| ADJUSTABLE
RATE MORTGAGE (ARM) |
A mortgage with an interest rate that may change, usually in response to changes in the Treasury Bill rate or the prime rate. The purpose of the interest rate adjustment is primarily to bring the interest rate on the mortgage in line with market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling), which might be reset annually. ARMs usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations will create.
|
| ACCELERATION
CLAUSE |
A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed. |
| AMORTIZATION
SCHEDULE |
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining. |
| ANNUAL
PERCENTAGE RATE
(APR) |
The cost of credit as a yearly rate. |
| APPLICATION
FEE |
A fee charged by the lender (bank) to cover the cost of processing the application. |
| APPRECIATION |
An increase in the value of a property due to changes in market conditions or other causes. |
| APPRAISAL |
A written estimation of the current value of a home made by a qualified appraiser. |
| ASSESSMENT |
The value placed on real estate for tax purposes. |
| ASSUMABLE
MORTGAGE |
A mortgage that can be taken over
(assumed.) by the buyer when a home is sold. |
| BALLOON
PAYMENT |
The unamortized principal of a mortgage or other type of loan, which is paid off in a lump sum. |
| CAPS |
Safeguards built into an adjustable rate loan to protect buyers against dramatic increase in the rate of Interest, and therefore, monthly payments. |
| COMMITMENT
LETTER |
A formal offer by a lender stating the terms under which it agrees to lend money to the home buyer. |
| CONTINGENCY |
A condition that must be met before a contract is legally binding. |
| CONVENTIONAL
(CONFIRMING) MORTGAGES |
A conventional/conforming mortgage loan is the most common type of mortgage. With low down payments, conventional mortgages are usually insured by private mortgage companies (PMI) to protect the lender. Conventional mortgages are used for purchase prices up to $203,150. |
| CLOSING |
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement." |
| CLOSING
COSTS |
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs." |
| CREDIT
REPORT |
A report of an individual's credit history prepared by a credit bureau and used by a tender In determining a loan
applicant's creditworthiness. |
| DEED |
The legal document conveying title to a property. |
| DEED
OF TRUST |
The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower. |
| DEFAULT |
The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage. |
| DELINQUENCY |
A loan in which a payment is overdue but not yet in default. |
| DEPRECIATION |
A decline in the value of the property. |
| DOWN
PAYMENT |
Cash amount paid by a buyer from his/her own funds which the difference between the purchase price and the amount to be covered by the mortgage loan. |
| EASEMENT |
A right of way giving persons other that the owner access to or over a property. |
| ESCROW
ACCOUNT |
An account set aside to accumulate money during the year for annual home related expenses such as insurance and property taxes. |
| FEDERAL
HOUSING ADMINISTRATION
(FHA) |
A federal agency that insures mortgages, allowing lenders to ban a greater percentage of the sale price of the property. In some cases, this can be as much as 97% of the sales price. |
| FIRST
MORTGAGE |
A mortgage that has first claim in the event of default. |
| FIXED
RATE MORTGAGE LOAN |
A mortgage loan at one stated interest rate over the life of the mortgage. |
| GROSS
INCOME |
Total income, either actual or estimated before other deductions are made. |
| HOMEOWNER'S
POLICY |
An insurance policy available to owners of private dwellings covering the dwelling and its contents in case of fire or wind damage, infestation, theft, liability for property damage and personal liability. |
| INSPECTION |
An examination of property to see if it is free of termites, etc., as well as to see if required repairs were made before the home is sold or if there are repairs required. |
| INTEREST |
The fee charged for borrowing money. |
| JUMBO
LOAN |
Loan amounts ranging from S203,150 to S1 million dollars. |
| LIEN |
A legal claim against a property that must be paid off when the property is sold. |
| LOAN-TO-VALUE
RATIO (LVR) |
The percentage of the property value that is being financed through a loan. |
| MORTGAGE |
A legal document that pledges a property to the lender as security for payment of a debt. |
| ORIGINATION
FEE |
A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount. |
| POINTS |
A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage. |
| PREQUALIFICATION |
The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for. |
| PRINCIPAL,
INTEREST, TAXES AND
INSURANCE (PITI) |
Used to indicate what is included in a monthly payment on real estate. Principal, interest, taxes and insurance are the four major items in a usual monthly mortgage loan payment. |
| PRIVATE
MORTGAGE INSURANCE (PMI) |
Insurance provided by non-government insurers that protects lenders agains loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan to value (LTV) percentages greater than 80 percent. |
| QUALIFYING
RATIOS |
Guidelines applied by the lenders to determine how large a loan to grant a home buyer. |
| TERM |
The number of years before your loan is scheduled to be paid off. |
| TITLE
INSURANCE |
Insurance that protects the lender and/or purchaser against loss due to problem or defects in connection with the title. |
| TITLE
SEARCH |
An examination of public records to reveal the past and current facts of ownership of real estate. |
| TRANSFER
TAX |
State or local tax payable when title passes from one owner to another. |
| UNDERWRITING |
The guidelines a lender uses to determine whether a borrower qualifies for a loan. |
| VETERANS
ADMINISTRATION (VA) |
A federal government agency that aids veterans in obtaining housing, primarily by guaranteeing loans with low down payments. |
