Centex Glossary

Whether or not you’re new to buying property, it helps to know the lingo. Boost your financing savvy (and your confidence) by getting familiar with these terms.


    Adjustable-Rate Mortgage (ARM)

    A home loan with an interest rate that changes periodically. Its interest rate is fixed for a short period of time (usually 1, 3 or 5 years) and then changes based on a standard financial index. After that, the rate adjusts at regular intervals. Most ARMs will have a cap on interest rate increases.

    Affiliated Business Disclosure

    A disclosure given by Pulte Mortgage, LLC, an affiliate of Pulte Group, Inc. outlining the service provided and cost of using the affiliated party's service.

    Alternative Credit Offer

    An offer to extend credit on different terms than the applicant originally requested.


    A schedule that details how the loan is to be repaid with each monthly payment. It includes the amount borrowed, the breakdown of how much of the payment goes to interest and to the principal and how much of the balance remains after each payment.

    Annual Percentage Rate (APR)

    The amount paid back to the lender for the cost of the loan, stated as a yearly rate. It includes mortgage insurance, points, and other costs in addition to the initial interest rate.


    A printed form used by a mortgage lender to record necessary information concerning a prospective mortgage.


    A report prepared by a professional appraiser that estimates the value of a property based on their physical inspection and comparable properties sold recently in the area.

    Approval Letter

    A lender's written offer to grant a mortgage loan outlining the terms, the amount of the loan, the interest rate and any other conditions. It can also serve as a communication of the lender's decision to the borrower's application.

    APR (Annual Percentage Rate)

    The cost of credit expressed as an annual rate. It usually includes a combination of the interest rate, points, and certain other fees paid to a lender to acquire a mortgage. The APR is the most meaningful measure for comparing the cost of mortgage loans offered by different lenders.

    ARM Adjustable Rate Mortgage

    A mortgage in which the interest rate is adjusted periodically according to a pre-selected index. Payments may go up or down accordingly.

    Assessed Valuation

    A payment to the lender from the seller, buyer, or third party, causing the lender to reduce the interest rate.


    Buy Down

    A payment to the lender from the seller, buyer, or third party, causing the lender to reduce the interest rate.


    Cash to Close

    Liquid assets readily available to pay the down payment, closing costs, and prepaid items of a mortgage transaction.

    Certificate of Occupancy

    A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied and stating the legally permissible use of the building.


    The meeting during which the title to the property actually changes hands, documents are executed and the sale of the property and/or the loan is completed.

    Closing Costs

    Expenses incurred in the transfer of property ownership that are paid by the buyer. They include a number of fees including appraisal origination attorney, recording, title fees and other costs. The lender is required to provide the buyer with a good faith estimate of closing costs.

    Closing Statement/HUD/Settlement Statement

    A form used at closing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.


    Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appear on documents with equal legal obligations.

    Commitment Fee (Loan)

    Any fee paid by a potential borrower to a lender for the lender's promise to lend money at a specified rate and within a given time period.


    Generally, almost any promise set forth in a written agreement. Most commonly, assurances set forth in a deed by the grantor or implied by law.

    Credit Report

    A report detailing an individual's credit history.


    Debt-to-Income Ratio

    A ratio lenders use to determine if a borrower is able to repay a loan. It compares monthly payments on existing debts, and on the presumed new loan, to monthly income. Income divided by expenses results in a percentage; the higher that percentage, the riskier the loan is considered to be for the lender.


    A legal document conveying title (ownership) to real property from one individual to another.

    Deed of Trust

    An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and reconveyed upon payment in full.


    A loan payment that is overdue but within the period allowed before actual default is declared.

    DeMinimus PUD

    A Planned Unit Development (PUD) in which the common property has less than a two % influence upon the value of the premises. The two % rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units.

    Department of Housing and Urban Development (HUD)

    Organization responsible for the implementation and administration of government housing and urban development programs.

    Discount Point(s)

    An amount payable to the lending institution by the borrower or seller to increase the lender's effective yield. One point is equal to one percent of the loan amount.

    Down Payment

    A payment made in cash by the buyer toward the property’s purchase price as part of the terms of the mortgage. A higher down payment can help you lower your monthly payments or qualify for a more expensive home. If the down payment is less than 20% of the purchase price, the lender may require you to purchase private mortgage insurance (PMI).


    Earnest Money

    A portion of the down payment delivered to the seller or an escrow agency by the purchaser of real estate with a purchase offer as evidence of good faith.


    A right created by grant, reservation, agreement, prescription, or necessary implication which one has on another's land (such as a public utility easement).


    Improvements, such as a wall, fence, building, etc., on the property of another.

    Equal Credit Opportunity Act (ECOA)

    A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs, or past exercising of rights under the Consumer Credit Protection Act.


    The difference between the estimated value of the home and the amount of the mortgage loan. Equity generally increases over time as the home’s value appreciates and the loan gets paid off.


    An account maintained by the lender that holds funds set aside for taxes, insurance and other recurring charges the lender pays on a regular basis. Escrow is also a legal procedure conducted by a neutral third party in which money and documents in a real estate transfer are held until all conditions of the sale are met.


    Fair Credit Reporting Act (FCRA)

    A Federal law that requires a lender who is declining a loan request because of adverse credit information to inform the borrower of the source of such information.

    Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC)

    A corporation authorized by Congress which purchases residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages. It sells participation certificates whose principal and interest are guaranteed by FHLMC.

    Federal National Mortgage Association - FNMA (FANNIE MAE)

    A corporation authorized by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.

    Finance Charge

    The total dollar amount your loan will cost you. It includes all interest payments during the term of the loan, any interim interest paid at closing, your origination fee, and any other charges paid to the lender or to a third party as a condition of the extension of credit. Certain charges like the appraisal, credit report, and the title search charges are not included in the finance charge calculation.

    First Mortgage

    A real estate loan that has priority over any subsequently recorded mortgages.

    Fixed Interest Rate

    An interest rate that does not change during the loan term.

    Fixed-Rate Mortgage

    A mortgage with an interest rate that stays the same for the entire duration of the loan.

    Flood Insurance

    Insurance protecting against loss by flood damage, required by lenders in areas designated (federally) as potential flood areas.


    A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.


    Gift Letter

    A written explanation signed by the individual giving the gift stating, "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time."

    Good Faith Estimate

    An estimate of charges that a borrower is likely to incur in connection with a settlement.

    Gross Monthly Income

    Total monthly income earned before tax and other deductions.

    Guaranteed Loans

    A loan guaranteed by Veteran's Administration or Rural Development. The guarantee protects the lender against loss incurred by a mortgage default.


    Hazard Insurance

    Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

    Homeowner's Association Dues

    The fees imposed by a condominium or homeowners' association for maintenance of common areas.

    Homeowner's Insurance

    An insurance policy that covers loss or damage to property (hazard coverage) as well as personal liability and theft coverage.



    A published interest rate not controlled by the lender to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. The index and the interest rate linked to it may increase or decrease.

    Insured Loans

    A loan insured by Federal Housing Authority (FHA) or a private mortgage insurance company. See Mortgage Insurance Premium or MIP.


    A share or right in some property. Also, money charged for the use of money (principal).

    Interest Rate Cap

    A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

    Interest-Only Mortgage

    A type of adjustable-rate mortgage that allows the borrower to make payments that are applied only to the interest on the loan, and not to the principal, for a specified period of time. This type of loan is considered high-risk.

    Investment Property

    Real estate owned with the intent of earning income and not intended for owner occupancy.


    Joint Tenancy

    Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and have equal rights in the property.



    An encumbrance against property for money due, either voluntary or involuntary.

    Loan Estimate

    An estimate of charges that a borrower is likely to incur in connection with a settlement.

    Loan-To-Value Ratio

    A ratio that compares the amount of the mortgage to the value of the home. The calculation results in a percentage that lenders use to determine if a borrower qualifies for a loan.



    The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.


    Termination or due date on which final payment on a loan must be paid in full.

    Monthly Payment

    Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.


    The loan and all the related supporting documentation arranged by the lender for the buyer to purchase a home.

    Mortgage Insurance

    Insurance protecting the mortgage lender against loss incurred by a mortgage default.

    Mortgage Note

    A written promise to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.


    The lender in a mortgage transaction.


    The borrower in a mortgage transaction who pledges property as security for a debt.


    Negative Amortization

    Occurs when the monthly payments cover only part of the interest then due. The interest cost that is not covered is added to the unpaid principal balance. This additional amount is additional principal.

    Non-Conforming Loan

    Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a higher rate and origination fee.


    A written agreement containing a promise of the signer to pay to a named person, or bearer, a definite sum of money at a specified date or on demand.



    The use of a property as a full-time residence, either by the title holder (owner-occupancy) or by another party through a formal agreement (rental).

    Origination Fee

    A fee that the borrower pays the lender when applying for a mortgage. It often includes fees for the application and appraisal, as well as other costs associated with the loan.


    PITI (Principal, Interest, Taxes, and Insurance)

    The most common components of a monthly mortgage payment.


    A point represents 1% of the loan amount, with the loan’s APR factored in. Lenders often use points to cover the costs of making the loan (origination points) or to allow the borrower to save on their interest rate by buying points (discount points).

    Preliminary Title Report

    The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

    Prepaid Items

    Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

    Primary Residence

    A residence that the borrower intends to occupy as a principal residence.


    The amount of money borrowed for the mortgage. Once payments are made, the principal is the amount of debt remaining (the balance left on the loan), excluding interest.

    Principal, Interest, Taxes and Insurance (PITI)

    The most common components of a monthly mortgage payment.

    Private Mortgage Insurance (PMI)

    An insurance policy that a lender usually requires a borrower to obtain if their down payment is less than 20% of the sale price. It protects the lender in the case that a borrower defaults on their loan.

    Private Mortgage Insurance (PMI)

    An insurance policy that a lender usually requires a borrower to obtain if their down payment is less than 20% of the sale price. It protects the lender in the case that a borrower defaults on their loan.


    The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

    PUD (Planned Unit Development)

    A planned combination of diverse land uses, such as housing, recreation, and shopping in one contained development or subdivision. A major feature of a PUD includes areas of common land for use by the housing unit owners. The association of unit owners generally owns, pays fees, and maintains the common areas. Also see DeMinimus PUD.

    Purchase Contract

    An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.


    Qualifying Ratios

    The ratio of fixed monthly expenses to gross monthly income. Used to determine how much the homebuyer can afford to borrow.


    Rate Lock

    An agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time.

    Real Estate Settlement Procedures Act (RESPA)

    A Federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances and servicing disclosure.

    Real Property

    Land and that which is affixed to it.


    The repayment of a debt from the proceeds of a new loan using the same property as security.

    Residential Mortgage Credit Report

    A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.


    Second Home (Vacation Home, Weekend Home)

    A residence other than the borrower's primary residence, which the borrower intends to occupy for a portion of each year.

    Secondary Mortgage Market

    A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.


    In lending, the collateral given, deposited, or pledged to secure the payment of a debt.


    When buyer and seller complete the transfer of the property. During this meeting, the title to the property is transferred to the buyer, the documents are signed and the sale is completed.


    A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.


    Title Insurance

    An insurance policy that ensures the property is clear of any liens that could put the mortgage in jeopardy. The policy guarantees that the owner is properly titled and can legally transfer the title of the property to another person.

    An examination of public records to disclose the past and current facts regarding the ownership and lien priority of a given piece of real estate.

    Total Debt Ratio

    Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End Ratio

    Truth-in-Lending Act

    A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.



    Analysis of credit risk on a specific rate and term for a mortgage on a given property for given borrowers.