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Glossary

Assumable Mortgage

An existing mortgage you can take over with the same rates and terms the current owner agreed to.

Balloon Mortgage

A short-term loan that is paid off through fixed monthly payments, followed by one large, final payment (the 'balloon') of the entire remaining loan balance. The balloon mortgage is amortized as though it were a long-term fixed rate loan, resulting in low monthly payments, but after a specified time period (usually five, seven or 10 years) the entire remaining balance is due and payable in full.

Balloon Payment

The final lump sum payment made at the maturity date of a balloon mortgage. When payment is due, the homeowner may be able to refinance the loan.

Bankruptcy

A legal process in which a person who is unable to pay outstanding debts is released from payment of all debts owed. In many cases, the court distributes the debtor's property to the creditors as payment for the outstanding debt.

Blanket Mortgage

One mortgage that covers more than one property.

Bridge Loan

A mortgage loan that enables you to obtain financing for a new house before your current house is sold. The current house is used as collateral. Also called a swing loan.

Buyer

The person who applies for a mortgage loan and will be responsible for repaying it. There may be more than one buyer on a single loan.

Buyer's Title Insurance

Insurance that protects you from losses that may result from disputes over the property's title. Typically, you purchase two separate policies: The Lender Title Insurance, which is a part of your closing costs, and separate insurance to protect your interests.

Cap (Interest Rate)

See Rate Cap.

Cap (Payment)

See Payment Cap.

Cash Out Refinance

A refinance loan in which the new loan amount is larger than the remaining balance of all current mortgages, giving you cash that can be used for any purpose. Many homeowners use a cash out refinance to pay for home improvements, to consolidate debt, or to take needed cash from the equity earned by the property.

Certificate of Title

A record of property ownership issued by a title company or other qualified source. It is based on a title search to determine that the seller is the current legal owner, and to identify any liens on the property.

Certified Funds

In the United States this form of payment is guaranteed to clear or settle by the company that which certified the funds. When purchasing property the seller requires a guarantee that the payment will satisfy the obligations, sellers require certified funds in the form of a cashiers check, certified bank check or money order. Personal checks and credit cards are not acceptable.

Closing

The conclusion of a real estate transaction. At closing, you sign documents that transfer legal ownership of the property to you, and pay closing costs. Also called Settlement.

Closing Costs

Expenses you and the seller pay to complete the transfer of ownership. Closing costs might include an origination fee, attorney's fee, initial escrow payments, and charges for obtaining title insurance and a survey. Closing costs vary according to geographic location. Also called Settlement Costs.