Income Property: Real estate developed or purchased to produce income, such as a rental unit.
Index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, stated in the note.
Individual Retirement Account (IRA): A tax-deferred plan that can help you build a retirement nest egg.
Inflation: An increase in prices. Initial Interest Rate: The original interest rate for an adjustable-rate mortgage (ARM). Sometimes known as the “start rate.”
Inquiry: A request for a copy of your credit report by a lender or other business, often when you fill out a credit application and/or request more credit. Too many inquiries on a credit report can hurt your credit score; however, most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time.
Installment: The regular periodic payment that a borrower agrees to make to a lender.
Installment Debt: A loan that is repaid in accordance with a schedule of payments for a specified term (such as an automobile loan). Interest: The cost you pay to borrow money. It is the payment you make to you. Interest is usually expressed as a percentage of the amount borrowed.
Interest Accrual Rate: The percentage rate at which interest accumulates or increases on a mortgage loan.
Interest Rate Cap: For an adjustable rate mortgage (ARM), a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.
Interest Rate Ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor: For an adjustable rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Investment Property: A property purchased to generate rental income, tax benefits, or profitable resale rather than to serve as the borrower’s primary residence. Contrast with “second home.”
Judgment Lien: A lien on the property of a debtor resulting from the decree of a court.
Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. Also called “non-conforming loan.”
Junior Mortgage: A loan that is subordinate to the primary loan or first-lien mortgage loan, such as a second or third mortgage.
Keogh Funds: A tax-deferred retirement-savings plan for small business owners or self-employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax-deductible.
Late Charge: A penalty imposed by the lender when a borrower fails to make a scheduled payment on time.
Lease-Purchase Option: An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.
Liabilities: A person’s debts and other financial obligations.
Liability Insurance: Insurance coverage that protects property owners against claims of negligence, personal injury or property damage to another party.
LIBOR-Index: An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market.
Lien: A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Lifetime Cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate or monthly payment can increase or decrease over the life of the loan.
Liquid Asset: A cash asset or an asset that is easily converted into cash.
Loan Origination: The process by which a loan is made, which may include taking a loan application, processing and underwriting the application, and closing the loan.
Loan Origination Fees: Fees paid to your mortgage lender or broker for processing the mortgage application. This fee is usually in the form of points. One point equals one percent of the mortgage amount.
Loan-To-Value (LTV) Ratio: The relationship between the loan amount and the value of the property (the lower of appraised value or sales price), expressed as a percentage of the property’s value. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.
Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.
Low-Down-Payment Feature: A feature of some mortgages, usually fixed-rate mortgages, that helps you buy a home with a low down payment.
Manufactured Housing: Homes that are built entirely in a factory in accordance with a federal building code administered by the U.S. Department of Housing and Urban Development (HUD). Manufactured homes may be single or multi-section and are transported from the factory to a site and installed. Homes that are permanently affixed to a foundation often may be classified as real property under applicable state law, and may be financed with a mortgage. Homes that are not permanently affixed to a foundation generally are classified as personal property, and are financed with a retail installment sales agreement.
Margin: A percentage added to the index for an adjustable-rate mortgage (ARM) to establish the interest rate on each adjustment date.
Market Value: The current value of your home based on what a purchaser would pay. An appraisal is sometimes used to determine market value.
Maturity Date: The date on which a mortgage loan is scheduled to be paid in full, as stated in the note.
Merged Credit Report: A credit report issued by a credit reporting company that combines information from two or three major credit bureaus.
Modification: Any change to the terms of a mortgage loan, including changes to the interest rate, loan balance, or loan term.
Money Market Account: A type of investment in which funds are invested in short-term securities.
Mortgage: A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign (to grant the lender a lien on your home). It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price of the home minus your down payment.
Mortgage Broker: An individual or firm that brings borrowers and lenders together for the purpose of loan origination. A mortgage broker typically takes loan applications and may process loans. A mortgage broker also may close the loan.
Mortgage Insurance (MI): Insurance that protects lenders against losses caused by a borrower’s default on a mortgage loan. MI typically is required if the borrower’s down payment is less than 20 percent of the purchase price.
Mortgage Insurance Premium (MIP): The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company.
Mortgage Lender: The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.
Mortgage Life Insurance: A type of insurance that will pay off a mortgage if the borrower dies while the loan is outstanding; a form of credit life insurance.
Mortgage Rate: The interest rate you pay to borrow the money to buy your house.
Mortgagee: The institution or individual to whom a mortgage is given.
Mortgagor: The owner of real estate who pledges property as security for the repayment of a debt; the borrower.
Multifamily Mortgage: A mortgage loan on a building with five or more dwelling units.
Multifamily Properties: Typically, buildings with five or more dwelling units.
Multiple Listing Service (MLS): A clearinghouse through which member real estate brokerage firms regularly and systematically exchange information on listings of real estate properties and share commissions with members who locate purchasers. The MLS for an area is usually operated by the local, private real estate association as a joint venture among its members designed to foster real estate brokerage services.
Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.