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IMPORTANT NOTICE REGARDING THESE MORTGAGE TERMS AND MORTGAGE DEFINITIONS
The mortgage terms and mortgage definitions that follow are meant to give simple, informal meanings for mortgage words and mortgage phrases you may see on this mortgage Web site that may be unfamiliar to you. The specific meaning of a mortgage term or mortgage phrase will depend on where and how it is used. The mortgage terms and mortgage definitions that follow have no binding effect for purposes of any contracts or other transactions. We offer mortgage terms and mortgage definitions here in the hope they will provide helpful basic information.
Tax-Deferred
Earnings accumulate in qualified retirement accounts or annuities without being taxed. Instead, taxes are deferred until money is withdrawn or a distribution is made.
Tax Lien
The right of the government to enforce a claim against the property of a person owing taxes.
Tax Sale
Public sale of property at auction by governmental authority, after a period of nonpayment of property taxes.
Teaser Rate
A term used in adjustable rate mortgages. It is an initial interest rate that is considerably below the "going market rate" which is determined by the index plus the margin. The teaser rate may result in a large increase in the interest rate and/or in your monthly payment at the first adjustment date. (see Adjustable Rate Mortgage, Index, Margin)
Tenancy for Years
Form of tenancy created by a written agreement in which the tenant has the right to occupy the premises for a stated period of time.
Tenancy in Common
A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.
Tenancy in Severalty
Ownership of property by one legal entity or a sole party.
Time Share
Ownership of real property for a limited time period, usually one week each year.
Title
Document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property.
Title Insurance
Title Insurance policies typically insure a homebuyer against any title-search errors or mistakes, and against loss due to disputes over property ownership. Title Insurance can additionally offer protection to the lender under similar circumstances. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.
Title Report
A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects.
Title Search
A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
Town House
A type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor; a series of individual houses having architectural unity and a common wall between each unit.
Tract
An extended area of land
Transfer Tax
State or local tax payable when title passes from one owner to another.
Truth in Lending
The federal Truth in Lending Act is intended to assure a meaningful disclosure of credit terms to borrowers, especially on consumer loans. Lenders are required to inform borrowers precisely and explicitly of the total amount of the finance charge which they must pay and the annual percentage interest rate to the nearest .01%. Excluded transactions include loans for commercial or business purposes, including agricultural loans; loans to partnerships, corporation, cooperatives and organization; and loans greater than $25,000 except for owner-occupied, residential real estate mortgages where compliance is required regardless of the amount. (Also called Reg Z)
Two-Step Mortgage
A mortgage in which the borrower receives a fixed rate for a specified number of years (most often 5 or 7), and then receives a new interest rate based on the terms in the note.
Underwriting
In mortgage lending, the process of approving or denying a loan based on an evaluation of the property and the applicant’s ability to repay the loan. The underwriter analyzes the risks involved and selects an appropriate loan term and interest rate.
Unencumbered Property
Real property that has no liens, encumbrances, easements, or debt; free and clear.
Unimproved Property
Land that has received no development
Unrecorded Deed
A deed that transfers ownership from one party to another without being officially recorded.
Vacation Home
Dwelling used by the owner occasionally for recreational or resort purposes. It may be rented to others for a portion of the year. Income tax deductions pertaining to vacation homes depend on the frequency of use by the owner. Generally, a business loss cannot be claimed on a vacation home. (Also commonly referred to as Second Home)
VA Loan (U.S. Veterans Administration)
A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates.
Variable Rate Mortgage
A long-term, mortgage loan in which the interest rate may vary, or float, periodically throughout the term of the loan. The rate fluctuations generally are based on an interest rate index, and are restricted under the terms of your mortgage. For example, the rate increase may be restricted to no more than 1 percentage point per year. (see Floating Rate of Interest) To your advantage, the initial interest rate on a Variable Rate Mortgage is usually low, making it easier for you to obtain this type of loan, but rate increases may make future monthly payments higher. (see Adjustable Rate Mortgage, Index)
Verification of Deposit (VOD)
A document signed by the borrower's financial institution verifying the status and balance of his financial accounts. Most lenders require that the funds used for real estate purchase be "seasoned", or on deposit in the account for at least 60 days.
Verification of Employment
Document signed by the borrowers employer verifying his/her position, salary, and dates of employment.
Waiver
The voluntary and intentional relinquishment of a known right, claim or privilege.
Warranty Deed
A deed used to convey real property which contains warranties of title and quiet possession and the grantor thus agrees to defend the premises against the lawful claims of third persons. It is used commonly in other states but not in California where it has been supplanted by the grant deed. The modern practice of securing title insurance has reduced the importance of express and implied warranty in deeds.
Wraparound Mortgage
A method of financing in which the new mortgage is placed in a secondary or subordinate position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. Sometimes called an all-inclusive loan, an overriding loan or an overlapping loan. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount, without cashing out or disturbing the existence of the first mortgage. The entire loan combines two or more debts and is treated as a single obligation, and the wrap, or secondary, mortgagee pays the obligations of the first mortgage from the total payments received. While the wraparound lender makes the debt service payments on the first mortgage, the lender does not assume liability for this first lien. A default on the wraparound mortgage would usually result in a default on the underlying mortgage.
Yield (7-Day or 30-Day)
In the case of mutual funds, the annualized current rate of investment income is calculated with a Securities and Exchange Commission formula that includes the fund's net income (based on the yield to maturity of each bond it holds), the average number of outstanding fund shares during the 7-day or 30-day period shown, and the maximum offering price per share on the last day of the period.
Yield Curve
A plot of the yields for bonds of different maturities taken at a specific point in time. Normally, the longer a bond's maturity, the higher its yield will be to compensate investors for greater risk.
Zero Lot Line
Lot where a home is set to the lot boundary, which leaves very little space between the houses.
Zoning
The ability of local governments to specify the use of private property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc.
Zoning Variance
A one-time modification of existing zoning law.
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