Glossary of Terms

1003 Pronounced ten-oh-three. Standard application form.
1031 Tax deferred Exchange Refers to section 1031 of the internal revenue tax code, which allows taxable gain to be deferred by exchanging property which is help for business or investment purposes.
5/1 ARM 30 year loan that is fixed for the first 5 years, and then adjusts each year after that to a predetermined index. The same concept applies to 7/1. 3/1 and 10/1 ARMS.
5/25 Balloon A loan which is fixed for 5 years, and then has a one time adjustment to a new rate, or has a conditional “right to refinance option”. The same concept applies to a 7/23
ARM Adjustable Rate Mortgage
Deed of Trust Security instrument recorded in public records as evidence of mortgage debt. Ties the NOTE to Property in question.
Note Contract that details the agreement between the borrower and the lender. Specifies interest rate, repayment terms, and remedies for default. Is often secured by a Deed of Trust in California Mortgage transactions.
Piggy-Back Loan Combination of two loans funding concurrently, usually used in a purchase transactions to avoid PMI
PITI  Principle, Interest, Taxes & Insurance. Refers to total monthly housing expense.
PMI Private Mortgage Insurance. Protects the Lender against a default by the borrower. Paid for by the borrower. Often required when the borrower has less than 20% down. Typically .52% with 10% down. Higher with less down, and lower with more down. FHA loans have MMI, which is similar.
Prelim / Preliminary Title Report Initial report of liens, judgments, attachments to a specific real property. Prepares the title insurance company to issue a policy of title insurance, and indicates which items, if any, would need to be cleared in order to issue clear title.
Title Insurance Insures clear title in Real Estate and mortgage transactions. Required by virtually all lenders and is a closing cost associated with both purchase and refinance transactions.
Prepayment Penalty A prepayment penalty is a charge by the lender if the loan is paid off early, and is usually limited to a maximum of 5 years. A Hard prepayment penalty will apply anytime the loan is paid off during the period in which it applies. A soft prepayment penalty does NOT apply if the property is sold.

Index: A published economic indicator that allows a rate of a variable rate Mortgage to be determined.