addendum
A document attached to the purchase agreement or contract that contains additional terms, conditions, or clauses agreed to by both parties.

adjustable-rate mortgage (ARM)
A mortgage whose interest rate changes periodically based on the changes in a specified index.

adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

adjustment period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

amortization
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.

amortization term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

appraisal fee
Fee that pays for the appraisal of the property. This fee is sometimes paid in advance as part of the loan application process or appears on the closing settlement statement.

appreciation
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

assignment
The transfer of a mortgage from one person to another.

assumable mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

assumption
The transfer of the seller's existing mortgage to the buyer.

assumption clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

assumption fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

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balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.

balloon mortgage
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.

balloon payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.

basis point
A basis point is 1/100th of a percentage point. For example, a fee calculated as 50 basis points of a loan amount of $100,000 would be 0.50% or $500.

binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

blanket mortgage
The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

BLC (Broker Listing Cooperative)
A cooperative real estate listing service used by real estate brokers in Indiana to list properties for sale and share information with other brokers to help sell a property.

boundary survey
A professional land survey that physically establishes the boundaries of a property by inserting stakes or pins along the property lines, ensuring no disputes over property lines and confirming legal property descriptions.

brokerage
A firm or company that provides real estate services, including buying, selling, leasing, or managing properties on behalf of clients.

broker
A licensed real estate professional who acts as an intermediary between buyers and sellers. In Indiana, all licensed salespersons are referred to as brokers, whether they are managing brokers or employed by a brokerage.

breach
A violation of any legal obligation.

bridge loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."

broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.

buyer's net sheet
A document that estimates the total costs a buyer will face in a real estate transaction, including the purchase price, closing costs, and other expenses. It provides buyers with an overview of the financial aspects of their purchase.

buyer exclusive agency Agreement
Starting July 1, 2024, Indiana law (HEA1068) mandates that all real estate brokers must have written agreements with their buyers to formalize their relationship. This agreement outlines the broker's duties and the buyer's obligations.

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call option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.

capital improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

cash-out refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.

certificate of deposit
Commonly known as a "CD," certificates of deposit bear a maturity date and a specified rate of interest. Penalties may apply for early withdrawal.

certificate of eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

certificate of reasonable value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.

certificate of title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

chain of title
The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

change frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

chasing the market (Overpricing a Home)
A term used when a home is initially overpriced and continuously lowered in an attempt to catch up with the market’s actual value. This strategy can lead to extended days on the market and may result in the property selling for less than it would have if priced correctly from the start.

clear title
A title that is free of liens or legal questions as to ownership of the property.

client
A person who has entered into a formal agency agreement with a real estate broker, who then owes the client fiduciary duties.

closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."

closing costs
In general, closing costs are the fees and expenses both buyers and sellers pay to complete a real estate transaction, separate from the property's purchase price. For sellers, typical closing costs include the seller's title insurance, settlement fees, prorated property taxes, legal and recording fees, and other expenses related to the property's conveyance. On the buyer's side, closing costs are generally tied to the financing of the transaction and are distinct from the buyer's down payment and earnest money deposit. Buyers’ closing costs often include a loan origination fee, lender's title fee, and other lender charges, and expenses for services like appraisal, survey, and homeowners insurance. Buyers may also choose to pay discount points to lower their loan’s interest rate. While some buyers may request the seller’s help with these costs, a seller’s willingness to assist depends on factors such as market conditions, seller motivation, loan type, and other specifics. This makes it a negotiable point rather than an expectation. Closing costs can vary significantly by region.

closing date
The date on which the purchase of a property is finalized, and ownership is transferred from the seller to the buyer.

closing statement
Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.

closing disclosure (CD)
A document provided to the buyer at least three days before closing that outlines all the terms and costs associated with the mortgage loan.

cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.

combination loan
With this type of loan, you receive a first mortgage for 80 percent of the loan amount, and a second mortgage at the same time for the remainder of the balance. If avoiding PMI (mortgage insurance) is important to you, consider combination loans--known as 80/10/10 loans or 80/20's.

combined loan-to-value (CLTV)
The unpaid principal balances of all the mortgages on a property (first and second usually) divided by the property's appraised value.

co-maker
A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.

commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

commission agreement
A written agreement between the seller and their real estate agent regarding the commission the agent will receive for selling the property.

commitment letter
A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."

common areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.

community property
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

comparables
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

comparative market analysis (CMA)
An analysis used by real estate agents to help sellers set a listing price based on the prices of similar properties that have recently sold in the area.

compound interest
E-LOAN CDs and Savings accounts compound interest daily. This refers to any interest earned on an account holder's principal balance, as well as any prior interest.

condominium conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

conforming loan
A mortgage loan that meets the underwriting guidelines and limits established by government-sponsored entities, such as Fannie Mae and Freddie Mac. Conforming loans generally have lower interest rates than non-conforming or jumbo loans.

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

consumer reporting agency (or bureau)
An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.

convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.

convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

corporate relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

cost of funds index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

covenant
A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

credit report fee
Fee that covers the cost of the credit report requested by the lender. This fee is sometimes paid in advance as part of the loan application process or appears on the closing settlement statement.

credit repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

customer
In real estate, a customer is someone who receives limited services from a real estate broker without entering into a formal agency agreement.

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deed
The legal document conveying title to a property.

deed & affidavit preparation fees
Fee charged by an attorney or title company for preparing the deed and any associated legal affidavits to facilitate the property transfer.

deed in lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.

deed of trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.

deed restrictions
Legal limitations written into the deed of a property that restrict how the property can be used. These restrictions are binding on future owners and can limit things like building size, property use, or external modifications.

default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

defect
In Indiana, a defect is defined as a condition that would have a significant adverse effect on the value of the property, significantly impair the health or safety of future occupants, or, if not repaired, would significantly shorten or adversely affect the normal life of the property.

delinquency
Failure to make mortgage payments when mortgage payments are due.

depreciation
A decline in the value of property; the opposite of appreciation.

drone photography
The use of unmanned aerial vehicles (drones) to capture aerial images and videos of a property. Drone photography is commonly used in real estate to showcase larger properties, land, or unique architectural features from above.

due diligence
The period during which a buyer has the opportunity to thoroughly investigate a property before finalizing the purchase. This typically includes inspections, reviewing legal documents, and assessing any issues or risks related to the property.

due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

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earnest money
A deposit made by the buyer to demonstrate serious intent to purchase a property, which is held in escrow until closing or forfeited if the buyer backs out without cause.

easement
A right of way giving persons other than the owner access to or over a property.

effective age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

effective gross income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

electronic funds transfer (EFT)
EFT allows account holders to transfer funds from an account electronically. This method of transfer is not only highly secure, but also extremely efficient and easy to transact.

encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

endorser
A person who signs ownership interest over to another party. Contrast with co-maker.

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
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.

escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

escrow accounts (for taxes and insurance)
An escrow account is established by the lender to collect and hold funds from the borrower to pay property taxes and insurance premiums when they become due.

escrow analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

escrow collections
Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.

escrow disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

escrow payment
The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.

estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

eviction
The lawful expulsion of an occupant from real property.

examination of title
The report on the title of a property from the public records or an abstract of the title.

exclusive agency listing
A listing agreement where the seller agrees to pay a commission to the real estate agent if the property is sold, unless the seller finds a buyer without the agent’s help.

exclusive right-to-sell listing
A listing agreement where the seller must pay the real estate agent a commission, regardless of who finds the buyer.

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Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Housing Act
A set of federal and state laws that protect individuals from discrimination when renting or buying property based on race, color, national origin, religion, sex, familial status, or disability.

fair market value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Fannie Mae's Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

fee simple
The greatest possible interest a person can have in real estate.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

fiduciary
A legal duty that requires real estate brokers to act in the best interest of their clients, putting the client’s needs above their own.

finder's fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

finished square footage (livable square footage)
The usable living space in a property, typically including rooms that are finished and suitable for occupancy, such as basements or attics that have been converted to living space.

first adjustment
When you can expect the first rate adjustment in your ARM loan.

first mortgage
A mortgage that is the primary lien against a property.

first right
Also known as "Right of First Refusal," this is a contractual agreement where a party has the opportunity to match or exceed an offer before the property is sold to another party.

float down option
An option to choose a lower rate within 30 days before the closing of your loan and "float down" to a lower rate than the previously locked-in rate. This allows you to pick the best rate within that time period.

flood insurance
Insurance coverage that compensates for physical property damage resulting from flooding. It is often required for properties located in federally designated flood zones.

flood plain
An area of low-lying ground adjacent to a river, lake, or ocean that is subject to flooding. Floodplain designations are used to assess flood risks and may require additional insurance.

floor plan
A visual representation of a property's layout, showing the arrangement of rooms, dimensions, and spatial relationships between spaces. Floor plans are often used to give potential buyers a clear understanding of the home's layout.

fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.

fixed second mortgage
See home equity loan.

flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

For Sale By Owner (FSBO)
A method of selling a property without the assistance of a real estate agent, where the seller handles the listing, marketing, and negotiation process.

foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

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geo-targeted ad
An advertisement that targets a specific geographic area based on the user's location. Geo-targeted ads allow real estate brokers to promote properties to potential buyers in a specific region or neighborhood, increasing the chances of reaching local audiences.

geo-targeted social media
The use of social media platforms to deliver advertisements or content to users based on their geographical location. Real estate brokers use geo-targeted social media campaigns to reach potential buyers within a specific area, city, or neighborhood.

good faith estimate
An estimate of charges which a borrower is likely to incur in connection with a settlement.

Good Funds Act
Indiana's Good Funds Act (House Act 1374) requires that funds for real estate transactions be securely available at closing. Transactions involving $10,000 or more must use wired funds, and checks are prohibited. Funds under $10,000 must still meet the Act's “good funds” criteria. Closing agents can advance up to $500 for incidental fees.

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hazard insurance
Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

hdr photography
High Dynamic Range (HDR) photography combines multiple exposures of the same scene to create a single image with a greater range of light and color. This technique is used in real estate photography to capture more detail in bright and dark areas, resulting in visually appealing property images.

hoa (Homeowners Association)
A governing body within a community, condominium, or subdivision that establishes rules for the property owners and often charges monthly or annual dues for maintenance of common areas and amenities.

hoa transfer fee
A fee charged by a Homeowners Association (HOA) to cover the administrative cost of transferring ownership records when a property is sold.

home equity line of credit
a credit line that is secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card, which can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.

home equity loan
a loan secured by a second deed of trust on a house, typically used as a home improvement loan.

home warranty
A service contract that covers the repair or replacement of major systems and appliances in a home, typically lasting for one year after the purchase of the property.

housing ratio
The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross monthly income. This ratio is sometimes referred to as the top ratio or front end ratio.

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

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IDX (Internet Data Exchange)
A system that allows real estate professionals to display MLS property listings on their websites. IDX feeds provide up-to-date information, enabling potential buyers to browse listings directly on a real estate broker's or brokerage’s website.

index
A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).

inspection
A professional evaluation of a property's condition. Various types of inspections include general home inspections, pest inspections, and specialty inspections (such as for mold, radon, or structural issues).

inspection contingency
A clause in the purchase agreement that allows the buyer to have the property inspected by a professional and back out of the deal or negotiate repairs if significant issues are found.

impound account
An impound account is an account established by the lender to pay a borrower's tax and insurance costs. The borrower's monthly mortgage payment is then increased to cover these costs, with the additional amount being held in the impound account and disbursed by the lender when the payments are due. Lenders typically prefer this arrangement because it reduces the possibility of a lapse in tax or insurance payments that could diminish the value of the lender's investment (your house). Therefore, while it is often possible to opt out of an impound account it will result in additional charges.

improved property
Land that has been developed with buildings or other structures, such as homes, roads, or utilities.

interest-only loan option
Loan payments have two components, principal and interest. An interest-only loan has no principal component for a specified period of time. These special loans minimize your monthly payments by eliminating the need to pay down your balance during the interest-only period, giving you greater cash flow control and/or increased purchasing power.

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jumbo mortgage
A mortgage loan that exceeds the maximum loan limits set by government-sponsored entities, such as Fannie Mae and Freddie Mac. Jumbo mortgages are considered non-conforming loans and typically come with higher interest rates due to their increased risk for lenders.

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Lead-Based Paint Disclosure
A federal requirement for sellers of homes built before 1978 to disclose any known lead-based paint or hazards. Sellers must provide potential buyers with a Lead-Based Paint Certification and Acknowledgement form.

lien
A legal claim or hold on a property (encumbrance) as security for a debt or obligation. If the debt is not paid, the lien holder may have the right to sell the property to satisfy the debt. The encumbrance can be either voluntary in involuntary.

lender
The bank, mortgage company, or mortgage broker offering the loan.

LIBOR
LIBOR stands for London Inter-Bank Offered Rate. This is a favorable interest rate offered for U.S. dollar deposits between a group of London banks. There are several different LIBOR rates, defined by the maturity of their deposit. The LIBOR is an international index that follows world economic conditions. LIBOR-indexed ARMs offer borrowers aggressive initial rates and have proven to be competitive with popular ARM indexes like the Treasury bill.

lifetime cap
A provision of an ARM that limits the highest rate that can occur over the life of the loan.

limited agency
A situation where a real estate agent represents both the buyer and the seller in a transaction, which requires disclosure and consent from both parties in Indiana.

listing agreement
A contract between a property owner and a real estate broker, authorizing the broker to represent the owner in the sale of the property.

list price to sales price ratio
The percentage of the final sale price compared to the original list price. This ratio helps assess market conditions and how closely homes sell to their asking price.

livable square footage (finished square footage)
The portion of a property's square footage that is finished and suitable for living space, such as bedrooms, bathrooms, and kitchens.

loan discount (points)
Loan discount points are a one-time, upfront payment to the lender to reduce the interest rate on a mortgage loan. Each point equals one percent of the loan amount and can lower monthly mortgage payments.

loan origination fee
Fee that covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage, but can vary by lender.

loan to value ratio (LTV)
The unpaid principal balance of the mortgage on a property divided by the property's appraised value. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.

lock period
The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.

lock-in
A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

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market value
The estimated price that a property would sell for in a competitive and open market, considering factors like location, condition, and comparable property sales.

margin
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

Matterport
A 3D virtual tour technology that creates interactive, high-quality, 3D models of real estate properties. Matterport tours allow viewers to navigate through a space as if they were walking through it in person, often used for enhanced virtual home tours.

maturity date
A pre-set date informing account owners when they can withdraw principal funds without incurring a penalty.

Megan's Law
A law requiring law enforcement authorities to make information available to the public regarding registered sex offenders. It is important for buyers to inquire if concerned about neighborhood safety.

MLS (Multiple Listing Service)
A cooperative real estate listing service used by real estate brokers to list properties for sale and share information with other brokers to help sell a property.

mold
A type of fungus that can grow in damp areas of a home and cause health problems. Mold inspections are common during property transactions.

mold mitigation
The process of removing mold from a building or home and preventing its return. Mold mitigation involves cleaning or replacing contaminated materials and addressing moisture issues that contribute to mold growth, such as leaks or high humidity levels.

mortgage
A legal document that pledges a property to the lender as security for payment of a debt

mortgage disability insurance
A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.

mortgage insurance (MI)
Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LTV of 80.01% or higher.

mortgagee
The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.

mortgagor
The mortgage borrower who gives the mortgage as a pledge to repay.

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negative amortization
Negative Amortization, or "deferred interest," occurs when the mortgage payment is less than a loan's accruing interest. This causes a loan's balance to grow instead of reduce or "amortize."

non-conforming loan
A mortgage that does not meet the underwriting guidelines or loan limits set by government-sponsored entities, such as Fannie Mae and Freddie Mac. Non-conforming loans, including jumbo loans, may have different terms and often come with higher interest rates or fees due to the increased risk for lenders.

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offer
A formal proposal made by the buyer to the seller to purchase a property at a specific price, which may be accepted, rejected, or countered by the seller.

origination fee
A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.

owner financing
A property purchase transaction in which the property seller provides all or part of the financing.

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periodic cap
The maximum rate increase for a specific period for a specific loan (ARM) only.

PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage payment.

PMI
Private Mortgage Insurance (PMI) premium is an insurance payment made by borrowers who have down payments of less than 20%. This protects the lender in case the borrower defaults on the loan.

planned unit developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

points
Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the mortgage loan.

prepaids
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

prepayment penalty
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.

principal
This term refers to the total amount of money originally deposited into a Savings or CD account. When taking out a loan however, it refers to the amount of debt, not including interest.

private mortgage insurance (PMI)
Insurance provided by non-government insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%.

possession
The date on which the buyer takes physical control and ownership of the property, often after closing has taken place.

preapproval letter
A letter from a lender indicating that a buyer has been pre-approved for a mortgage loan up to a specified amount, based on a preliminary review of their financial situation.

prepaid interest
This fee covers the interest payment from the date of the home purchase to the date of the first mortgage payment. It is calculated based on the loan amount and interest rate for the days between closing and the first payment date.

property taxes
Annual taxes levied by local governments on the assessed value of real estate, paid by the property owner, and used to fund public services like schools and infrastructure.

prorated property taxes
Property taxes that are divided proportionally between the buyer and seller based on the date of sale, with each party responsible for their share of the year’s taxes.

purchase agreement
A legally binding document that outlines the terms and conditions of the sale of a property between the buyer and seller.

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qualifying ratios
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.

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radon
A naturally occurring radioactive gas that can cause lung cancer. Radon testing is commonly done as part of a home inspection.

radon mitigation
The process used to reduce radon gas concentrations in the indoor air of a building or home. Radon is a radioactive gas that can pose health risks, and mitigation systems often involve ventilation or sub-slab depressurization to lower radon levels.

rate
The annual rate of interest on a loan, expressed as a percentage of 100.

rate cap
A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

rate lock-in
A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.

rebate
Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans with rebates often carry higher interest rates than loans with "points" (see above).

recording fees
Fees charged by local or state authorities for recording the purchase documents and officially transferring ownership of the property.

refinancing
The process of paying off one loan with the proceeds from a new loan using the same property as security.

RESPA (Real Estate Settlement Procedures Act)
A federal law that requires lenders to provide borrowers with information about settlement costs and protects them from certain abusive practices. RESPA ensures transparency in real estate transactions.

residential mortgage credit report (RMCR)
A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.

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seller carry back
An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

seller's net sheet
A document that outlines the estimated costs a seller will incur during a real estate transaction and the net proceeds they can expect to receive after closing. It typically includes costs like broker commissions, closing fees, and mortgage payoffs.

simple interest
An amount earned on an account holder's principal, according to a specified rate. This does not include any compounding interest.

Seller's Residential Real Estate Sales Disclosure
In Indiana, sellers of residential properties are required by law to disclose any known defects through a Seller’s Residential Real Estate Sales Disclosure form. This form must be made available to potential buyers unless the property is in an estate or bank-owned.

settlement fee
Fee charged by the title company for conducting and insuring the closing process. Sometimes referred to as a "Title Company Closing Fee or Closing Fee."

settlement statement
A document that itemizes all the financial details of a real estate transaction, including loan fees, commissions, and any other costs to both buyer and seller. Also known as a HUD-1.

square footage
A measurement of the total area within the exterior walls of a property. It includes both finished and unfinished areas but is often divided into different categories, such as livable square footage and finished square footage.

stated/documented income
Some loan products require only that applicants "state" the source of their income without providing supporting documentation such as tax returns.

subordination
If you are refinancing your first mortgage and have an existing second or home equity line, one option is to "subordinate" the second mortgage: request that your second mortgage holder go back into the second lien position when you replace your existing first mortgage with the new refinance loan.

survey
A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.

Surveyor Location Report (SLR)
A report prepared by a licensed surveyor showing the location of a property’s boundaries and any improvements, such as buildings or fences, in relation to property lines.

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tenants in common
An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.

title company
A company that ensures the property title is legitimate and issues title insurance to protect both the buyer and lender against legal issues that may arise from the title.

title company closing fee
Fee charged by the title company for conducting and insuring the closing process. Sometimes referred to as a "Settlement Fee."

title insurance
A policy that protects the buyer and the lender from financial losses due to defects in the title to a property.

title insurance fees
These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees to ensure clear ownership of the property.

title search
An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio.

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unimproved property
Land that has not been developed with structures or improvements, such as roads, homes, or utility connections.

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variable rate
An interest rate that may change once an account opens.

virtual tour
A virtual tour allows potential buyers to explore a property online through a 360-degree view. Virtual tours offer an immersive experience, providing a sense of the property's layout and features without the need for a physical visit.

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