The portion of a borrower's monthly payment that is held by the lender in order to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other additional items.
Improvements
Any permanent improvements to a structure such as buildings, streets, utilities, etc.
Inchoate Instrument
An unrecorded instrument, such as a deed, which is valid only between the parties involved but not as it would be after recording.
Income Approach
A method of appraising a property that is based on the property’s anticipated future income. The net income is established and then divided by the estimated capitalization rate to arrive at a fair market value.
Income Property
Real estate developed or improved to produce income.
Index
(Also called 'Rate Index'). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.
Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worthless.
Ingress and Egress
Easements that give the right to go in and out of a section of property, but not the right to park on it.
Inheritance Tax
A tax on the transfer of property from a deceased person, based on the right to acquire the property rather than the property itself.
Initial Borrower Interest Rate
The rate on which the borrower's first payment is calculated.
Initial Borrower Payment Rate
The annual interest rate used to calculate the borrower's initial cash payment.
Initial Interest Rate
The original interest rate of the mortgage at the time of closing.
Insolvency
When a debtor is unable to meet his/her debt obligations.
Installment
A borrower's periodic payment to a mortgage lender.
Insurable Title
A property title that a title insurance company agrees to insure against defects and disputes.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred, or the insured amount
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
Interest Only Loans
These are short term loans whose only payment is on the interest, not on the principle loan amount.
Interest Rate
The percentage of an amount of money, which is paid for its use for a specified time.
Interest Rate Cap
A provision of an ARM limiting how much interest rates may increase per adjustment period.
Interest Rate Ceiling
For an adjustable rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Interim Financing
Short-term financing issued during the completion of a building or project, in anticipation of longer-term financing.
Interpleader
A court action which may be filed in an existing case to be the initial action. A neutral third party holding funds that are in dispute would file an interpleader.
Investment Banker
An individual or institution that operates as an underwriter or agent for corporations issuing securities, but that does not accept deposits or make loans. In addition, most investment bankers maintain broker/dealer operations, maintain markets for previously issued securities, and offer advisory services to investors.
Investment Property
A property that is not occupied by the owner. Also known as non-owner occupied (NOO).
Investor
An individual or organization that invests in mortgages.
Involuntary Conversion
When a property is taken by eminent domain, the owner can convert the money from the condemned property into real property without paying taxes on the gain. This is for a period up to 3 years.
A pier or other structure built out into a body of water. Pier and post is a fairly common foundation for properties partially on water.
Joint and Several Note
Two or more parties who are responsible for the entire amount of the debt.
Joint Appraisal
An appraisal done by more than one appraiser, but with one appraiser stating the conclusion of all.
Joint Tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.
Judgment
A Court act creating or affirming an obligation, such as a debt. The court may place a lien against the debtor's real property as collateral for the judgment's creditor.
Judgment Lien
An unpaid, court-ordered, monetary judgment against a current or previous property owner.
Judgment Proof
Someone who a judgment creditor cannot collect due to no assets.
Judicial Foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Jumbo Mortgage
The current loan limit for a conforming loan is $333,700. Loans for amounts above $333,700 are considered non-conforming or jumbo mortgages.
Just Compensation
When an owner receives the fair market value of a property that is taken by the government.
Any tenant contributing revenues of 30% or more of the total revenue for a particular property.
Kicker
A payment to a lender in addition to the ordinary fixed-interest payments. It may include an equity position in a property or a percentage participation in the income stream.
An unreasonable delay by a party making a claim or bringing an action, so that the rights of said party are waived.
Land Development
A loan for the acquisition of raw land in anticipation of future zoning and development.
Late Charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
Lateral Support
The landowner has the right to the natural support of his land by adjoining land. The adjoining landowner does not have the right to change his land so as to cause the support to be weakened or removed.
Lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.
Lease-Purchase Mortgage Loan
A financing option that allows low and moderate income buyers to lease a home with the option to buy. Each month's payment includes principal, interest, taxes, and insurance (PITI) on the first mortgage, plus an additional amount that accrues in a savings account and is used for a down payment.
Leasehold Estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Leasing Commission Reserve Funds
set aside on a monthly basis to pay leasing commission necessary to release vacant space during the term of the loan.
Legal Description
A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.
Lender
An institution that makes loans to borrowers on real estate.
Lender Margin
The profit the lender anticipates to receive from the loan.
Lenders
Institutions that make loans to borrowers on real estate.
Letter of Credit
A written statement permitting an individual to draw on a bank, or stating that the bank will honor their credit up to the stated amount.
Letter of Intent
A written statement expressing that a buyer or developer is interested in a property. The letter is not legally binding.
Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Liability Insurance
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
Lien
Any claim against a property, including mortgages, unpaid taxes, or repair bills, or other unpaid charges. Prospective property buyers conduct a title search to determine whether any liens against the property exist. A lien must be filed or recorded with the local county government to be attached to a property title.
Lifetime Cap
A provision of an adjustable rate mortgage (ARM) that limits the total increase in interest rates over the life of the loan.
Lifetime Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.
Line of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid Asset
A cash asset or an asset that is easily converted into cash.
Lis Pendens
A legal notice of action given when a lawsuit is pending.
Loan
A sum of borrowed money (principal) that is generally repaid with interest.
Loan Application
A non-binding agreement between a lender and a prospective borrower showing the terms they are going to submit to the underwriter for approval. A cash deposit is usually part of the agreement.
Loan Closing
The end of the process of purchasing or refinancing a home. Often done at a title company where the documents are signed, recorded, and the loan funded usually within 3 days of signing the legal closing documents.
Loan Commitment
Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Loan Origination
The process by which a mortgage lender brings into existence a mortgage secured by real property.
Loan Policy
A title insurance policy that insures a mortgagee or beneficiary under a deed of trust against loss caused by invalid title.
Loan Servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Loan-to-Value
A ratio calculated by dividing the mortgage amount by the value of the property. A lender will often use the lower of the purchase price or the appraised fair market value when the loan is used to purchase a property.
Local Housing Authority
A government agency that monitors and executes community housing development programs.
Lock
The period, expressed in days, during which a lender will guarantee a rate.
Lock Period
The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45, or 60 days.
Lockout Period
A period of time after the loan is originated during which a borrower cannot prepay the mortgage loan.
London Inter-Bank Offer Rate (LIBOR)
The rate of interest that the largest international banks charge each other for loans.
Long Term Financing
A mortgage or deed of trust that lasts at least ten years or more.
