Glossary of Terms

In our ProGrowth Mortgage Promise™, we make a commitment to you to uncomplicate the mortgage process and help you make an informed decision. One of the most frustrating aspects of a new home purchase can be the numerous and confusing terms used by mortgage lenders and closing agents. We hope this Glossary of Financing Terms demonstrates one of the many ways we at ProGrowth keep our promise.

abstract of title  Usually a very thick document which is a summary statement of the successive conveyances and other facts on which a title to a piece of land rests from its origin to the present.

adjustable rate mortgage A loan that allows the lender to adjust the borrower's interest rate and payments at designated times and sometimes with designated limits. Lower interest rates are common. 

amortized loan A loan that is paid off in equal installments during its term. 

appraisal An estimate of real estate value, usually issued to the standards of FHA, VA, FNMA. Recent comparable sales in the neighborhood are the most important factor in determining value. 

assumable mortgage Purchaser takes ownership of real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage. 

bridge loan  Also known as a gap loan where the customer may use the equity available in an existing home or other real property to help purchase a new home or property.

closing costs Expenses incurred in the closing of a real estate or mortgage transaction. Purchaser's expenses normally include, but not limited to:

  • cost of title

  • examination

  • premiums for title policies

  • survey

  • attorney's fee

  • lender's service fees

  • recording fees. 

In addition, the purchaser may have to place in escrow a sum of money to cover accrued real estate taxes and insurance. 

conventional mortgage A loan neither insured by the FHA nor guaranteed by the VA. 

discount fee or point  Points are prepaid interest on your mortgage, charged by the lender at the time of closing. Each point is one percent of the loan amount. For example, two points on a $100,000 mortgage is $2,000. The more points you pay, the lower your interest rate will be, thus lowering your monthly payment. The points you pay are tax deductible.

equity The difference between the market value of property and the homeowner's indebtedness (mortgage). 

escrow payment The portion of a mortgagor's monthly payment held in trust by lender to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due. 

exchange The trading of equity in one piece of property for the equity in another. 

fixed mortgage rate A loan that fixes the interest rate at a designated rate for the duration of the loan. 

Freddie Mac Nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. 

Fannie Mae Nickname for Federal National Mortgage Association (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. 

graduated mortgage payment A FHA, VA or Conventional Loan where the borrower pays a portion of the interest due each month during the first few years of the loan. This payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life.

investor The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.

lease purchase agreement Buyer makes a deposit for the future purchase of property with the right to lease the property in the interim. 

loan-to-value ratio The ratio of the mortgage loan principal (amount borrowed) to the property's appraised value (selling price). On a $100,000 home, with a mortgage loan principal of $80,000, the loan to value ratio is 80%. ($80,000÷$100,000=.80) 

mortgage/deed of trust Pledge of real property to secure a debt by written instrument given by the mortgagor. Should be recorded in the County Recorder's Office. 

mortgage insurance premium The consideration paid by a mortgagor for mortgage insurance either to FHA or private mortgage insurance company. This insurance protects the investor from possible loss in the event of a borrower's default on a loan. 

mortgagee The lender of money or the receiver of the mortgage document. 

mortgagor The borrower of money or the giver of the mortgage document. 

note A written promise to pay a certain amount of money.

origination fee A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan. 

point One percent of loan amount. 

prepayment penalty A fee paid to the mortgagee for paying off the mortgage before it is due. Also known as prepayment fee or reinvestment fee. 

prepayment privilege The right given to a purchaser to pay all or part of a debt prior to its maturity. The mortgagee does not have to accept any payment other than those originally agreed to. 

private mortgage insurance Insurance written by a private company protecting the mortgage lender against loss caused by a mortgage default. 

rate lock  A process whereby after receiving from the customer a signed rate lock agreement the lender will work with its investor to guarantee to the customer an agreed upon rate at closing. Rate locks are good for a fixed number of days. Typically 30, 45, or 60 days are locked but sometimes shorter or longer periods are available. However, if the original lock-in maturity date expires through no fault of the lender, there may be a fee charged to the customer to extend the lock-in for a longer period. Occasionally lock-ins are “floating locks” which means if the market rate goes down so will the locked in rate. The use of these rate locks varies from lender to lender. Most common are fixed rate lock-ins.

rent with option A contract that gives one the right to lease property for a certain sum with the option to purchase at a future date. 

second mortgage/second trust Junior Mortgage or Junior Lien; an additional loan imposed on property with a first mortgage, generally at a higher interest rate and for a shorter term than a "first" mortgage. 

straight loan A loan with periodic payments of interest only; the principal sum due in one lump sum at maturity. 

title Often used interchangeably with the word ownership. It indicates the accumulation of all rights in property. 

title insurance An insurance policy that protects the insured (purchaser or lender) against loss resulting from defects in title.

Torrens certificate  Usually a two-sided, one sheet document which is a summary statement of the successive conveyances and other facts on which a title to a piece of land rests from the time it was converted from abstract to being platted as Torrens property to the present.

Thank you for choosing ProGrowth Bank as your mortgage lender.