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| Glossary of Lending Terms |
| Your inquiry into the Focus Publications Glossary of Lending Terms produced the following results: |
impound (impounds) (impound account, reserve fund) - An account set up by a lender for the collection of funds to pay for future property taxes, mortgage insurance, and homeowners insurance premiums. These funds are usually collected with the loan payment. Often required when the buyer is putting less than 20 percent cash down. Also known as reserves. |
improvement Any permanent structure placed on land. For real-estate tax purposes, any change that adds to a property's value, increases its useful life, or adapts it to a new use. Improvements can be added to the basis of a property, but they cannot be deducted. See repair. |
imputed interest Implied interest. In a mortgage that states an insufficient interest rate, the law will impute that the rate is higher, and the principal is less. |
inclusions and exclusions Items, often of a personal property nature, that are to be included or excluded from the sale price of the entire property. |
income The money or other benefit coming from the use of property, services or business. |
income approach A method of appraising real estate based on the property's anticipated future income. The formula for appraisal by the income approach is market value equals expected annual income divided by capitalization rate. |
income-to-debt ratio A lender's calculation of the percentage of income represented by a borrower's housing payments plus all other revolving debt payments. |
index 1. An economic indicator or statistic that indicates an economic or financial condition. 2. A floating index lenders use to calculate the rate on an adjustable-rate mortgage. Loan documents specify which index is to be used. Popular indexes include; 11D = 11th District Cost of Funds; 6TB = Six-month Treasury bill average; 1TB= One-year Treasury bill average; 6CD = Six-month CD average. PRI = Prime rate; LIBOR = 6 month London Interbank Offered Rate average. The margin is the amount a lender adds to the index to establish the actual interest rate on an ARM. |
indexed loan The sum of the published index plus the margin . The rate on the market index used to determine changes in an adjustable-rate mortgage. For example if the index were 6% and the margin 2.75%, the indexed rate would be 8.75%. If the borrower's starting rate is below the index rate, it is said to be discounted. See index. |
in-file credit report An objective account of credit and legal information obtained from a credit repository. |
inflation An increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less. |
in-house sale Sale of a property in which both the buyer's and seller's agents work for the same broker. |
initial interest rate The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as start rate or teaser. |
inspection contingency A clause in a purchase agreement making the sale contingent upon the outcome of a structural and/or pest inspection of the premises. See home inspection and pest inspection. |
installment The regular periodic payment that a borrower agrees to make to a lender. |
installment loan Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for in installments. |
installment sale A type of sale that may qualify the seller for more favorable tax treatment. |
institutional lender Financial intermediaries who invest in loans and other securities on behalf of their depositors or customers. Laws to limit risk regulate institutional lending and investment activities. Commonly, an institutional lender is a bank, mortgage company, savings and loan association or other business that makes loans to the public as a major part of its ordinary business. |
instrument Any writing having legal form and significance. A legal document. |
insurable title A property title that a title insurance company agrees to insure against defects and disputes. |
insurance A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. |
insurance binder A document that states that insurance is temporarily in effect. Because the coverage will expire by a specific date, a permanent policy must be obtained before the expiration date. |
insurance policy A contract, paid in advance, under which one party (the insurer) agrees to pay a certain sum to another party (the insured) if a loss should occur under a given set of circumstances. There are many types of insurance. |
insurance premium The periodic payment for an insurance policy is known as an insurance premium. |
insured mortgage A mortgage that is protected by the Federal Housing Administration (FHA) (MIP) or underwritten by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount. |
interest 1. Cost of the use of money. 2. The type and extent of ownership. |
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 checking or “now” account (negotiable order of withdrawal) Liquid account, providing FDIC insurance to $100,000 per person, that permits unlimited check-writing that pays interest. |
interest only loan A non-amortizing loan in which the lender receives only the interest during the term of the loan and the principal is repaid at maturity. Does not require amortization. |
interest rate 1. The percentage of a sum of money charged for its use by the lenders. 2. The rate of return on an investment. Unless otherwise stated, interest is figured on a yearly basis even though it is paid monthly, quarterly, etc. |
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 A loan, including a construction loan, used when the property owner is unable or unwilling to arrange permanent financing. Generally arranged for less than three (3) years, used to gain time for financial or market conditions to improve. |
interim loan 1. A temporary, short-term loan that enables a homeowner to liquidate the equity in one home, before its sold, in order to make a cash down payment on another home. Also called a Swing or Bridge Loan. 2. Also refers to a construction loan that is replaced by a permanent loan after completion. |
investment The use of money to make a profit. |
investment property A property that is not occupied by the owner. |
investor Lenders may keep a loan in their portfolio or, after the close, they may sell the loan to an investor. Portfolio lenders (lenders that keep the loans they originate) tend to be more flexible but they generally have higher rates. The investor sets the underwriting criteria for the loans they invest in. Some of the largest mortgage investors are Fannie Mae and Freddie Mac. |
involuntary lien A claim or lien that attaches to a property without the consent of the owner, such as a tax lien. |
IRA (individual retirement account) A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investments such as stocks, bonds or mutual funds. |
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