Mortgage Glossary

Second Mortgage

A second mortgage is a mortgage that has rights subordinate to a first mortgage. A home-equity loan is an example of a second mortgage.

Secured Debt

A secured debt is one that is tied to a specific piece of property, such as a house. The property, called collateral, guarantees repayment of the debt. If you don't pay, the creditor can take the property back (see Foreclosure).

Seller's Agent

An agent who acts on behalf of the seller of real property.

Settlement

Please see "Closing."

Site-Built Housing

Housing that is built on the construction site. Although some of the house may be prefabricated off-site, the house is assembled on-site.

Spending Plan

A spending plan is a tool you can use to help you manage your money. It lists your monthly expenses and monthly income, and is often referred to as a budget. Your spending plan shows you where to make adjustments to keep you expenses below - or in line with - your income. You should monitor your spending plan often to see if you are staying within your spending goals.

Title

Written evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift, or through foreclosure of a mortgage.

Title Insurance Policy

A contract by which the insurer agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest. Homebuyers usually must purchase lender's title insurance to protect the lender's interest and may choose to purchase buyer's title insurance to protect their own interest.

Townhouse

A two- or three-story house that shares a common wall with at least one other house. Rows of townhouses that are clustered in urban or suburban areas may also be called "rowhouses."

Trust

A fiduciary relationship whereby legal title to a property is transferred to a trustee with the intention that such property be administered by the trustee for the benefit of another, the beneficiary, who holds equitable title to such property.

Underwriting

Mortgage underwriting is the analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves the evaluation of the property as outlined in the appraisal report, and the borrower's ability and willingness to repay the loan.

Upfront Costs

Upfront costs are fees and other costs that a buyer must pay before closing on a home. These fees can include an appraisal fee, credit report fee, hazard insurance, flood insurance, and other inspection fees.

VA Loan

A mortgage loan made by an approved lender and guaranteed by the Department of Veterans Affairs. VA loans are made to eligible veterans and those currently serving in the military, and can have a lower down payment than other types of loans.

Variable Interest Rate

A variable interest rate is one that is adjusted, usually quarterly, based on an economic indicator. They are commonly based on an economic index such as the prime interest rate, Treasury Bill rate, or the Federal Funds rate.