Loan and Mortgage Glossary

Acceleration Clause

Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

Adjustable Rate Loan or Adjustable Rate Mortgage (also ARM)
A loan with an interest rate that changes during the term of the loan. The payments generally increase or decrease with the interest rate. The rate is based on one of several "index" options.

Agency Relationships: Buyers Agent, Sellers Agent, and Dual Agent.

A Buyers Agent is a real estate agent who represents the buyer and owes fiduciary duties to the buyer.

A Sellers Agent is a real estate agent who represents the seller and owes fiduciary duties to the seller.

A Dual Agent is a real estate agent who represents both the buyer and seller. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller.

Amortization

Means loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Amount Financed
A required Truth in Lending Act disclosure for consumer loans. Calculated by starting with the full amount borrowed (principal) and subtracting out the dollar amount of prepaid finance charges (finance charges the borrower is paying in advance).

Annual Percentage Rate (APR)

An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. This APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan.

Application Fee
A fee charged by the lender or broker to process the loan application.

Appraisal
A report that estimates the value of real estate.

Annual percentage rate (also APR)
A required Truth in Lending Act disclosure for consumer loans. It is a calculation of the cost of credit as a yearly rate, shown as a percentage. It is often higher than the interest rate because it incorporates prepaid finance charges that are not interest.

Assumption

The agreement between buyer and seller, where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charges will apply.

Balloon Payment
A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. It is designed to occur when the regular payments do not pay off all principal and interest owing (not fully amortizing) on the loan over the term of the loan.

Broker Agreement (also Mortgage Broker Agreement)
A contract between a borrower and a mortgage broker. It describes what the broker will do for the borrower, and the terms of the agreement, including compensation due the broker.

Broker Compensation or Fee
The amount of money the broker will receive for finding a loan for a borrower. This amount may be paid by the borrower, by the lender, or by both.

Buy Down

When the lender and/or the homebuilder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

CAPS (INTEREST)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

CAPS (PAYMENT)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Cash-out Refinancing Loan
A loan that refinances a prior mortgage and that provides additional cash to the borrower.

Closing

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement

Closing Costs
A general term to describe the fees that a borrower will pay at closing. Sometimes called "settlement fees."

Conforming Loans
Loans which conform to Fannie Mae guidelines.

Construction Loan

A short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

Conventional Loan

A mortgage not insured by FHA or guaranteed by the VA or Farmers Home Administration (FMHA).

Credit Report

A report documenting the credit history and current status of a borrower's credit standing.

Credit Score
This is a number that is supposed to show the lender how likely you are to repay a loan; i.e., whether you are a good or poor credit risk. This score can be a very important factor in determining whether you will get a loan, from whom, and what interest rate and fees you will be charged for your loan. The score is generated by a mathematical formula that considers your credit reports and other factors. It may also be referred to as a FICO (Fair Isaac Company) score or Beacon score or some other name; these are companies that create credit scores.

Debt-To-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

Deed of Trust
In some states, including California, loans are secured by means of a document called a deed of trust, which serves as a mortgage document.

Debt-To-Income Ratio

Default

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

Deferred Interest

See negative amortization.

Delinquency

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

Department of Veterans Affairs (VA) - an independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Discount Points

See points

Document Preparation Fee
An amount of money that you may be charged for the preparation of mortgage loan documents. This charge will be shown on the HUD-1 Settlement Statement.

Down Payment

Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional loans, and no money down up to 5 percent on FHA and VA loans.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity
The dollar value of your home that you actually own. You can calculate your equity by taking the market value of your home and subtracting out the debt that is secured by your home. For example, if your home is worth $150,000 and you owe $65,000 on a first mortgage and $15,000 on a home equity line of credit, you would calculate $150,000 minus $80,000 ($65,000 + $15,000) to arrive at $70,000 in equity.

Escrow

Escrow is a form of buying a home in which a neutral third party holds the documents and money until the closing activities are completed. To open escrow, you'll make a deposit that is cashed and held in the escrow account. Known as "acceptance of deposit," it means that you're done house hunting and the builder is finished selling your chosen house. It also marks your agreement to start the loan approval process in good faith with the goal of closing escrow. To close escrow, all of the papers and the money are deposited with the escrow agent within the agreed-upon time. The documents are recorded and everyone gets the documents and money due them. Escrow requirements vary by region. Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments.

FANNIE MAE

See Federal National Mortgage Association.

Farmers Home Association (FMHA) - provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB)

A regulatory and supervisory agency for federally chartered savings institutions.

Federal Home Loan Mortgage Corporation (FHLMC)

Also called "Freddie Mac," is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA)

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Federal Nation Mortgage Association (FNMA)

Also known as "Fannie Mae." A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FHA Loan

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA Mortgage Insurance

Requires a small fee (up to 3.8 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed-rate FHA loan, this fee would amount to either $2,850 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FICO
Credit scores calculated by Fair Isaac Company are often referred to as FICO. Normally an average of credit scores taken by three national credit bureaus.

Finance Charge
The finance charge is a disclosure that appears on the Truth in Lending Act Disclosure Statement. It is intended to show the cost of your loan as a dollar amount. It includes (1) interest that will be charged over the life of the loan and (2) some up-front fees (prepaid finance charges). Prepaid finance charges include such items as mortgage broker fees, lender fees, points, and some closing agent fees. Any closing fees that are unreasonably high should also be included. You may also be required to pay other fees that will not be included in the finance charge.

Fixed Rate Loan
A loan in which the interest rate does not change during the term of the loan.

Flood Certification Fee
A fee charged to determine if the property lies in a flood zone and whether flood insurance is required.

Foreclosure
The legal procedure by which a lender holding a mortgage on your house forces a sale of the house to obtain repayment of your loan. Foreclosure proceedings are typically started by a lender when you do not pay your loan on time. Foreclosure might also be started if you fail to pay property taxes or insurance or fail to keep other promises.

FREDDIE MAC

See Federal Home Loan Mortgage Corporation

Fully Amortizing
This describes a loan in which the balance owed at the scheduled end of the loan is zero if all regular monthly payments are made as scheduled.

GINNIE MAE

See Government National Mortgage Association.

Good Faith Estimate
This document lists the estimated fees you will have to pay to obtain the loan. It also identifies who is expected to provide services and receive fees in connection with your loan, such as credit bureaus, appraisers, and closing agents.

Government National Mortgage Association (GNMA)

Also known as "Ginnie Mae," provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Government Recording Fees and Taxes
Fees and taxes required to be paid to the local government where your mortgage documents are filed.

Graduated Payment Mortgage (GPM)

A type of flexible payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Gross Monthly Income

The total amount the borrower earns per month, before any expenses are deducted.

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 in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Home Equity Loan
A loan made to a current homeowner that is secured by the equity in the home (also called a second mortgage).

Homeowners Association

This is the organization that governs regulations and expenditures within a community. The Homeowners Association is typically responsible for the development of an annual budget, the collection of assessments that homeowners pay to maintain and repair "common areas," and the creation of various rules and guidelines for living in the community. Each homeowner within the community is a member of the Association with voting privileges.

Homeowner's / Hazard Insurance
Homeowner's or Hazard Insurance is required to protect the mortgage lender against possible damage to your home. It can also protect the borrower. A borrower must obtain this insurance and bring proof of its existence to the loan closing.

Housing Expense To Income Ration

The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income ratio.

HUD
The U.S. Department of Housing and Urban Development.

HUD-1
Also called a "Settlement Statement" of all costs and fees in your closing.

Impound

That portion of a borrower's monthly payments 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 against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average cost-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Rate
Cost of borrowing money expressed as a percentage of the amount borrowed. Typically lower than the annual percentage rate (APR).

Introductory Rate
Some loans have a lower introductory interest rate, which remains in effect for a limited time. At the end of the introductory period, the interest rate will increase. Also known as a "teaser rate."

Investor

A money source for a lender.

Jumbo Loans
Loans which exceed the Fannie Mae guidelines for loan size and amount. Jumbo loans may have different guidelines from those of a "conforming" loan.

Late Charge
A penalty you will have to pay if you do not make your loan payment on time. This usually is calculated as a percentage of the payment amount or a minimum dollar amount, such as 5% of the late payment, or $25.

Lender Paid Compensation to Broker
Also called the Yield Spread Premium. A fee the lender pays to the mortgage broker for obtaining the loan for his client.

Lien
A claim (legal interest) against a home. Common types of liens include a mortgage, tax lien, and judgment lien.

Line of Credit
Also called an "open line of credit" secured on your home. Often there are no closing costs involved, or the lender offers to pay all closing costs. Used like a checking account for borrowing up to your credit limit.

Loan Term
Length of time until your loan is fully due and payable.

Loan To Value Ratio

The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Market Value

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Mello-Roos (or Special Taxing District)

Special tax districts, created by the California State Legislature in 1982. These districts collect funds to pay for the vital facilities a new home community needs — such as streets, schools, water, drainage, parks, sidewalks, median landscaping, and sewer systems — which otherwise might not be available to initial homeowners in the community. An Assessment District or Mello-Roos District is formed by the local government. They issue bonds (which are essentially loans) to fund the community's facilities. To repay the bonds, homeowners will pay assessments, which will be added to their annual property tax bill.

Mortgage
A mortgage is a promise in which you agree to put up your home as security for a loan. The mortgage is the instrument that secures the Promissory Note, in which you promise to repay the loan by a certain date. The mortgage document allows the lender to force a sale of your home (foreclosure) if, for example, you fail to make payments, fail to pay property taxes or insurance, or fail to keep other promises. In some states, including California, the mortgage document is called a "deed of trust."

Mortgagee

The lender.

Mortgagor

The borrower or homeowner.

Mortgage Broker
A person or company that obtains a mortgage loan for the borrower from another lender. A mortgage broker does not necessarily represent the borrower and is not necessarily concerned with the borrower's best interests.

Mortgage Insurance (also MI or PMI)
Insurance that may be required when a loan is greater than 80% of the value of the home. This insurance protects the lender in the event a borrower fails to make his or her loan payments. The borrower ordinarily pays the cost of MI or PMI, in the form of monthly premiums added to the mortgage payments.

Negative Amortization

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 balance of the loan. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

Net Effective Income

The borrower's gross income minus federal income tax.

Nonassumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage with out the prior approval of the lender.

Notice of Right to Cancel
Under federal law, you may be permitted to cancel or "rescind" a mortgage loan within a specified time, generally three days, after you have signed loan documents in a refinance, second mortgage, or other mortgage loans which do not involve the purchase of a home. The lender is required to give the borrower (1) notice in writing of this right to cancel or rescind and (2) the deadline to cancel.

Open End Loan
A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity line of credit (HELOC) is an open-end loan secured by a home.

Origination Fee

The fee charged by the lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

Payment Schedule
This information on the Truth in Lending Disclosure Statement shows the amount of the first loan payment, the amount and number of the regularly scheduled payments, the amount of the final payment, and when all those payments are due. The actual payment due may be greater for a number of reasons, including taxes and insurance. If the loan has an "adjustable rate," the actual payments will differ from the payment schedule.

PITI

Principal, interest, taxes and insurance. Also called monthly housing expense.

PITI Ratio

Also called an "income-to-debt" ratio. It is used by lenders in deciding whether to give you, the borrower, a loan. It compares the amount of your monthly income to the amount you will owe each month in principal, interest, real state tax and insurance on that mortgage. (compare to Qualifying Income Ratio)

Points
A fee charged by the lender as additional compensation for making the loan. One "point" is equal to 1% of the principal amount of the loan.

Power of Attorney

The authority to act in another person’s behalf, at this request. If your are granted such authority you are called the attorney-in-fact. If you are the grantor (see Grantor), you may revoke a power of attorney at any time. If you, as grantor die, relocate or are judged legally incompetent, the power of attorney will automatically terminate. 2. A document granting the power of attorney.

Prepaids

Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment Penalty
The charge that can be imposed if you pay off your loan before maturity. The Truth in Lending Disclosure Statement will show whether a loan has a prepayment penalty.

Prime Loan
A loan offered to borrowers with better credit history (sometimes called "A" loans). Prime loans generally are priced lower and cost the borrower less.

Principal

The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)

In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on your loan's structure. On a $75,000 house with a 10 percent down payment, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.

Promissory Note
A legal contract in which the borrower promises to pay back the loan. The "promissory note" sets forth the terms and conditions that apply to the loan repayment, such as interest rate, when payments are due, where payments are made, what happens if payments are not made, etc.

PUD

Planned Unit Development. 1. It is the comprehensive development plan for a large area. Usually indicating where roads, schools, recreational, office, commercial or industrial and residential areas will be. 2. It also refers to a subdivision that has common areas reserved for the use of and commonly owned by the separate lot owners.

Purchase Money Loan/Mortgage
A loan for the purpose of purchasing a home.

Qualifying Income Ratio

Used by lenders in deciding whether to offer you a loan. One type compares only the amount of your proposed monthly mortgage payment to your monthly income (see PITI Ratio) Another compares the amount of your total monthly payments (e.g. you car, credit card and proposed mortgage payments) to your monthly income.

Quitclaim Deed

A legal document which transfers to the buyer or owner, whatever interests in the property are held by the maker of the deed. It does not guarantee that those interest are valid. By accepting such a deed, you accept the risk that someone may later appear with a valid claim to your property.

Rate Lock (also Lock in the Rate)
A written agreement between the borrower and the lender or broker that as long as the loan is closed within a certain period of time (e.g., 30 or 60 days), the interest rate on the loan will be set (locked) at an agreed-upon rate.

Realtor

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Recording Fees
Fees charged by the local government to record loan documents (for example, the mortgage). These fees will be charged to the borrower and shown on the Settlement Statement (HUD-1).

Recision

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Refinance
To repay one or more existing mortgage loans by getting a new mortgage loan.

Renegotiable Rate Mortgage (RRM)

A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

Rescind (also Right of Rescission)
Literally means "to take back" or "cancel." If a borrower rescinds a mortgage loan, it is as if the mortgage loan never existed. Some borrowers have by law a right to "rescind" certain mortgage loans. Note: A borrower is entitled to a refund of all fees paid in connection with the loan if the borrower exercises his right of rescission.

RESPA

Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish the information after application only.

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 security.

Secondary Mortgage Loan (also Second Mortgage or Home Equity Loan)
A mortgage loan that is in addition to a mortgage that already exists on the home.

Servicing

All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

Settlement
The time when loan and mortgage documents are formally signed and the loan transaction is completed. Also called "Closing."

Settlement Agent (also Closing Agent or Settlement Attorney)
The person who organizes and is in charge of the loan closing. The settlement agent can explain any document the borrower must sign.

Shared Appreciation Mortgage (SAM)

A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the properly. May also apply to mortgages where the borrower shares the monthly principal and interest payments with another party in exchange for a part of the appreciation.

Sub prime Loans
These loans are priced higher than prime loans, often much higher. Loans to borrowers whose credit is less than perfect will almost always be sub prime loans. There are also other circumstances that lead to sub prime loans, including high outstanding debt, unproven income, etc. Even borrowers with good credit may receive sub prime loans for a variety of reasons, including fraud, discrimination, failure to shop around, etc.

Survey
A drawing or map showing the precise legal boundaries of a property and other physical features, prepared by a registered land surveyor.

Term
The period of time during which loan payments are made. At the end of the loan term, the loan must be paid in full.

Term Mortgage

See balloon payment mortgage.

Title

A document that gives evidence of an individual's ownership of property.

Title Insurance

A policy, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually based on the value of the property, and is often borne by the purchaser and/or seller.

Title Search

An examination of municipal records to determine the legal ownership of property which is usually performed by a title company.

Transfer Tax or Charge
A government tax or charge that is usually based on a percentage of the property value or loan amount and imposed by state or local law. Many states do not require this charge for a refinance loan, but almost all require it for a home purchase. A transfer tax will be shown on the Settlement Statement (HUD-1).

Truth in Lending Act (also TILA)
A federal law designed to protect borrowers and to give them enough information to comparison-shop for loans. TILA requires certain disclosures about the loan and when they must be given to the borrower. TILA also provides additional protections and prohibitions.

Truth in Lending Disclosure Statement
A document required by federal law for all consumer loans. It provides key information to enable borrowers to shop around and compare loan terms from various lenders.

Two-Step Mortgage

A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier mortgage. "

Underwriting

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

Underwriting Fee
A fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan. An underwriting fee may be charged to the borrower and shown on the Settlement Statement (HUD-1).

Upfront Costs
Costs or fees charged to the borrower at or before closing of the mortgage loan, such as loan application fees, appraisal fees, points, broker fees, credit report fees, real estate taxes, etc. Upfront costs can be paid in several ways: (1) they can be paid by the borrower in cash; or (2) they can be added to the loan amount and financed over the life of the mortgage.

VA Loan

A long-term, low- or no down payment loan guaranteed by the Department of Veterans

Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Finding Fee

- a premium of up to 1 7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 30-year fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

Variable Rate Mortgage (VRM)

See adjustable rate mortgage.

Verification of Deposit (VOD)

A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)

A document signed by the borrower's employer verifying his/her position and salary.

Yield Spread Premium (also YSP)
A payment made by a lender to a mortgage broker in connection with a borrower's mortgage transaction. It is shown on the Settlement Statement (HUD-1), but often in a way that is difficult to understand. For example, a $1,000 yield spread premium may be shown as "YSP POC 1000." Borrowers are often unaware that the YSP payment is being made. The payment of a YSP by a lender affects the interest rate charged to the borrower.

Wraparound

Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Zero Lot Line

The positioning of a structure so that one side of it sits directly on the lot’s boundary line. Although usually prohibited by setback ordinances see Setback Lines), such positioning can be part of special planned unit developments. (see PUD)

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