Assumption: The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Balloon Mortgage: A loan which is amortized for a longer period than the term of the loan. Usually this refers to a thirty-year amortization and a five year term. At the end of the term of the loan, the remaining outstanding principal on the loan is due. This final payment is known as a balloon payment.

Blanket Mortgage: A mortgage covering at least two pieces of real estate as security for the same mortgage.

Borrower (Mortgagor):
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker:  An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Business Inventories And Sales: These figures measure the inventories and sales of manufacturing, wholesalers, and retail establishments. These figures are released monthly by the Bureau of Census. In most cases, an increase in these numbers indicates an expanding economy, which could be inflationary. Bond Market Moves Down In Price.

Buy-down: When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).

Capacity Utilization: The capacity utilization rate measures the percent of industrial output currently in use. A change in the rate indicates a change in the direction of economic activity. As the percentage rate moves closer to 90% the industrial output is practically at full capacity and is inflationary. A number closer to 70% is recessionary. A higher percent- age indicates a stronger manufacturing sector and an expanding economy which can be inflationary. Bond Market Moves Down in Price.

Caps (interest): Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage which may change per year and/or the life of the loan.

Caps (payment): Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Certificate of Eligibility: The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business and mobile homes. Certificates of eligibility may be obtained by sending form DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)

Certificate of Reasonable Value (CRV) : An appraisal issued by the Veterans Administration showing the property's current market value
Certificate of veteran status. The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Closing: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands, also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

COFI: Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.

Construction loan: A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Contract sale or deed: A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Conventional loan: A mortgage not insured by FHA or guaranteed by the VA.
Credit Report. A report documenting the credit history and current status of a borrower's credit standing.

Consumer Price Index (CPI): The consumer price index is an indicator of the general level of prices. Components include energy, food and beverages, housing, apparel, transportation, medical care, and entertainment. When the consumer price index goes up, it is a sign of an inflationary environment. Consumers have to pay more for the same amount of goods and services. Bond Market Moves Down In Price.

Debt-to-Income Ratio: The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

Deed of trust: In many states, this document is used in place of a mortgage to secure the payment of a note.

Default: Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred interest: When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding to the loan balance. See negative amortization

Delinquency: Failure to make payments on time. this can lead to foreclosure.

Department of Veterans Affairs (VA): An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Discount Point: see point

Down Payment: Money paid to make up the difference between the purchase price and the mortgage amount.

Due-on-Sale-Clause: A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Durable Goods Orders: This gives a reading on the country's future manufacturing activity. Durable goods include those manufactured items with a normal life expectancy of three years or longer. An increase in the amount of durable goods orders may indicate an expansion in the economy and, if inflationary, the Federal Reserve could choose to tighten money by raising interest rates. Bond Market Moves Down In Price.

Earnest Money Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Effect Of Economic Indicators On Fixed Income Investments: Market participants look to U.S. Government economic releases as an indication of the economy's strength and general direction. Overall, economic indicators reflect the rate of economic growth and inflation which, in turn, affects interest rates. There is an inverse relationship between interest rates and bond prices. If the economic indicators indicate that the rate if inflation is on the rise, it will most likely result in higher interest rates and lower bond prices. Conversely, if these indicators indicate the rate of inflation is falling this will result in lower interest rates and higher bond prices. The following glossary defines what these indicators are and how they might affect the bond market.

Entitlement The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA): Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity: The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property.

Escrow: An account held by the lender into which the home buyer pays money for tax or insurance payments. Also earnest deposits held pending loan closing.