Glossary of Terms and Acronyms

Home | contact us

Glossary of Terms and Acronyms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accepted Offer to Purchase: A sales contract signed by both a Homebuyer and a seller, specifying the terms and conditions under which real estate will be purchased.
Adjustable Rate Mortgage (ARM): A mortgage for which the interest rate and the payments may change over the life of the loan. WHEDA does not offer adjustable rate mortgages. (See Fixed Interest Rate.)
Amortization: The repayment of a loan by monthly installment payments of principal and interest, until the loan has been paid in full.
Annual Percentage Rate (APR): The interest rate paid when all of the costs of obtaining credit (such as closing costs) are included.
Appraisal: A report made by a qualified expert (appraiser) establishing an opinion or estimate of the value of property.
Appraised Value: The estimated value of property given by a qualified expert (appraiser).
Assessed Value: The value of property established by a public tax assessor (for a city or township) in order to determine how much the property will be taxed. (See Property Taxes.)
Asset: Real property (real estate, automobiles, or other personal property) or accounts (bank accounts, investments, etc.) owned by someone.
Assignment: A document which transfers a mortgage security in a property from one lender to another.

Bankruptcy: A legal proceeding in which the court establishes that a debtor is no longer required to repay debts they have acquired because they can no longer afford to repay them.

Closing: A real estate transaction during which a seller transfers the ownership of a property to a buyer.
Closing Costs: Any fee the lender charges for obtaining a loan, such as, the fee for the credit report or for the appraisal of the property. These fees are paid to the lender at closing.
Closing Statement: A document signed by the buyer and seller at the loan closing. It is a detailed list of the original purchase price, fees paid or owed, the buyer's loan amount, and the amount of funds the seller will receive in the transaction. The closing statement is sometimes called the Settlement Statement.
Co-Borrower: Someone who shares the ownership of a property with the borrower. They also share the obligation to repay the loan to the lender.
Collateral: Property that a borrower offers as security for a loan. If the borrower does not repay their loan as promised, the lender may take the collateral from the borrower.
Collection: A past due debt which a creditor will attempt to collect from a borrower. Collections result from debts such as unpaid medical, credit card, or utility (telephone, electric, or cable) bills. Collections are shown on a borrower's credit report and often must be paid before other lenders can approve a borrower for a loan.
Compliance Income: The anticipated annual income of all adults who will occupy the property.
Condominium (Condo): A form of ownership of a property in which each unit, or condominium, is owned separately but common areas, such as hallways, roofs, and yard areas surrounding the buildings, are owned jointly by the owners of all of the units.
Construction Loan: A short-term loan for financing the cost of construction of a new property.
Cosigner: Someone who signs a Note with the primary borrower for a loan. Although the cosigner does not own the property along with the primary borrower, they share equal responsibility for loan payments and are required to repay the loan if the primary borrower does not.

WHEDA does not allow cosigners for mortgage loans.
Creditor: A person, financial institution (such as a bank), store, or other entity to which a borrower (debtor) owes money.
Credit Report: A document which includes a complete history of someone's experience with credit. Any payments that were not made on time are listed, as are any open and closed collections, judgements, tax liens, or bankruptcies. Lenders will review borrowers' credit reports to help them determine whether or not they will approve additional loans/credit.
Credit Score: A number usually disclosed on a borrower's credit report that is intended to reflect the borrower's credit history and other characteristics related to their experience with credit.

Debt: An obligation or liability to pay money to someone else.
Debt Ratio: A calculation lenders use to determine if a borrower qualifies for a loan. The lender divides the borrower's monthly total debts (credit card payments, student loan payments, car payments, etc) and new house payment by the borrower's gross monthly income.
Deed: A document that transfers the rights of ownership of a property from the seller to the buyer. The document is recorded with the local Register of Deeds.
Deed-in-Lieu of Foreclosure: The transfer of title (ownership) of a property, from a borrower who is delinquent on their loan back to their lender to satisfy the balance due on the delinquent loan. The transfer is made voluntarily so that the borrower can avoid foreclosure proceedings.
Default: Failure to meet all of the terms of a financial obligation, for example, failing to make loan payments.
Delinquency: A loan payment that has not been received by its due date.
Down Payment: The difference between the sales price of a property and the amount of the loan. The buyer pays the down payment amount at the closing.

Earnest Money: A sum of money a potential buyer gives to the seller prior to the closing of the loan, often when the buyer submits an Offer to Purchase to the seller.
Equity: The amount of money paid or invested in a property.
Escrow: Funds held by a lender for the purpose of paying property taxes and insurance as they become due, typically once each year. A portion of each of the borrower's monthly payments goes into these escrow accounts. An escrow is sometimes held by a lender at the loan closing for the purpose of paying for repairs to the property.

Federal Recapture Tax: A tax that a borrower may have to pay on their federal income tax return when they sell their WHEDA financed Home.
First Time Homebuyer: Anyone who has not had an ownership interest in his or her primary residence for the last three years.
Fixed Interest Rate: An interest rate that does not change throughout the life of a loan. WHEDA only offers fixed interest rate loans.
Flood Certification: The Federal government has determined which areas of land are considered to be flood plains. Flood plains are areas of land that are prone to flooding. The flood certification is made for a specific property to determine whether or not it is in a flood plain.
Flood Insurance: Insurance that will pay for damage that occurs when a property is flooded.
Forced Placed Insurance: If a borrower fails to provide a lender with evidence of insurance, the lender is forced to protect their interest in the property and place insurance on the property. This insurance covers only the house (building structure) and does not cover the contents inside the house. If, in the event of a fire, the mortgage is paid in full, any remnants of the property are the sole responsibility of the borrower. This includes, but is not limited to city code compliance regulations, debris removal, and lot maintenance. A forced-placed insurance policy is generally more expensive due to the high risk involved and is not in the best interest of the borrower.
Foreclosure: Legal action a lender takes to revoke the borrower's ownership of a property because the borrower has defaulted on their loan.

Gifted Down Payment: Down payment funds given to a borrower by an immediate family member. The lender will require the gift donor to sign a document which states the dollar amount of the gift and also that the gift does not have to be repaid to them by the borrower.
Good Faith Estimate: A document the lender gives to the borrower shortly after the borrower has submitted an application for credit, which provides a breakdown of the estimated closing costs (fees, etc., paid at the closing of a loan).
Gross Monthly Income: Monthly income before any deductions.

Home Inspection: An inspection of a property performed by a trained expert (certified Home inspector). The Home inspector will provide a detailed list of any defects in the property, especially in the structure itself or mechanical systems (electrical, heating, etc.).
Home Warranty: Insurance that covers the cost to repair or replace certain items within a Home, such as the furnace or roof, for a specific period of time. Sellers will often pay for the cost of this warranty as part of the sale of the Home.
Homeowner's Insurance: Insurance that will pay for the cost to repair damage to a Home. Damage from storms, fire and financial loss due to theft is typically covered, although insurance policies vary. Damage caused by flooding usually is not covered but Homeowners may purchase extra insurance that specifically covers flood damage. Homeowner's Insurance is sometimes referred to as hazard insurance.
Housing Ratio: A calculation lenders use to determine if a borrower qualifies for a loan. The lender divides the total monthly housing expense (principal, interest, real estate taxes, and Homeowner's insurance) by the borrower's gross monthly income.

Improvements: Any permanent structures on land, such as buildings, fences and driveways, as well as landscaping, drainage, utilities, etc.
Installment Loan: A loan for which periodic (monthly, biweekly, etc.) payments are made. The loan balance may not be increased during the life of the loan and the payments remain the same amount for the entire term of the loan. Credit card accounts are not installment loans (see Revolving Credit).
Interest: A charge for borrowing money. A borrower pays this charge to a lender in addition to the original amount (principal) for "temporary" use of the money.

Judgement: A sum of money which a borrower owes to an individual or other creditor, as decreed by a court of law. Judgements can result from past due debts or lawsuits. Judgements are shown on a borrower's credit report and must be paid before a lender can approve a borrower for a mortgage loan.

Late Charge: A fee a borrower pays to a lender for having made their payment after the payment due date.
Legal Description: A specific description of the location of a parcel of land. The description specifies the boundaries around the land.
Liabilities: A borrower's debt or other financial obligations.
Lien: A legal claim of an individual or lender on someone's property. Liens may be placed against a property as security for a loan (in the form of a mortgage) or a debt (in the form of a judgement).
Line of Credit: A type of loan which allows a borrower to withdraw funds, up to a preapproved credit limit, in a way similar to the way they use a credit card. Borrowers make payments based only on the amount they've actually withdrawn plus interest.
Loan Term: The period of time a borrower is given for the repayment of their loan. Usually the loan term is expressed in the form of the number of months the borrower will make payments.
Loan-to-Value Ratio (LTV): The comparison of the loan amount to the purchase price of the Home, expressed as a percentage (loan amount divided by the purchase price).

Mortgage: A legal document which is recorded with the Register of Deeds as a lien against a property. The mortgage is the lender's security for extending the borrower a loan for the purchase of the property.
Mortgage Insurance: Insurance that protects a lender against financial losses if a borrower were to default on their mortgage loan.
Mortgagee: The holder of a mortgage.
Mortgagor: A person who mortgages their property for the purpose of obtaining a loan.

Note: A written promise by one party to pay a specified sum of money to a second party under conditions agreed upon mutually. The Note will specify the payment amount, number of payments, interest rate, and finance charges.

Offer to Purchase: A sales contract signed by a buyer, specifying the terms and conditions under which real estate will be purchased.
Owner-Occupied Property: A Home in which the borrower/property-owner lives. In the case of a Home which has more than one unit, for example a duplex (two-unit), the borrower would live in one of the units.

PITI (Principal, Interest, Taxes, and Insurance): The total mortgage loan payment that includes the monthly amount of principal and interest. The total payment (PITI) also includes the monthly amount that is set aside in the real estate tax and Homeowner's insurance escrows.
Preapproval: A lender's certification that a potential borrower is qualified for a mortgage loan even if the borrower has not found a specific property to purchase. You may be preapproved for a WHEDA mortgage loan directly from this website. Get ready for Home shopping by being preapproved online today!
Prepaids: Similar to closing costs, prepaids are paid by the borrower at closing. Lenders will often need to collect a few months worth of real estate taxes and Homeowner's insurance to set aside for tax and insurance escrows.
Prepayment: A loan repayment made in advance of its contractual due date or payment that exceeds the minimum required amount.
Private Mortgage Insurance (PMI): Insurance provided by a private company to protect the lender against losses that might be incurred if a loan defaults. It is required for any mortgage where the buyer's downpayment is less than 20% of the purchase price. The cost of the insurance is factored into the borrower's payment and is sometimes referred to as mortgage insurance. It is easy to confuse (PMI) with other types of insurances associated with Homeownership. PMI is not mortgage life insurance, which pays the borrower's mortgage off if he/she becomes disabled or dies.
Principal: The outstanding balance of a loan not including interest.
Property Taxes: Taxes paid to a city or township for properties/Homes owned. The amount of tax is based on the assessed value (established by a public tax assessor) of the property. The local government will use property taxes collected for government services, such as the public schools, snow and trash removal, etc.

Rate: The percentage of an amount of money which is paid for its use for a specified time; usually expressed as an annual percentage.
Rate Lock: A commitment by a lender to guarantee an interest rate to a borrower for a given period of time. If the borrower's loan does not close within the specified period of time, the borrower might not be given the interest rate offered originally.
Real Estate Agent: A licensed professional who works on behalf of a seller or buyer of real estate.
Realtor: A licensed professional who works on behalf of a seller or buyer of real estate.
Recorded Documents: Documents which are entered into public record by the local government's (city or township) Register of Deeds. Lenders will have documents recorded to establish a lien or interest in a borrower's property.
Refinance: Paying off a loan with loan proceeds from another loan. Borrowers will often refinance with a loan that has a lower interest rate and lower payments.

WHEDA does not provide loans for the purpose of refinancing other loans unless the borrower is applying for a Major Rehabilitation loan, which would provide funds for the payoff of a current mortgage loan and would include additional funds for significant repairs and/or improvements to the property.
Rescission: Borrowers' cancellation of a loan contract. Often, second mortgage loans (see Second Mortgage) will allow a borrower three business days (after loan closing) to rescind or cancel their loan.

WHEDA allows three days for borrowers to rescind after extending them a Home Improvement loan or a Home Plus loan that will be used for Home improvements.
Revolving Credit: A type of credit which allows a borrower to withdraw funds up to a preapproved credit limit. Credit cards are most often the type of revolving credit borrowers use. Borrowers make payments based only on the amount they've actually charged to their revolving account/credit card, plus interest.

Second Mortgage: A mortgage lien which is recorded against a property as security for a loan and is taken out after a first mortgage loan.
Secured Loan: A loan that offers collateral such as a Home or an automobile, as security for repayment of the loan.
Servicing: The management of a loan, including collecting all payments and disbursing funds for the payment of the real estate taxes and Homeowner's insurance. The servicing company may or may not be the original lender that closed the mortgage loan.
Settlement Fee: Lenders will sometimes pay an agent, attorney or title company to close the mortgage loan for them. The borrower is typically charged this fee. The settlement fee is sometimes referred to as the closing fee.
Settlement Statement: A document signed by the buyer and seller at their loan closing. It is a detailed list of the original purchase price, fees paid or owed, the buyer's loan amount, and the amount of funds the seller will receive in the transaction. The settlement statement is sometimes referred to as the closing statement or the HUD-1.
Subordinate Loan or Financing: A mortgage lien which is recorded against a property as security for a loan and is taken out after a first mortgage loan.
Survey: A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to the boundaries of land and also the location of any improvements.

Target Area: Areas which have been designated by the federal government as places where more Homeownership is desired. Target areas in Wisconsin will allow WHEDA borrowers certain advantages. In the target areas, the income limits are higher, the purchase price limits are higher, and borrowers do not have to be first time Homebuyers.
Term: The period of time a borrower is given for the repayment of their loan. Usually the loan term is expressed in the form of the number of months the borrower will make payments.
Title: An instrument that establishes legal ownership of a property.
Title Company: Companies that specialize in establishing legal ownership of properties through a search of the title.
Title Insurance: A contract by which the title insurance company indicates who has legal title and also will pay the lender a specific amount of any loss caused by claims or disputes against the title/legal ownership of a property. The title insurance policy is bought and paid for only once, at the loan closing.
Title Search: Title companies will search the public records to establish legal ownership of a property. The search will identify liens and other claims against ownership of a property.

Underwriting: The process of evaluating a mortgage loan application. Mortgage lenders will evaluate the risk of the loan based on the borrower's credit history and ability to repay the loan, and also based on the quality of the property (the loan's collateral).
Unsecured Loan: A loan that does not offer collateral such as a Home or an automobile, as security for repayment of the loan. Typically unsecured loans will be assigned a higher interest rate than a secured loan because the lender does not have collateral to take back if the borrower does not make timely payments.

Zoning: Local ordinances set by the city or township that establish any restrictions on properties, such as property use (for residential or commercial use) or building codes.