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Mortgage and Real Estate Glossary ~ D

Date of last delinquency

The date when you last missed a regular monthly payment. The date of last delinquency shows up on your credit report, a document that outlines your credit history and current credit. Even if you make a partial payment of a debt, the creditor can still report you to a credit bureau as delinquent. Some creditors report a delinquency right away, others do not. Often you can negotiate with a creditor to get a more flexible pay back plan before they report you as delinquent.
Compare: Delinquency

Debt

The money you owe to a person or a company. There are a lot of types of debt-credit card, car and student loans, child support and alimony. Debt can leave you with little opportunity to save money. If debt takes a big bite out of your income, start looking at ways to manage your finances since lenders prefer you have very manageable debts when you apply for a loan to buy a home.
See: Acceptable debt

Deed

A legal document that transfers ownership/title of a property. Whoever holds the deed on a home is the legal owner (or holds title). Before the closing date, however, the lender requires a title search to prove that the seller really owns the property you are about to buy. You receive the original deed in the mail after it is recorded at the county courthouse. You need to make sure this happens since it is proof that you own the home. A grant deed is the most common type of deed used to transfer title.


Deed of Trust states: Alaska, Arizona, California, Missouri, Nevada, North Carolina, Virginia, and Washington DC.

Mortgage States: Alabama, Arkansas, Connecticut, Delaware, Florida, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont, Wisconsin

States that use both deeds of trust and mortgages** Colorado, Idaho, Illinois, Iowa, Maryland, Montana, Nebraska, Oklahoma, Oregon, Tennessee, Texas, Utah, Wyoming, Washington, West Virginia
* Georgia uses a security deed
** Custom dictates which document is used
See: Grant deed, Quitclaim deed
Compare: Mortgage

Deed of trust

A document that gives a lender the right to sell your property if you cab not repay your loan. A deed of trust is similar to a mortgage contract except that a deed of trust involves a third party called a trustee, usually a title insurance company, who acts on behalf of the lender. When you sign a deed of trust, you are in effect giving the trustee title (ownership) of the property, but holding on to the right to use and live in it. The lender or trustee holds the original deed of trust until you repay the loan on your home. Unlike a mortgage, a deed of trust also gives the lender the right to foreclose on your property without taking you to court first.

Default

When a home owner fails to make payments on the mortgage. In some rare cases, due to financial trouble, a borrower can not make the monthly mortgage payments. To keep from losing the property, the borrower can negotiate with the lender for a more flexible pay back plan until he or she can get back on track. If after about 3 months the borrower is still in default, the lender will have no choice but to start the foreclose process and sell the home to repay the loan.
See: Foreclosure

Deferred Interest

When the minimum payment on the loan is less than the amount of interest due that month, the difference is deferred and added to the principal balance. Deferred interest is often tax-deductible after the loan is refinanced-consult your tax advisor.

Deficiency judgment

Legal action sought by a lender who wants to recover any losses on a foreclosure. If you default on a mortgage, the lender can not only sell your property to get their money back, but they can also sue you if the money from the sale is not enough to cover the loan. For example, if you owe a lender $100,000, but the lender only gets $90,000 in a foreclosure sale, they can take you to court for the remaining $10,000. If the lender wins, they can attack your assets, income, credit and peace of mind until you pay this amount. If you have private mortgage insurance, a lender can use this money to offset any losses instead of getting a deficiency judgment. Some states do not give the lender the right to a deficiency judgment.
See: Judicial foreclosure, Trustee's

Delayed adjustable rate mortgage

A loan that first has a fixed interest rate followed by a fluctuating rate. Delayed adjustable rate mortgages (Delayed ARMs) have a fixed initial interest rate, then adjust, usually annually, for the life of the loan. A 5/1 ARM is an example of a delayed ARM, since the interest rate stays the same for the first 5 years and then changes on the sixth year and every year after that. A delayed ARM gives you the opportunity to enjoy fixed monthly payments for a longer period of time. Often people opt for this type of loan because they plan to sell their homes before the ARM starts to fluctuate. Delayed ARMs are also called intermediate ARMs.
See: Adjustable rate mortgage

Delinquency

When you miss a payment to a creditor. If you have missed one or more payments on your mortgage, credit card bill, car loan, or utilities bill, your account is considered delinquent.
See: Date of last delinquency

Deposit

A sum of money that a buyer gives to the seller when making an offer on a home. A deposit is normally given to a seller to show that you are serious about buying the property, even though it is not required by law. It is a good idea to put down as little as possible. If you are going through a broker, the deposit will be placed into an escrow account for safe keeping, which also bears interest. If a broker is not involved in the deal, suggest opening a neutral escrow account. If the deal works out, your deposit is then applied to your total closing costs to purchase the home. If the deal goes sour and you are at fault, you can lose your deposit. The deposit is also called earnest money.
See: Deposit receipt

Deposit receipt

An official document that can act as both the receipt for a buyer's deposit and the purchase agreement. Some states use a deposit receipt to outline a buyer's offer on a home, including the description of the property and how it will be financed, and how the deposit money is handled in the event the deal breaks down. If the seller accepts the offer and signs the document, the deposit receipt becomes the legal purchase agreement for the deal. The deposit receipt is also called a sales contract.
See: Deposit

Depreciation

A decrease in a property's value. Your home can lose value over time due to any number of reasons, such as poor condition, an over supply of homes in the market, or a declining neighborhood. If you buy a house for $100,000 and sell it two years later for $90,000, your home has depreciated by $10,000. Unless it is a rental property, you do not get any tax deductions on this loss.
See: Appreciation

Disposable income

The money that you have left from your salary after taxes are taken out and you pay your regular monthly bills. A high disposable income is a plus since lenders will feel more comfortable that you can pay your monthly mortgage payments with ease. A high disposable income can also allow you to save money towards the downpayment. Normally, a lender looks at your disposable income when you apply for a VA loan, and sometimes a FHA loan. Disposable income is also referred to as residual income.

Down payment

The portion of a property's purchase price that buyers must pay up-front with their own money. Lenders prefer that you make at least a 20% down payment when buying a home. This amount serves to protect the lender in case you can't make payments (default) on your loan. If you can't make the 20% cash down payment, and most first-time buyers can't, there are financing options that can cut down the amount.
Three common choices are:
(1) private mortgage insurance, where you pay a fixed monthly premium in return for a lower down payment
(2) government-insured loans that let you put down less, but limit how much you can borrow and
(3) piggyback loans, which require a 10% down payment. You get 2 loans, one for 80% of the purchase price and the other, usually at higher rate, for 10% of the purchase price.
See: Private mortgage insurance

Due-on-sale clause

Part of a loan agreement that gives a lender the right to demand repayment of a loan when the property is sold. Lenders include a due-on-sale clause in a mortgage to prevent buyers from taking over a seller's existing mortgage. Lenders don't benefit when this happens because the existing mortgage usually has a lower interest rate than current market rates. A due-on-sale clause is a type of acceleration clause.
See: Acceleration clause, Assumable mortgage

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