Appraisal: An estimate of the value of property resulting from an analysis of facts about the property. An opinion of value

 

Bridge Loan: A loan intended to be used for a short period of time between the initial requirement for funds and a permanent, usually less costly, financial solution

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Closing Costs: The expenses which borrowers incur to complete the loan transaction. These costs may include title searches, title insurance, closing fees, recording fees, processing fees, & other charges

 

Deed of Trust: A three party security instrument conveying the legal title to real property as security for the repayment of a loan. The three parties included in a deed of trust are the borrower, lender, and trustee

 

Escrow: The deposit of instruments and/or funds with instructions for a third neutral party to carry out the provisions of an agreement or contract

 

Fractionalize: To divide the ownership of the trust deed amongst multiple investors

 

Interest-only: A straight, non-amortizing loan in which the lender receives only interest during the term of the loan and principal is repaid in a lump sum at maturity

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Interest Rate: The percentage of a sum of money charged for its use. Rent or charge paid for use of money, expressed as a percentage per month or year of the sum borrowed

 

Lien: The claims of debt, judgment, mortgage or taxes brought against a property. Examples of types of liens would include judgments, mortgages, and unpaid taxes

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LTV (Loan to Value): The ratio of the requested loan amount against the market value of the property being used as collateral. A property valued at $400,000 with a loan request against the property asset of $200,000 would have a loan-to-value ratio of 50%

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Market Value: The highest price in terms of money which a property will bring in a competitive and open market and under all conditions required for a fair sale, i.e. the buyer and seller acting prudently, knowledgeably and neither affected by undue pressures

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Maturity date: The date by which a loan is to be paid in full

 

Notice of Default: A notice sent to the wrongful party as recognition of a default made. This is the first phase of the two step foreclosure process in California

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Note: A signed written instrument acknowledging a debt and promising payment, according to the specified terms and conditions-- a promissory note

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Points: A fee paid upfront on a loan that is incurred at the time of the loan. A point is equal to 1% of the amount of the mortgage

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Prepayment Penalty: The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity

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Principal: The loan amount borrowed or loan amount remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage

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Trustor: One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust

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Trustee: One who holds property in trust for another to secure the performance of an obligation. Third party under a deed of trust 

Underwriting: The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan. This is based on the criteria of assets, credit, income, employment, real estate equity, etc.