M-S

Margin
The lender’s “retail markup” on the mortgage. For example, if the index rate for an adjustable-rate mortgage is 5 percent but the lender has a 2.5 percentage-point margin, the rate the borrower will pay is 7.5 percent.

Market value
The price that a piece of property sells for at a particular point in time.

Mechanic’s lien
Subcontractors or suppliers sometimes will file an encumbrance, or mechanic’s lien, against a property to seek payment.

Mortgage
A legal document specifying a certain amount of money to purchase a home at a certain interest rate, and using the property as collateral.

Mortgage acceleration clause
A clause which allows a lender to demand that the entire balance of the loan be repaid in a lump sum under certain circumstances. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage banker
A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

Mortgage broker
A company that matches lenders with prospective borrowers who meet the lender’s criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.

Mortgage insurance
Required by lenders in some loans to protect them from a possible default . All conventional loans with less than a 20 percent down payments require private mortgage insurance, or PMI.

Multiple listing service (MLS)
The service combines the listings for all available homes in an area, except For-Sale-By-Owner (FSBO) properties, in one directory or database.

Negative amortization
The situation occurs when a borrower’s monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible.

No-documentation loan
A loan application that does not require verification of income but typically is granted in cases of large down payments.

Non-assumption clause
A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-recurring closing costs
Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection.

Note
The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Note rate
The interest rate specified in a mortgage note.

Notice of default
A lender’s initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

Origination fee
A fee charged by most lenders–also called points–for processing a loan. A point is 1 percent of the total loan amount.

Owner financing
A transaction in which the seller of a property agrees to finance all or part of the purchase.

PITI (Principal, Interest, Taxes, Insurance)
When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower’s actual monthly mortgage-related expenses.

Point
Fees charged by lenders at the time a loan is originated. A point is equal to 1 percent of the total loan amount.

Pre-approval letter
A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.

Prepaid expenses
The costs for taxes, insurance and assessments paid before the due date.

Prepaid interest
Interest paid before it is due. For example, at the close of a real estate transaction borrowers usually pay for the interest on their loan that falls between the closing period and the first monthly payment.

Prepayment penalty
Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.

Prequalification
Many lenders will prequalify a borrower who is shopping for a loan by completing a preliminary assessment of the buyer’s ability to pay for a home.

Principal
The amount of money that the borrower owes on a mortgage.

Private mortgage insurance (PMI)
A special type of loan insurance that many lenders require borrowers to purchase if the borrower’s down payment is less than 20 percent of the home’s purchase price.

Property tax
Property taxes are calculated at about 1.5 percent of the current market value.

Property value
The value of a piece of property is based on the price a buyer will pay at a certain time.

Purchase agreement
A document which details the purchase price and conditions of the transaction.

Qualifying ratios
Lenders compute qualifying ratios to determine how much a potential buyer can borrow.

Quit-claim deed
A document that releases a party from any interest in a piece of real estate.

Rate-improvement mortgage
A loan with a clause that entitles a borrower to a one-time cut in the interest rate without going through refinancing.

Rate lock
When interest rates are volatile, many borrowers want to “lock in” an interest rate and many lenders will oblige, setting a limit on the amount of time the guaranteed interest rate is in effect.

Real estate
Land and anything permanently affixed to it, including buildings, fences and other items attached to the structure.

Real estate agent
A real estate agent has a state license to represent a buyer or a seller in a real estate transaction in exchange for a commission. Most agents work for real estate brokers.

Real estate broker
A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Most brokers also have agents working for them, and are entitled to a portion of their commissions.

Real estate investment trusts (REITs)
The trusts are publicly traded companies that own, develop and operate commercial properties.

Real Estate Settlement Procedures Act (RESPA)
A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.

Recording fee
A fee charged by real estate agents for conveying the sale of a piece of property into the public record.

Refinancing
The process of replacing an older loan with a new mortgage that has better terms.

Regulation Z
The federal code issued under the Truth-in-Lending Act which requires that a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.

Rehabilitation mortgage
A mortgage that provides for the costs of repairing and improving a resale home or building.

Remaining balance
The amount of unpaid principal on a home loan.

Remaining term
The original loan term minus the number of payments made.

Resale value
The future value of a piece of property that can be affected by many factors, including the surrounding neighborhood, school scores, and economic and housing market conditions.

Reserve fund
All homeowners associations set aside a certain amount of money for major repairs or improvements.

Restructured loan
A mortgage in which new terms are negotiated.

Return on investment
The amount of profit a property generates.

Reverse mortgage
A special type of loan available to equity-rich, older owners. Repayment is not necessary until the borrower sells the property or moves into a retirement community.

Right of first refusal
An agreement by a property owner to give another person the right to buy or rent the property before it goes on the open market.

Right to rescission
A provision in the federal Truth-in-Lending Act that allows borrowers to cancel certain kinds of loans within three days of signing.

Second mortgage
Another loan placed upon a piece of property.

Secured loan
Any loan backed by collateral.

Servicer
A firm that collects mortgage payments and manages borrowers’ escrow accounts.

Settlement statement
A document that details who has paid what to whom.

Shared-appreciation mortgage
A loan that allows a lender or other party to share in the borrower’s profits when the home is sold.

Shared-equity transaction
A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.

Special assessment
When a homeowners’ association needs or wants extra funds, it levies a special assessment upon the owners.

Step-rate mortgage
A loan that allows a gradual increase in the interest rate during the first few years of the loan.

Subordinate loan
A second or third mortgage.

Sweat equity
The non-cash value put into a piece of property by the owner, such as do-it-yourself home improvements.