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Mortgage and Foreclosure Glossary

The following is a glossary of key terms you should be aware of concerning your mortgage and foreclosure:

  • Adjustable rate mortgage (ARM Mortgage): A mortgage where the interest rate changes throughout the period of the loan. The interest rate is based on the index rate, which measures the financial markets, and the margin rate, which is the rate the lender charges.
  • Balloon mortgage: A mortgage where the interest and principal payments are a fixed rate for a certain period of time. After this period ends, a lump sum of the remaining mortgage amount is due and owed to the lender.
  • Credit score: A number based on your credit history that allows lenders to determine your ability to obtain credit. Credit scores range between 300-850 points. The chart below illustrates the approximate ranges for credit scores and how lenders consider them.
CREDIT SCORE
CREDIT RATING
760-850
Excellent
700-759
Very Good
680-699
Good
620-679
Acceptable
580-619
Low
500-579
Bad
300-499
Risky

  • Deed in lieu of foreclosure: The deed of your home is given to your lender in order to satisfy your mortgage because you are no longer able to pay the mortgage. Under this option, you no longer have to make your monthly mortgage payments, but you will have to vacate your home.
  • Default: If you are unable to make your monthly mortgage payments, you are considered to be in default of the terms of your loan. Your loan is considered to be in default if you have not made your mortgage payment within 60 to 90 days of its due date.
  • Deficiency amount: The difference between the amount owed on your mortgage and either the value of your home or the amount received from the sale of your home.
  • Delinquency: The status of your loan when your payment is more than 30 days late.
  • Equity: The difference between the value of your home and the amount you currently owe on your mortgage(s) when the difference is a positive amount.
  • Fixed-rate mortgage: The interest remains at the same rate for the entire period of the loan.
  • Forbearance: Your lender agrees that you do not have to make your mortgage payment until a later date. Interest and principal continue to accrue even though you are not making any payments.
  • Foreclosure: Your home is sold and the proceeds are used to pay the mortgage because you are in default. States vary on the length of time it takes for the foreclosure process to conclude.
  • Home equity line of credit: A loan that allows you to borrow money from the equity in your home.
  • Interest-only mortgage: You pay only the interest amount, rather than interest and principal, for a specified period of time.
  • Late payment: Any payment that is received after the date specified in your mortgage note, including the grace period.
  • Lender: A company that loans money to individuals for home purchases.
  • Lien: A recorded legal document that shows there is a mortgage(s) owed on the property.
  • Mortgage rate: The rate of interest that your loan is based on.
  • Note: The document you sign that states the terms of your mortgage, including, but not limited to, the total amount of the mortgage, the interest rate and the monthly payment amount.
  • Points (Mortgage): Points can be purchased with your mortgage in order to lower your interest rate. Each point costs 1 percent of your mortgage amount.
  • Reverse mortgage: A loan that uses the equity in your home as collateral. This mortgage can only be utilized by those who are 62 years of age or older. You do not have to make payments on this mortgage, however, it will be repaid upon the owner's death or the sale of the home.
  • Short sale: Your home is sold and all of the proceeds go to the lender. The proceeds are less than what is fully owed on the mortgage, but the lender agrees to accept the lower amount as payment in full for your mortgage.
  • VA mortgage: A mortgage guaranteed by the Veteran's Administration. This option is only available to veterans. Neither a down payment nor mortgage insurance is required for a VA loan.