Mortgage Terminology

National Association of Home Builders (NAHB)

A national trade association located in Washington, D.C. that provides support to the building industry through lobbying and educational services.

National Association of Mortgage Brokers (NAMB)

Professional society for mortgage brokers which was developed to foster professional business relationships.

Negative Amortization

A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.

Net Cash Flow

The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Proceeds

Amount of cash which accrues to the seller after expenses are deducted from a home sale.

Net Worth

The value of all of a person's assets, including cash, minus all liabilities.

No Cash-Out Refinance

A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

Non-conforming Loan

A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Jumbo loans are nonconforming. See also: conforming loan.

Non-conforming Use

A permitted use of real property that does not conform to current zoning laws because it was lawfully established and maintained before the current zoning laws were in effect.

Nonliquid Asset

An asset that cannot easily be converted into cash.

Notice of Default

Notice recorded after a default under a deed of trust or mortgage. Also, the notice sent to defaulting borrowers, required by insurers or guarantors such as FHA, VA, or MIC.

Note

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. One way to think of the mortgage note is that it is a legal "IOU." Often called the promissory note, it represents your promise to pay the lender according to the agreed upon terms of the loan, including when and where to send your payment. The note lists any penalties that will be assessed if you don't make your monthly mortgage payments. It also warns you that the lender can "call" the loan -- demand repayment of the entire loan before the end of the term -- if you violate the terms of your mortgage.

Note Rate

The interest rate stated on a mortgage note.