What is an Abstract of Title? An abstract of title is a history of a piece of property. How Does an Abstract of Title Work? For example, let's say John Doe wants to buy the house at 123 Main
What is an Adjustable Rate Mortgage (ARM)? An adjustable rate mortgage (ARM) is a type of mortgage using a varying interest rate calculated by adding a premium to a specific benchmark 
What Is an Amortization Schedule? An amortization schedule is a chart that shows the amounts of  principal and interest due for each loan payment of an amortizing loan. An amortizing loan is
What is Assessed Value? Assessed value refers to the value of an asset -- usually real estate -- as determined by an assessor for tax purposes. The assessed value is often computed by
What is a Balloon Mortgage?A balloon mortgage is a mortgage with a large payment made near or at the end of a loan term. How Does a Balloon Mortgage Work?Unlike a loan whose total cost (interest and
What is a Canadian Rollover Mortgage?A Canadian rollover mortgage is an adjustable-rate mortgage commonly available to homebuyers in Canada. How Does a Canadian Rollover Mortgage Work?An adjustable-
What is the Case-Shiller Home Price Index?The Case-Shiller Home Price Index refers to a set of indices released by Standard and Poor's that tracks changes in the value of residential real
What is a Cash Out Refinance? A cash out refinance (also called a cash out refinance loan or cash out refinance mortgage) is a type of mortgage loan that lets you to turn the equity you have in
What are Closing Costs?Closing costs are fees and expenses paid by both the buyer and the seller when a transaction is completed. Closing costs are common expenses in real estate transactions.
What is a Collateralized Mortgage Obligation (CMO)?A collateralized mortgage obligation (CMO) is a fixed income security that uses mortgage-backed securities as collateral.  Like other
What is a Commercial Mortgage-Backed Security (CMBS)?A commercial mortgage-backed security (CMBS) is a fixed-income security, typically in the form of a bond, which uses commercial real estate loans
What is Commercial Real Estate?Commercial real estate is any property that is exclusively used for business activity. Commercial Real Estate ExampleCommercial real estate is any non-residential
What is Eminent Domain?Eminent domain is a legal strategy that allows a federal or local government to seize private property for public use. The seizing authority must pay fair market value for the
What is Escrow?Escrow is a financial arrangement whereby a third party holds funds in safekeeping pending the completion of a contract or other obligation. How Does Escrow Work?For example, let's
What is an Escrow Account?In the real estate world, mortgage companies use escrow accounts to collect property taxes, homeowners insurance, private mortgage insurance and other payments that are
What are Existing Home Sales?Existing home sales is an economic indicator released by the National Association of Realtors. The data reflect the number of homes that have previously been constructed
What is Fannie Mae (FNMA)?Fannie Mae (OTC: FNMA) is the nickname for the Federal National Mortgage Association (FNMA). Established in 1938, Fannie Mae's purpose is to create a secondary
What is the Federal Home Loan Bank System (FHLB)?Created by Congress in 1932, the Federal Home Loan Bank System (FHLB) is a lending system for financial institutions. How Does the Federal Home Loan
What is Federal Home Loan Mortgage Corporation (Freddie Mac)?The Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") is a government-sponsored entity that buys certain types of
What is a First-Time Homebuyer?A first-time homebuyer an individual or couple purchasing a home for the first time. The IRS also considers someone who has not owned a home in the past two years to be
What is Foreclosure?Foreclosure occurs when a lender seizes and sells a borrower's collateral after the borrower has failed to repay the lender. The term is most often associated with real estate.
What is Ginnie Mae (GNMA)?Ginnie Mae is the nickname for the Government National Mortgage Association. Ginnie Mae guarantees the timely payment of interest and principal on certain mortgage-backed
What is a Good Faith Estimate?A good faith estimate is a written estimate of the fees due at closing for a mortgage.How Does a Good Faith Estimate Work?The Real Estate Settlement Procedures Act (
What is Good Faith Money?Good faith money is money a buyer uses to prove to a seller that he or she intends to complete a transaction. In real estate, good faith money is also called earnest money.
What is Home Equity?Home equity equals the value of a house less the balance owed on the homeowner's mortgage. How to calculate Home EquityLet's assume that John Doe pays $200,000 for a house
What is a HELOC? A home equity line of credit (or HELOC) is a flexible loan that lets you turn your home's equity into cash whenever you need it, up to a certain amount. A HELOC uses your
What is a Home Equity Loan (HEL)?A home equity loan (HEL), also called a second mortgage, is a loan secured by the equity in a house. Equity equals the value of the house less the balance owed on the
What is a Home Loan?A home loan (or mortgage) is a contract between a borrower and a lender that allows someone to borrow money to buy a house, apartment, condo, or other livable property. A home
What is a Home Mortgage? A home mortgage is a loan secured for a house. The borrower is usually obligated to make a predetermined series of payments on the loan. How Does a Home Mortgage Work
What is House Poor?House poor is used to describe a homeowner who spends too large a portion of his or her income on home ownership, leaving too little for discretionary spending. How Does House
What is an Interest Rate Ceiling?The term interest rate ceiling typically refers to the maximum lifetime interest rate charged on an adjustable rate mortgage according to the terms of a mortgage
What is an Interest-Only Mortgage?An interest-only mortgage is a mortgage in which the borrower only pays the interest on the loan for a set period. How Does an Interest-Only Mortgage Work?In
What is Investment Real Estate?Investment real estate refers to any residential structure owned solely for the purpose of generating investment returns, either through rental income or through market
What is a Jumbo Loan?A jumbo loan, also called a jumbo mortgage, is a mortgage that exceeds the maximum amount that will be guaranteed by a government-sponsored entity like Fannie Mae. How Does a
What is a Junior Mortgage? A junior mortgage is a loan secured by the equity in a house. Equity equals the value of the house less the balance owed on the homeowner's first (or in some cases,
What is Land Value? Land value is the overall value of a piece of property. How Does Land Value Work? The value of a piece of property includes a number of variables including location, the
What is Main Home?In the tax world, a main home is where a taxpayer has lived for most of the tax year or is the only home the taxpayer owns. How Does Main Home Work?For example, let's assume
What is Making Home Affordable (MHA)?The idea behind Making Home Affordable is to stabilize the economy. A major contributor to the financial crisis of 2008 was a large number of defaults on home
What is a McMansion?This term is a play on the word "McDonalds," which is a global fast-food restaurant chain whose food is usually so consistent that an item from one restaurant is
Homeownership is a cornerstone of the American Dream. A home is a valuable asset for most people, and mortgages (or home loans) make buying one possible for many Americans. What Is a Mortgage?A
What is a Mortgage Accelerator?A mortgage accelerator is a type of checking account that allows a borrower to repay a mortgage more quickly using the balance of monthly paychecks as opposed to
What are Mortgage Allocations?Mortgage allocations refer to the specific mortgage information given to an MBS buyer by an MBS seller.How Do Mortgage Allocations Work?Mortgage-backed securities (MBS)
What is a Mortgage Application?A mortgage application is a document that a prospective property buyer submits to a lender to secure a mortgage. The lender must approve the application before any
What is a Mortgage Banker? A mortgage banker is a person or entity who lends mortgages. How Does a Mortgage Banker Work? A mortgage banker may be a sole agent or larger institution that
What is a Mortgage Bond? A mortgage bond uses a mortgaged property as collateral. How Does a Mortgage Bond Work? A mortgage bond is collateralized by one or several mortgaged properties. In
What is a Mortgage Broker?A mortgage broker is an agent who connects property buyers with mortgage lenders. How do Mortgage Brokers work?A mortgage broker acts as a professional intermediary on a
What are Mortgage Credit Certificates (MCC)?Mortgage credit certificates (MCC) are issued by state or local governments and allow some taxpayers to receive a tax credit for the interest paid on a
What is a Mortgage Equity Withdrawal (MEW)?A mortgage equity withdrawal (MEW) is a loan that uses the value of a mortgaged property as collateral. How Does a Mortgage Equity Withdrawal (MEW) Work?
What is Mortgage Excess Servicing?Mortgage excess servicing is the percentage remainder of the annual yield on a mortgage-backed security (MBS) once it has been allocated between the holder, the
What is a Mortgage Fallout?Mortgage fallout is the percentage of an originator's mortgages that fail to close.How Does a Mortgage Fallout Work?A mortgage originator maintains a number of clients
What is a Mortgage Forbearance Agreement?A mortgage forbearance agreement is a contractual arrangement between a mortgage lender and a borrower to help the borrower catch up on payments when he/she
What is Mortgage Insurance?Mortgage insurance is insurance for lenders that covers losses resulting from borrower default. How Does Mortgage Insurance Work?Mortgage lenders assume a high degree of
What is Mortgage Interest?Mortgage interest is the compensation a borrower pays a lender for money used to purchase property. How Does Mortgage Interest Work?Mortgage interest is the percentage
What is a Mortgage Interest Deduction?A mortgage interest deduction allows mortgage borrowers to reduce their income tax liability by listing the amount of mortgage interest paid as an itemized
What is a Mortgage Originator?A mortgage originator is an individual or institution that collaborates with the borrower to complete a mortgage transaction.How Does a Mortgage Originator Work?Mortgage
What Are Mortgage Points? Mortgage points (also called interest rate points or discount points) are fees you can pay to a lender at closing to lower your mortgage's interest rate -- or annual
What is a Mortgage Pool?A mortgage pool is a group of mortgages in a mortgage-backed security (MBS).How Does a Mortgage Pool Work?Once a lender completes a mortgage transaction, it generally sells
What is a Mortgage Putback?A mortgage putback is a mandatory buyback of a mortgage by its original lender.How Does a Mortgage Putback Work?Once a lender completes a mortgage, the lender often sells
What is a Mortgage Rate?A mortgage rate is the rate of interest a borrower pays on his or her mortgage. How Does a Mortgage Rate Work?Mortgage rates can be either fixed or variable. The terms and
What is a Mortgage Rate Lock?A mortgage rate lock is the term in a mortgage contract that stipulates the rate the borrower will pay for the entire duration of the mortgage. How Does a Mortgage Rate
What is a Mortgage Rate Lock Deposit?A mortgage rate lock deposit is a sum of money that a borrower must pay the lender to lock in a specific interest rate until a borrower's mortgage is approved and
What is a Mortgage Rate Lock Float Down?A mortgage rate lock float down is a provision that allows a borrower to obtain a lower rate if interest rates decline during the process of applying for a
What is a Mortgage Real Estate Investment Trust (mREIT)? Mortgage real estate investment trusts (mREITs) invest in residential mortgages that have been bundled together into securities called
What are Mortgage Servicing Rights (MSR)?Mortgage servicing rights (MSR) is an arrangement by which a third party promises to collect and disseminate mortgage payments in exchange for a fee. How Do
What is a Mortgage Short Sale?A mortgage short sale is the sale of a mortgaged property for less than the remaining value of the mortgage itself. How Does a Mortgage Short Sale Work?In a weak
What are Mortgage-Backed Securities (MBS)?Mortgage-backed securities (MBS) are securities that represent an interest in a pool of mortgage loans.Example of Mortgage-Backed SecuritiesTo understand how
Mortgagee DefinitionA mortgagee is a lender in a mortgage, usually a bank, credit union, or other lending institution. A mortgagee lends money to a borrower for the purpose of purchasing real estate
What are New Home Sales?New Home Sales is an economic indicator released monthly by the United States Census Bureau. The data reflect the number of newly constructed homes purchased in the previous
What is Non Judicial Foreclosure? A judicial foreclosure occurs when a court allows a lender to seize and sell a borrower's collateral when the borrower has failed to repay the lender. The term is
What is an Offset Mortgage?An offset mortgage is a mortgage held in the same bank as the borrower's deposit accounts, savings accounts or other accounts. The mortgage payments are calculated based on
What is PMI? Private mortgage insurance (PMI), also called mortgage insurance, is what borrowers must pay on each mortgage payment if they didn't make a 20 percent down payment toward their home
What is a Price Level Adjusted Mortgage (PLAM)?A price level adjusted mortgage (PLAM) is a mortgage with a fixed interest rate but an adjustable principal balance. How Does a Price Level Adjusted
What Is PITI?The sum total of a mortgage payment is comprised of principal, interest, taxes, and insurance (PITI). The amount of principal paid, interest paid, property taxes, and homeowners
What is Property Lien?A property lien is a lender's claim against a piece of real estate that may be legally sold should the borrower fail to repay a loan. How Does Property Lien Work?When someone
What is Property Tax?Property tax is a tax on property -- usually real estate -- as determined by an assessor. Property Tax ExampleLet's assume you own a house. The property tax assessor in your
What is Qualified Acquisition Cost?A qualified acquisition cost refers to the cost of buying, building, or rebuilding a home. Investors can often withdraw qualified acquisition costs from their IRAs
What is a Qualified Mortgage Insurance Premium?A qualified mortgage insurance premium is a payment to insure a homeowner’s mortgage payments. How Does a Qualified Mortgage Insurance Premium
What is Rate and Term Refinance?A rate and term refinance occurs when a borrower replaces one mortgage with another mortgage that has a different maturity and interest rate. How Does Rate and Term
What is Real Estate? Real estate refers to land, as well as any physical property or improvements affixed to the land, including houses, buildings, landscaping, fencing, wells, etc. How Does
What is a Real Estate Agent?A real estate agent, working on behalf of a licensed real estate broker, is a licensed professional who works on behalf of the buyer and seller of real estate during a
What is a Real Estate Short Sale?A real estate short sale is the sale of property that is worth less than what is owed on it. How Does a Real Estate Short Sale Work?For example, let's say John
What is Real Property? Real property is anything that is attached to land. How Does Real Property Work? For example, Company XYZ's factory, the five-acre lot on which the factory sits and
What is a Realtor?A realtor is a professional designation for a real estate broker who has membership in the National Association of Realtors (or NAR).How Does a Realtor Work?Real estate agents must
What is Refinancing?Refinance refers to the replacement of a debt with new debt bearing different terms. How Refinancing WorksFinancing involves borrowing a specific amount of money over a length of
What is a Reverse Mortgage?A reverse mortgage is an arrangement whereby a homeowner borrows against his or her home equity and receives regular payments from the lender until the total payments reach
What is a Second Mortgage?Also called a home equity loan, a second mortgage is secured by the equity in a house. Equity equals the value of the house less the balance owed on the homeowner's mortgage
What is a Tax Home?A tax home is a taypayer's primary residence or place of business (if the taxpayer is an organization).How Does a Tax Home Work?Let's assume John lives in Montana during
What is a Tax Lien Certificate?A tax lien certificate is written proof that a taxing authority has placed a lien on a piece of property for unpaid property taxes. How Does a Tax Lien Certificate
What is an Underwater Mortgage?An underwater mortgage is a mortgage on a property that is worth less than what is owed on it. How Does an Underwater Mortgage Work?For example, let's say John Doe
What is a Zero-Lot-Line House?A zero-lot-line house is a house whose structure goes right up the edge of the property line. How Does a Zero-Lot-Line House Work?Let's say John Doe buys a tiny