (if applicable) and operating expenses from the gross rental income.

Net worth
The amount by which an individual’s assets (or assets of a business) exceed total liabilities.

Non-assumption clause
In a mortgage contract, a statement that disallows a new buyer to assume a mortgage payment without the approval of the lender.

Non-conforming loan
A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines because the loan amount is too high or FNMA/FHLMC underwriting or other criteria are not met. Jumbo loans are non-conforming. Also called sub-prime or BCD.
See also: conforming loan

Non-permanent resident alien
A non-U.S citizen who resides in the United States on a temporary basis on a government-issued work visa.

Non-resident alien
A non-U.S. citizen who resides outside of the United States.

Note
A signed document that acknowledges a debt and shows the borrower is obligated to pay it.

Origination fee
The amount charged by a lender to originate and close a mortgage loan. Origination fees are usually expressed in points.

Payment to income (P/I) ratio
The ratio of the borrower’s total housing payment (principal, interest, taxes insurance, HOA fees, special assessments, and subordinate financing) that is used to measure the borrower’s capacity to manage the housing expense: also known as "housing debt-to-income ratio."

Permanent buydown
A permanent reduction to the interest rate for the life of the loan. The funds for the buydown may come from the borrower, lender, seller or a third party.

PITI
Abbreviation for principal, interest, taxes, and insurance.

Planned Unit Development (PUD)
A real estate project in which each unit owner has title to a residential lot and building and a non-exclusive easement on the common areas of the project.

Points
Charges levied by the lender based on the loan amount. Each point is one percent of the loan amount; for example, two points of a $100,000 mortgage is $2,000. Discount points are used to buy down the interest rate. Points can also include a loan origination fee, which is usually one point.

Power of attorney
A legal document authorizing one person to act on behalf of another.

Prepaid items
Items that generally must be paid for at the time of closing and are generally recurring charges. Prepaid items may include the following:

• first year premiums for hazard, flood, and mortgage insurance, as applicable to the transaction,
• prorated interest,
• any special assessments which must be prepaid (i.e., water/sewer connection, etc.) and,
• escrow accounts for any of the above.

Prepayment
The borrower’s ability to make full or partial payments on a loan’s principal before they are due.

Pre-payment penalty
Money charged for an early repayment of debt. Prepayment penalities are allowed in some form in 36 states and the District of Columbia.

Pre-qualification
Tentative establishment of a borrower’s qualification for a mortgage loan amount of a specific amount or ability to make monthly payments at a certain level, based solely on debt-to-income ratios. Pre-qualification is an estimate only is subject to debt and income verification, credit history, property appraisal and other factors.

Primary Mortgage Market
Lenders making mortgage loans directly to borrower’s such as savings and loan association, commercial banks and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as FNMA of GNMA, etc.

Prime rate
The interest rate designated by a lender as its prime rate and which serves as a basis for the interest rate charged to certain customers.

Principal
The amount of the mortgage loan, not counting interest.

Private mortgage insurance
Insurance coverage that many lenders, investors, and government agencies require the borrower to obtain to protect the lender against loss in event of a mortgage default for higher LTV mortgages.

Prorate
To proportionally divide amounts owed by the buyer and the seller at closing.

Qualification
As determined by a lender, the ability of the borrower to repay a mortgage loan based on the borrower’s credit history, employment history, assets, debts, income and other factors.

Qualifying ratios
The percentage of payment to income (P/I) and debt-to-income (D/I) that is used to measure the borrower’s capacity to repay the mortgage debt.

Refinance
Retirement of an existing debt from the proceeds of a new loan, using the same collateral as security.

Rental income
Income generated by renting property to a tenant.

Reserves
Sometimes referred to as "cash reserves" or "post closing reserves"; this is the amount of liquid assets the borrower has remaining after completion of the mortgage loan transaction and payment of any other debt(s) that had to be satisfied in order for the borrower to qualify for the loan.
See also: liquidity

Resident alien
A non-U.S. citizen who is granted most of the rights of an U.S. citizen, including permanent residency in the United States. Resident Alien status is usually evidenced by a "Green Card."

RESPA
Abbreviation for the federal Real Estate Settlement Procedures Act, which requires lenders to disclose information on the nature and costs of the real estate settlement process, limits certain fees and charges, and regulates the amount home buyers are required to place in escrow.

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 satisfaction of the mortgage (The document issued by the mortgagee when the mortgage loan is paid in full).

Revolving debt
A debt that does not have a fixed payment, although repayment is usually a percentage of the outstanding balance and made at regular intervals; most common are credit cards issued by banks or department stores.

Second mortgage
A loan that is junior to a primary or first mortgage and often has a higher interest rate and a shorter term.

Second/vacation home
A second home/vacation home that is occupied by the borrower for some portion of the year for his/her exclusive use and enjoyment but which is suitable for year-round occupancy. It cannot be subject to a mandatory rental pool and the borrower does not intend to use the property for income purposes.

Secondary market
A market in which investors like GNMA, FHLMC, FNMA and private organizations buy large numbers of mortgages from the primary lenders and either hold them in a portfolio or package them for sale to others. By selling loan in secondary market, lenders obtain the funds needed to make new loans.

Self-employed borrower
A borrower whose income is derived from a business in which he/she has an ownership interest of 25%or more.

Servicing
The responsibility of collecting monthly mortgage payments and properly crediting them to the principal, interest, taxes and insurance, as well as keeping the borrower informed of any changes in the status of the loan.

Settlement
The closing of a mortgage loan.

Subdivision
An area of land that is platted and subdivided into individual lots.

Survey
A physical measurement of the property done by registered professional showing the boundaries, dimensions and location of any buildings as well as easements, rights of way, roads, etc.

Sweat equity
Equity created by a purchaser’s work on a property purchased.

Temporary buydown
A loan on which the interest rate has been "bought down" for a temporary period of time at the beginning of the loan by escrowing funds at the time of closing, which can be applied to the total monthly mortgage payment as each becomes due.

Title
A formal document establishing ownership of property.

Title search
An examination of municipal records to determine the legal ownership of the property. Usually is performed by a title company.

Underwriter
A professional who approves or denies a loan to a potential homebuyer based on the homebuyer’s credit history, employment history, assets, debts, property appraisal and other factors.

Underwriting
The decision whether to make a loan to a potential home buyer based on credit, employment, assets and other factors and the matching of this risk to an appropriate rate and term or loan amount.

Uniform Settlement Statement
A standard document prescribed by the Real Estate Settlement Procedures Act disclosing all costs paid in connection with the settlement of a real estate transaction. Also called a HUD-1.

VA loan
See: Veterans Administration

Variable Rate Mortgage
See: Adjustable Rate Mortgage

Verification of Deposit (VOD)
A document signed by the borrower’s financial institution verifying the status and balance of his or her financial accounts.

Verification of Employment (VOE)
A document signed by borrower’s employer verifying his or her position and salary.

Veteran’s Administration (VA)
The federal agency responsible for the VA loan guarantee program as well as other services for eligible veterans. In general, qualified veterans can apply for home loans with no down payment and a mortgage insurance premium of 1 percent of the loan amount.

Walk-through
An inspection of a property by the prospective buyer prior to closing on a mortgage.

Warranty deed
A document protecting a homebuyer against any and all claims to the property.

Wraparound Mortgage
A junior mortgage taken back by the seller for the amount of the property’s purchase price less the buyer’s down payment. The existing loan is retained and combined with a new, larger loan and the interest rate is set somewhere between the old rate and the current market rate. A typical wraparound is an interest-only loan with a 5 year balloon or less.

Yield
The ratio of investment income to the total amount invested over a given period of time; also known as "return on investment" or ROI.

Zoning
The ability of local governments to specify the use of property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc.