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A Glossary of SRFSI Financial Terms

Additional Principal Payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.


The gradual repayment of a loan by equal installments.

Amortization Schedule

A timetable for payment of a loan. An amortization schedule shows how much of each payment as it is applied to interest and principal the remaining balance after each payment.

Annual Percentage Rate (APR)

The APR takes into account various charges such as private mortgage insurance and the origination fee, in addition to the base interest rate. The APR is calculated by spreading these charges over the life of the loan, which results in a higher rate than the one shown on your Mortgage/Deed of Trust Note.


Form used to apply for a loan.


A written analysis of the estimated value of real estate prepared by a licensed Appraiser.

Appraised Value

An opinion of a property’s fair market value based on the appraiser’s analysis of the property and recent sales in the area.


A person licensed to evaluate real estate. (also see Appraised Value)


Anything of monetary value that is owned by a person.


The transfer of a loan from one person to another.

Assumable Loan

A loan that can be taken over (assumed) by a new owner when a home is sold.


The transfer of the seller’s exisiting loan to the buyer. See assumable loan.

Assumption Clause

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


One who has a power of attorney from another to execute documents on behalf of another.


A person, firm, or corporation that through a federal court process, is relieved from the payment of debts.

Cash Out Refinance

A loan in which the proceeds exceed the total of the money needed to repay the existing first loan and loan expenses.

Cash Reserve

An amount of money, usually equal to two or more monthly payments of a mortgage, which a lender requires a borrower to have after the closing of the mortgage.

Certificate of Completion

A document normally issued by an appraiser, which states that a construction project is completed in accordance with the building plans and specifications, which pertain to the project.

Certificate of Eligibility

A document issued by the Department of Veterans Affairs (VA) citing eligibility for a VA loan.

Certificate of Occupancy

Written authorization given by a municipality which allows a newly completed or remodeled structure to be inhabited.

Change Order

A change in the original plan of construction agreed to by a general contractor and building owner or purchaser.

Clear Title

Title to a parcel of real estate, which is not encumbered or “clouded” with defects or liens.


The time at which a transaction is final.

Closing Costs

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property.


Real or personal property that guarantees the repayment of a loan. The borrower risks losing the property if the loan is not repaid.


The efforts used to bring a delinquent loan current and to the filing of the necessary documents to proceed with foreclosure.


An agreement, verbal or written, made by a lender to loan money to a borrower subject to compliance with certain conditions. Also referred to as a “loan approval” or “notification of loan approval”.

Construction Contract

An agreement between a general contractor and an owner which sets forth the terms and conditions under which building shall occur on a parcel of real estate, and provisions for the owner’s payment to the general contractor for such building.

Construction Loan

A short term or interim loan used for financing the cost of construction, in which the lender advances funds at periodic intervals as the construction progresses.

Construction Loan Agreement

A written agreement among a lender and a builder and/or owner in which the specific terms of a contruction loan, including the schedule of disbursements, are set forth.

Construction Loan Draw

The partial disbursement of the proceeds of a construction loan based on the disbursement schedule in a construction loan agreement and the process of completion of the project.

Consumer Reporting Agency

A firm that prepares reports that are used by brokers and lenders to determine a potential borrower’s credit history. The firm may obtain data for reports from a credit repository and other sources.


An oral or written agreement to do or not to do something.

Conventional Loan

A loan on residential real estate of 1 to 4 units and that is not insured or guaranteed by the federal government.

Cost Estimate

A document which itemizes out the various costs of construction of a structure by item. Also referred to as “cost breakdown”.

Credit History

A report prepared by a credit reporting agency for a lender which sets forth the credit standing of a prospective borrower, which is used in the process of determining the borrower’s credit worthiness.


A person to whom money is owed.

Credit Report

A report of an individual’s credit history prepared by a credit bureau and used by a broker or a lender in determining a loan applicant’s creditworthiness. (also see Credit Repository)

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.


An amount owed to another.


The legal document conveying title to a property.

Deed of Trust

The document used in some states instead of a mortgage.


Failure to make loan payments in a timely fashion or to comply with other covenants of a loan.


Failure to make loan payments when loan payments are due.

Demand Feature

A clause in a note, which entitles the mortgagee (lender) to declare the note due and payable in full prior to its stated maturity date.


Copies of account information, such as bank statements, profit and loss statements, tax returns, paycheck stubs, retirement letters and credit reports.

Down Payment

The part of the purchase price of real estate that the buyer pays in cash and does not finance.

Earnest Money Deposit

A deposit made by a potential homebuyer to show that he or she is in earnest about buying the house.


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


A scale architectural drawing showing a particular profile of a structure.


Anything that affects or limits the ownership to real estate, such as loans, leases, easements or restricitons.

Equal Credit Opportunity Act (ECOA)

A federal law that prohibits lenders from discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.


Financial interest in real estate. Equity is the difference between the value of the property and the amount owed.


The holding of documents and money by a neutral third party prior to closing; also, an account held by the lender into which a homeowner pays money for taxes and insurance.

Escrow Company

An organization established to perform as an escrow (“settlement”)

Escrow Impounds

A sum of money deposited at settlement and with each monthly payment on a loan by a borrower for the purpose of paying future real estate taxes and homeowner’s and other insurance premiums.

Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports to consumers and establishes procedures for correcting mistakes.

Fair Market Value

The highest price that a willing buyer and willing seller would complete a real estate sales transaction.

Fannie Mae

A privately-shareholder-owned corporation that is the nations’s largest supplier of home loans.

Federal Truth-In-Lending (TIL) Act

A federal law which requires lenders to disclose various settlement costs associated with a loan, including an annual percentage rate.

FICO Score

An acronym referring to “Fair Isaac Credit” ratings, which grade consumers’ credit rating with a numeric score.

Fixed Installment

Monthly payment due on a mortgage loan.

Fixed-Rate Loan

A loan in which the interest rate or payment does not change during the course of the loan.


The act on the part of a lender (mortgagee) of refraining from taking legal action despite a mortgage being in a state of default.


A forced sale of real estate at public auction with the proceeds of the sale being applied to the remaining loan amount.

Freddie Mac (FHLMC)

The Federal Home Loan Mortgage Corporation; a quasi-governmental agency chartered to purchase residential loans from federally insured depository institutions and approved mortgage lenders.

Good Faith Estimate

A disclosure required pursuant to the Real Estate Settlement Procedures Act to be made by lenders to borrowers within three days of a loan application. The Good Faith Estimate provides an estimate of various settlement costs to be incurred by the borrower in association with the applied for.


The person or entity to who interest is conveyed in a legally binding transaction.


The person or entity conveying interest in a legally binding transaction.

Gross Income

Total income before expenses are deducted. Generally refers to an individual’s income before deductions for income taxes and social security, etc.

Hazard Insurance

Insurance that covers for fire and certain physical damage to real estate.

Home Owners Insurance

An insurance policy that combines liability coverage and hazard insurance.

Income Statement

A component of financial statements which sets forth the income, expenses and net profit or loss of an individual or business entity over some specified period of time. Also referred to as a “Profit and Loss Statement”.


The regular periodic payment that a borrower agrees to make to a lender.

Interest Rates

The rate charged for the use of money usually expressed as a percentage on an annual basis.

Interim Construction Financing

The financing provided from the time a construction project is commenced until its completion or the settlement of a permanent loan.


Joint Tenancy

Joint ownership by two or more persons in which each person has equal interest and rights in the property, including the full right of survivorship.


(1) Final determination (decree) by a court of the rights and claims of the parties to a legal action. (2) A lien upon a parcel of real estate resulting from a court’s decree in a legal action.

Late Charge

An additional charge paid by a borrower as a penalty for failure to pay a regular installment on a loan when due.

Legal Description

A property description recognized by law, which is sufficient to locate and identify the property without oral testimony.


A legal hold or claim by one person or entity on the property of another as security for a debt or charge. The right given by law to satisfy a debt.

Loan Servicing

The act of collecting and applying regular payments, paying insurance, and performing collection and foreclosure activities as they relate to mortgage loans.

Loan Submission

The act of an originating lender presenting a completely documented mortgage loan application file to an investor for the purpose of obtaining the investor’s commitment to purchase the loan.

Loan to Value

The loan amount compared to the value of the property, normally expressed as a percentage.

Loss Payee Clause

An insurance policy provision for payment of a claim to a person or entitiy other than the named insured in the policy.


A measured parcel of land having fixed boundaries as shown on the recorded plat.


A legal document that ledges a property to the lender as a security for payment of a debt.


A document that obligates a borrower to repay a loan. Minimally stated are, interest rate, payment schedule and due date for a specified period of time.

Notice of Default

A written notice to a borrower that the payment has not been made and that legal action will be taken, if not remedied.

Original Principal Balance

The total amount of principal owed on a loan that was originally borrowed.

Origination Fee

A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.

Permanent Financing

A mortgage loan placed on a newly built property after completion of construction.

Plans and Specifications

Drawings (floor plans and elevations) and material descriptions for a building project.

Power of Attorney

A document that authorizes a person to act on another’s behalf. Can grant complete authority or limited/specified authority.


An additional amount paid to reduce the principal balance of a loan.

Prepayment Penalty

A penalty that a lender may impose if a loan is paid off before it is due.


The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.

Prime Rate

An index used to adjust adjustable rate loans. The rate a bank charges it’s best customers.


The portion of a payment that goes to reduction of the loan amount due.

Principal Balance

The balance remaining on a loan.

Promissory Note

A written promise to repay an amount over a specified time period.

Purchase and Sale Agreement

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Qualifying Rate

Rate often used to qualify a borrower on adjustable rate loans with low start rates. Based on the relevance that should payments go up substantially borrower would be able to make the higher new payment.

Qualifying Ratios

Guidelines used by lenders to determine how large a loan to grant a homebuyer.

Quitclaim Deed

A deed which, when granted, relinquishes all interest, title or claim to a property without representing the vaidity of or making any warranties with regard to the title to the property.

Rate Lock

A lenders commitment to a borrower or borrower’s broker guaranteeing a specified interest rate for a specified period of time for a specified fee or price.

Real Estate Settlement Procedures Act (RESPA)

Consumer protection law that requires lenders to give borrowers advance notice of all closing costs.


The required waiting period, 3 days for a refinance.


The notice published in the public records of legal documents that affect specific real estate.

Refinance Transaction

The paying off of one loan with a new loan on the same real estate.

Right of Rescission

A right extended to borrowers pursuant to law, which permits them to cancel a mortgage refinance transaction within three business days from the date the settlement documents were executed.

Secured Loan

A loan that is backed by something of value.


The property that will be pledged as collateral for a loan.

Security Instrument

The mortgage or deed of trust evidencing the pledge of real property as security for a mortgage note.


Land divided into a number of parcels for the purpose of its sale, leasing or financing.


A drawing showing the precise legal boundaries of real estate, the location of improvements, easements, rights of way, encroachments.

Sweat Equity

Using labor to build or improve real estate rather than cash.


The length of a loan (usually in months for purposes of loan calculations).


A document evidencing one’s right to ownership of real estate.

Truth in Lending

A federal law that requires lenders and brokers to fully disclose, in writing, the terms and conditions of a loan, including the annual percentage rate and charges.


A third party, a fiduciary who holds property title for the benefit of another.


The process of evaluating a loan application and its supporting documents to determine the risk to a lender in making a loan.

Veterans Administration (VA)

An agency of the federal government created in 1930 pursuant to the Servicemen’s Readjustment Act, and authorized to provide a variety of benefits to veterans, including the VA home loan guaranty program.

VA Loan

A loan that is guaranteed by the Department of Veterans Affairs (VA).

Warranty Deed

A deed in which the grantor guarantees that good and merchantable title is being conveyed.