A loan with an interest rate that changes during the term of the loan. The payments increase or decrease with the rise and fall of a designated index. The rate is based on one of several “index” plus a margin.

(AIR) American Industrial Real Estate Association
Founded in 1960, the Commercial Real Estate Association (AIR) is the nation’s largest and most respected organization of industrial and commercial real estate brokers. AIR is an association of industrial and office real estate brokerage professionals dedicated to providing superior information, industry standards, services, and education by mutual cooperation among its members for the benefit of their clients and the business community.

The payoff of a debt in equal installments that includes both principal and interest.

A required “Truth in Lending Act” disclosure for consumer loans. It is calculated by starting with the full amount borrowed (principal) and subtracting out the dollar amount of prepaid finance charges (finance charges the borrower is paying in advance).

A required “Truth in Lending Act “disclosure” for consumer loans. It is a calculation of the cost of credit as a yearly rate and shown as a percentage. It is often higher than the interest rate because it incorporates prepaid finance charges that are not interest.

A fee sometimes charged by the lender or broker for the loan application.

A report that compiles market information and estimates the value of a specific piece of real estate.

A licensed professional who gathers information and prepares a report that estimates the market value of real estate.

An alternative to litigation. It can also be used in conjunction with litigation. It employs a neutral third party to arbitrate a dispute. Arbitration in many cases is binding (in which case there is no appeal). It can also be non-binding, in which an appeal may be possible.

A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. This may be a very large payment. It is designed to occur when the regular payments do not pay off all interest and principal owing (not fully amortizing) on the loan over the term of the loan.

The entity that lends the money and collects the interest.

BOMA International is a primary source of information on building management and operations, development, leasing, building operating costs, energy consumption patterns, local and national building codes, legislation, occupancy statistics, technological developments and other industry trends. BOMA sets the standard of measurements for office and retail space.

A person who receives funds in the form of a loan who takes on the obligation to repay the loan in full.

A contract between a borrower and a loan broker. It describes what the broker will do for the borrower, and the terms of the agreement, including the amount of compensation.

The amount of money the broker will receive for finding a loan for a borrower. This may be an amount paid by the borrower, an amount paid by the lender or a combination of the two.

Establishes a minimum and a maximum for interest rate increases in an adjustment period for an ARM.

Establishes a maximum payment amount. This may cause negative amortization.

A loan that pays off an existing loan(s) and includes additional cash to the borrower.

After money has been disbursed and documents are signed and recorded a transaction is considered to be closed. Escrow facilitates the closing.

A general term to describe the fees that a borrower will pay at closing. These closing fees can be included when refinancing a loan.

(See HUD1)

An asset used as security for a loan.

Loans which conform to Fannie Mae guidelines.

A monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts. The 11th district covers Arizona, California and Nevada. This one of several index that may be used on adjustable rate loans.

This is a fee that may be charged to send documents or payments by courier, messenger or overnight mail service to various parties involved in the loan transaction. The charge is shown on the “HUD1” closing statement

Certified Property Manager (CPM) is a real estate professional designation awarded by the Institute of Real Estate Management (IREM) and recognized by the National Association of Realtors (NAR).

This is a report which is generated by a credit reporting agency (such as Trans Union, Experion or Equifax). It should accurately show payment history as well as how much is owed on various debts. It also shows the percentage of available credit that has been used through credit card borrowing. Credit reports are used, with other information, to generate a credit score to reflect the credit worthiness of a borrower.

This is a number that is developed to show the lender how likely a borrower is to repay a loan. This score can be a very big factor in determining if a person will get a loan, from whom, and at what interest rate and fees that may be charged. The score is generated by a mathematical formula that considers the borrower’s credit history. It may also be referred to as a FICO score (Fair Isaac Company).

CECL, or current expected credit loss, is a new accounting standard that will change how financial institutions account for expected credit losses. … It replaces the current standards for loss accounting – commonly known as FAS-5 and FAS-114.

The net operating income calculated on a given property that is available to debt service a specific monthly loan payment. Lenders look for ratios of approximately 1.20:1. For every dollar that is available to service the loan they want twenty (20) cents to remain in the borrower’s pocket.

The amount of net income available to make monthly loan payments

In some states loans are secured by means of a recorded document called a Deed of Trust, instead of a mortgage document.

Occurs when a borrower stops making payments on a loan payment obligation.

A loan is delinquent when a payment is late or past due.

An amount of money that a borrower may be charged for the preparation of loan documents. This charge will be shown on the “HUD-1” Closing Statement.

The act of signing one’s name on the back of a check or a note.

This is the dollar amount of your home that you really own. You can calculate your equity by taking the market value of your home and subtracting the debt that is secured by your home. The difference is your equity.

A loan made to a property owner that is secured by equity in the property. An equity line can be borrowed on and paid down many times over the life of the loan.

A third party facilitator for the transfer and financing of real estate and businesses. Escrow makes certain that all the parties involved have abided by the terms of the contract.

Charges a borrower incurs when a loan is made. The charges are disclosed on the “HUD 1” closing statement.

Credit scores calculated by Fair Isaac Company are referred to as FICO scores. The three national credit bureaus each develop a FICO score. These scores can be different and lenders will use the middle score for qualifying purposes.

Fiduciary as defined by Barron’s Dictionary of Real Estate Terms is, “one who acts, in a legal role, in the best interests of others.”

Part of exercising one’s fiduciary duty is to act in the consumer’s best interest by being able to effectively match the borrower with the products that best serve their needs.

The finance charge is a disclosure that appears on the “Truth in Lending Act” Disclosure Statement. It is intended to show the cost of your loan as a dollar amount. It includes (1) interest that will be charged over the life of the loan and (2) some up front fees (prepaid finance charges). All closing fees should be disclosed on the “HUD 1” closing statement..

An index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a five-year maturity. Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. Used for fixed rate loans.

A loan where the interest rate remains unchanged during a period of the loan.

A fee charged to determine if the property lies in a flood zone and if flood insurance is required.

The legal procedure by which a lender holding a promissory note and a recorded Deed of Trust against a property, forces a sale of the property to obtain repayment of the loan. Foreclosure proceedings are typically started by a lender when a loan goes into default. It might also be started for failure to pay property taxes, insurance, or keep other promises.

A loan where the balance owed at a predetermined end of a loan is zero if all regular monthly payments are made as scheduled.

This document lists the estimated fees you will be required to pay to secure a loan. It identifies who is expected to provide services and receive fees in connection with your loan, such as credit bureaus, appraisers, and closing agents. Should be delivered to the borrower by the loan broker or lender within three business days of receipt of initial loan request.

Fees and taxes required to be paid to the local government where your mortgage documents are filed. Included in your “HUD 1” closing statement of costs, prepared by escrow and delivered at closing.

The U.S. Department of Housing and Urban Development

Provided by escrow at the time of closing. It is also called a “Settlement Statement” of all costs and fees charged in closing.

Holding account established by the lender, for the borrower’s benefit. The lender collects money each month along with the regular principle and interest payment. This additional money is held to make periodic payments for property taxes and insurance payments.

Prime Rate, 11th District Cost of Funds, LIBOR, Two Year Treasury Bill, Five Year Treasury Bill and the 12 month Treasury Average are all examples of an index which lenders use to determine interest rates on adjustable or fixed rate loans.

Investment value on money determined by constantly changing economic factors. Index values establish lending rates.

A note that describes how a loan is to be repaid in more than one payment of a designated amount on specific dates, as specified in the promissory note.

A lender which makes a substantial number of real estate loans, and may include banks, credit unions, mortgage bankers, and insurance companies.

Cost of borrowing money, expressed as a percentage.

Some loans have a lower introductory interest rate, which is in effect for a limited time. At the end of the introductory period, the interest rate will increase. It is also known as a “teaser rate.”

A penalty that is charged if payment are not made on time. This usually is calculated as a percentage of the payment amount or a flat fee dollar amount.

A company or person that makes loans, such as a mortgage banker, credit union, bank or insurance company. The lender’s name will appear on the promissory note as beneficiary.

London Interbank Offered Rate. It’s the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London. It is a standard financial index used in U.S. capital markets and can be found in the Wall Street Journal. In general, its changes have been smaller than changes in the prime rate. This index is used for adjustable rate loans.

A claim (legal interest) against a property. Common types of liens include a mortgage, tax or judgment lien.

Also called an “open line of credit” secured on your property. Use like a checking account, borrowing credit over time up to your credit limit.

A lender’s agreement to make a loan on particular terms, including interest rate, fees and charges.

Helps clients arrange loans for their real estate investments.

Length of time over which a loan is paid.

The percentage of the loan in comparison to the value.

The amount or percentage added to the index value to determine the interest rate on a loan.

A non-judicial process of dispute resolution in which an impartial third party, a mediator, intervenes in a dispute with the consent of the disputing parties and helps them negotiate an agreement. The role of the mediator is to assist the disputants define and clarify issues, help reduce obstacles to communication, explore possible solutions, and reach a mutually satisfactory agreement. Results are generally non-binding.

Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company’s assets which is senior only to that of the common shares. Mezzanine financing can be structured either as debt (typically an unsecured and subordinated note) or preferred stock.

In California, a mortgage refers to a loan secured by a piece of real estate.

A lender, other than a bank or credit union that specializes in making real estate mortgage loans.

A person or company that arranges a loan for a borrower through another lender. A mortgage broker should always be representing the borrower and should be looking after the borrower’s best interests.

Insurance that may be required when a loan is greater than 80% of the value of the home. This insurance protects the lender in the event a borrower fails to make the loan payments. The borrower ordinarily pays the cost of MI or PMI, in the form of monthly premiums added to the mortgage payments.

Occurs when the lender allows a borrower to make monthly payments that are less than the amount needed to cover even the interest charges. Any interest not paid is added to the original loan balance. The balance of the loan can actually increase.

Under federal law, you may be permitted to cancel or “rescind” a mortgage loan within a specified time, generally three days, after you have signed loan documents in a refinance, second mortgage or other mortgage loans which do not involve the purchase of a home. . The lender is required to give the borrower notice in writing of this right to cancel or rescind and the deadline to cancel.

A loan that permits the borrower to draw money from time to time up to a credit limit. A home equity line of credit (HELOC) is an open-end loan secured by real property.

(See points)

The information on the “Truth in Lending Disclosure” Statement shows the amount of the first loan payment, the amount and number of the regularly scheduled payments (usually monthly), the amount of the final payment, and when all those payments are due. The actual payment due may be greater for a number of reasons, including taxes and insurance. If the loan has an “adjustable rate,” the actual payments can differ from the payment schedule.

A fee charged by the lender or the broker as compensation for obtaining the loan. One “point” is equal to 1% of the principal amount of the loan.

The charge which can be imposed if the loan is paid off before maturity. The “Truth in Lending Disclosure” Statement and the promissory note will show if a loan has a prepayment penalty.

A loan offered to borrowers with better credit history (sometimes called “A” loans). Prime loans generally are priced lower and cost the borrower less.

The Wall Street Journal, surveys large banks and publishes the consensus of the prime rate. The Journal surveys the 30 largest banks, and when three-quarters of them (23) change, the Journal changes its rate, effective on the day the Journal publishes the new rate. It’s the most widely quoted measure of the prime rate, which is the rate at which banks will lend money to their most-favored customers.

A fee charged by lenders or brokers to prepare a complete loan application file. A processing fee may be charged to the borrower and is shown on the Settlement Statement (HUD-1).

A legal contract in which the borrower promises to pay back the loan. The “promissory note” sets forth the terms and conditions that apply to the loan repayment, such as interest rate, when payments are due, where payments are made, what happens if payments are not made, etc.

Property owner’s or Hazard Insurance is insurance required to protect the lender against possible damage to the property. It can also protect the borrower. A borrower must obtain this insurance and provide proof of insurance prior to the loan closing.

A loan for the purpose of purchasing real estate.

Refers to the agreement between the borrower and the lender or broker that as long as the loan is closed within a certain period of time (for example, 12, 30 or 60 days), the interest rate on the loan will be set (locked) at an agreed- upon rate. A “rate lock” agreement must be in writing or it will be unenforceable.

Fees charged by the local government to record loan documents (for example, the Deed of Trust). These fees will be charged to the borrower and are shown on the Settlement Statement (HUD-1).

To repay one or more existing loans by getting a new loan.

Literally means “to take back” or “cancel.” If a borrower rescinds a mortgage loan, it is as if the mortgage loan never existed. Some borrowers have by law a right to “rescind” certain mortgage loans. Note: A Borrower is entitled to a refund all fees paid in connection with the loan if the Borrower exercises his right of rescission.

A loan that is subordinate to existing financing on the property.

New FNMA index product is scheduled to replace the LIBOR rates by 2021.  The (SOFR) index will have 6 month, 12 month and 18 month maturities.

The Society of Industrial and Office Realtors (SIOR) is an international professional commercial and industrial real estate association based in Washington, D.C. It offers a professional designation (SIOR) to commercial brokers and other industry professionals. Its membership is composed of around 3,000 individuals and organizations in more than 630 cities in 32 countries. SIOR designees can hold the following specialty designations: industrial, office, sales manager, executive manager, or advisory service. SIOR also includes associate members, who are corporate executives, developers, educators, and other involved in the commercial real estate industry. NAREB. National Association of Real Estate Brokers is NOT the predecessor of NAR. NAREB still exists and is the minority RE brokers trade association founded in 1947 when minorities were NOT allowed. Also, minorities were NOT allowed to join NAR for MANY years. See www.NAREB.com

These loans are priced higher than prime loans, often much higher. Loans to borrowers whose credit is less than perfect will almost always be subprime loans. There are also other circumstances that lead to subprime loans, including high outstanding debt, unproven income, etc. Even borrowers with good credit may receive subprime loans for a variety of reason.

A drawing or map showing the precise legal boundaries of a property and other physical features, prepared by a registered land surveyor.

The interest rate the U.S. government pays to borrow money for different lengths of time. Treasury yields don’t just influence how much the government pays to borrow and how much investors earn by investing in this debt, however; they also influence the interest rates individuals and businesses pay to borrow money to buy real estate, vehicles and equipment. Treasury yields also tell us how investors feel about the economy. The higher the yields on 10-, 20- and 30-year Treasuries, the better the economic outlook.

Having ownership in property.

A company that compiles information on real properties and determines the clarity and insurability of title to a property.

Required when real estate is transferred or a new loan is secured. Buyers require it from the seller to insure clear title in a real estate transfer transaction. Lenders require it to protect their interest in the real estate.

This is a government tax that is based on a percentage of the property value as imposed by state or local law. A transfer tax will be shown on the Settlement Statement (HUD-1).

This is a federal law designed to protect borrowers and to give them enough information to comparison shop for loans. TILA requires certain disclosures about the loan and when the disclosures must be given to the borrower.

This is a very important document that federal law requires for all consumer loans. It provides key information to enable borrowers to shop around and compare loan terms from various lenders. Should be delivered to the borrower within three days of loan application.

This index is the 12 month average of the monthly average yields of U.S. Treasury securities adjusted to a constant maturity of one year.  Used in adjustable rate loans

An index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a two-year maturity. Used in both adjustable and fixed rate loans.

This is a fee charged by the lender to evaluate the borrower qualifications for a loan. An underwriting fee may be charged to the borrower and shown on the Settlement Statement (HUD-1).

These are costs or fees which are charged to the borrower before closing of the loan, such as loan application fees, appraisal fees and credit report fees. Charges are reported on the “HUD1” closing statement.

This is a payment made by a lender to a mortgage broker in connection with a borrower’s loan transaction. It is shown on the Settlement Statement (HUD-1).