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Quick Find: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Acceleration The right of the mortgagee
(lender) to demand the immediate repayment of the mortgage loan balance upon
the default of the mortgagor (borrower), or by using the right vested in the
Due-on-Sale Clause. Adjustable rate mortgage (ARM) Is a mortgage in which the
interest rate is adjusted periodically based on a preselected index. Also
sometimes known as the re-negotiable rate mortgage, the variable rate mortgage
or the Canadian rollover mortgage. Adjustment interval On an adjustable rate mortgage,
the time between changes in the interest rate and/or monthly payment, typically
one, three or five years, depending on the index. Amortization Means loan payment by equal
periodic payment calculated to pay off the debt at the end of a fixed period,
including accrued interest on the outstanding balance. Annual percentage rate (A.P.R.) Is a interest rate reflecting
the cost of a mortgage as a yearly rate. This rate is likely to be higher than
the stated note rate or advertised rate on the mortgage, because it takes into
account point and other credit cost. The APR allows home buyers to compare
different types of mortgages based on the annual cost for each loan. Appraisal
An estimate of the value of
property, made by a qualified professional called an "appraiser". Assessment
A local tax levied against a
property for a specific purpose, such as a sewer or street lights. Assumption
The agreement between buyer and
seller where the buyer takes over the payments on an existing mortgage from the
seller. Assuming a loan can usually save the buyer money since this is an
existing mortgage debt, unlike a new mortgage where closing cost and new,
probably higher, market-rate interest charges will apply. Balloon (payment) mortgage Usually a short-term fixed-rate
loan which involves small payments for a certain period of time and one large
payment for the remaining amount of the principal at a time specified in the
contract. Blanket Mortgage A mortgage covering at least
two pieces of real estate as security for the same mortgage. Borrower (Mortgagor) One who applies for and
receives a loan in the form of a mortgage with the intention of repaying the
loan in full. Broker An individual in the business
of assisting in arranging funding or negotiating contracts for a client buy who
does not loan the money himself. Brokers usually charge a fee or receive a
commission for their services. Buy-down
When the lender and/or the home
builder subsidized the mortgage by lowering the interest rate during the first
few years of the loan. While the payments are initially low, they will increase
when the subsidy expires. Cash Flow
The amount of cash derived over
a certain period of time from an income-producing property. The cash flow
should be large enough to pay the expenses of the income producing property
(mortgage payment, maintenance, utilities, etc). Caps (interest) Consumer safeguards which limit
the amount the interest rate on an adjustable rate mortgage may change per year
and/or the life of the loan. Caps (payment) Consumer safeguards which limit
the amount monthly payments on an adjustable rate mortgage may change. Certificate of Eligibility The document given to qualified
veterans which entitles them to VA guaranteed loans for homes, business, and
mobile homes. Certificates of eligibility may be obtained by sending DD-214
(Separation Paper) to the local VA office with VA form 1880 (request for
Certificate of Eligibility). Certificate of Reasonable Value (CRV) An appraisal issued by the
Veterans Administration showing the property's current market value Certificate of veteran status The document given to veterans
or reservists who have served 90 days of continuous active duty (including
training time) It may be obtained by sending DD 214 to the local VA office with
form 26-8261a (request for certificate of veteran status). This document
enables veterans to obtain lower down payments on certain FHA insured loans. Closing The meeting between the buyer,
seller and lender or their agents where the property and funds legally change
hands. Also called settlement. Closing costs usually include an origination
fee, discount points, appraisal fee, title search and insurance, survey, taxes,
deed recording fee, credit report charge and other costs assessed at
settlement. The cost of closing usually are about 3 percent to 6 percent of the
mortgage amount. Commitment
A promise by a lender to make a
loan on specific terms or conditions to a borrower or builder. A promise by an
investor to purchase mortgages from a lender with specific terms or conditions.
An agreement, often in writing, between a lender and a borrower to loan money
at a future date subject to the completion of paper work or compliance with
stated conditions. Construction loan A short term interim loan to
pay for the construction of buildings or homes. These are usually designed to
provide periodic disbursements to the builder as he progresses. Contract sale or deed: A contract between purchaser
and a seller of real estate to convey title after certain conditions have been
met. It is a form of installment sale. Conventional loan A mortgage not insured by FHA
or guaranteed by the VA. Credit Report A report documenting the credit
history and current status of a borrower's credit standing. Debt-to-Income Ratio The ratio, expressed as a
percentage, which results when a borrower's monthly payment obligation on
long-term debts is divided by his or her gross monthly income. See housing
expenses-to-income ratio. Deed of trust In many states, this document
is used in place of a mortgage to secure the payment of a note. Default Failure to meet legal
obligations in a contract, specifically, failure to make the monthly payments
on a mortgage. Deferred interest When a mortgage is written with
a monthly payment that is less than required to satisfy the note rate, the unpaid
interest is deferred by adding it to the loan balance. See negative amortization. Delinquency Failure to make payments on
time. This can lead to foreclosure. Department of Veterans Affairs (VA) An independent agency of the
federal government which guarantees long-term, low-or no-down payment mortgages
to eligible veterans. Discount Point See point. Down Payment Money paid to make up the
difference between the purchase price and the mortgage amount. Due-on-Sale-Clause A provision in a mortgage or
deed of trust that allows the lender to demand immediate payment of the balance
of the mortgage if the mortgage holder sells the home. Earnest Money Money given by a buyer to a
seller as part of the purchase price to bind a transaction or assure payment. Entitlement The VA home loan benefit is
called entitlement. Entitlement for a VA guaranteed home loan. This is also
known as eligibility. Equal Credit Is a federal law that requires
lenders and other creditors to make credit equally available without
discrimination based on race, color, religion, national origin, age, sex,
marital status or receipt of income from public assistance programs. Equity The difference between the fair
market value and current indebtedness, also referred to as the owner's
interest. The value an owner has in real estate over and above the obligation
against the property. Escrow An account held by the lender
into which the home buyer pays money for tax or insurance payments. Also
earnest deposits held pending loan closing. Fannie Mae
see Federal National Mortgage Association. Farmers Home Administration (FmHA) Provides financing to farmers
and other qualified borrowers who are unable to obtain loans elsewhere. Federal Home Loan Bank Board (FHLBB) The former name for the
regulatory and supervisory agency for federally chartered savings institutions.
Agency is now called the Office of Thrift Supervision Federal Home Loan Mortgage Corporation (FHLMC) also
called "Freddie Mac" Is a quasi-governmental agency
that purchases conventional mortgage from insured depository institutions and
HUD-approved mortgage bankers. Federal Housing Administration (FHA) A division of the Department of
Housing and Urban Development. Its main activity is the insuring of residential
mortgage loans made by private lenders. FHA also sets standards for
underwriting mortgages. Federal National Mortgage Association (FNMA) also
know as "Fannie Mae" A tax-paying corporation
created by Congress that purchases and sells conventional residential mortgages
as well as those insured by FHA or guaranteed by VA. This institution, which
provides funds for one in seven mortgages, makes mortgage money more available
and more affordable. FHA loan
A loan insured by the Federal
Housing Administration open to all qualified home purchasers. While there are
limits to the size of FHA loans ($155,250 as of FHA mortgage insurance Requires a fee (up to 2.25
percent of the loan amount) paid at closing to insure the loan with FHA. In
addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of
the current loan amount, paid in monthly installments. The lower the down
payment, the more years the fee must be paid. FHLMC The Federal Home Loan Mortgage
Corporation provides a secondary market for savings and loans by purchasing
their conventional loans. Also known as "Freddie Mac." Firm Commitment A promise by FHA to insure a
mortgage loan for a specified property and borrower. A promise from a lender to
make a mortgage loan. Fixed Rate Mortgage The mortgage interest rate will
remain the same on these mortgages throughout the term of the mortgage for the
original borrower. FNMA The Federal National Mortgage
Association is a secondary mortgage institution which is the largest single
holder of home mortgages in the Foreclosure A legal process by which the
lender or the seller forces a sale of a mortgaged property because the borrower
has not met the terms of the mortgage. Also known as a repossession of
property. Freddie Mac See Federal Home Loan Mortgage Corporation. Ginnie Mae
See Government National Mortgage Association. Government National Mortgage Association (GNMA) Graduated Payment Mortgage (GPM) A type of flexible-payment
mortgage where the payments increase for a specified period of time and then
level off. This type of mortgage has negative amortization built into it. Guaranty
A promise by one party to pay a
debt or perform an obligation contracted by another if the original party fails
to pay or perform according to a contract. Hazard Insurance A form of insurance in which
the insurance company protects the insured from specified losses, such as fire,
windstorm and the like. Housing Expenses-to-Income Ratio The ratio, expressed as a
percentage, which results when a borrower's housing expenses are divided by
his/her gross monthly income. See debt-to-income ratio. Impound That portion of a borrower's
monthly payments held by the lender or servicer to pay for taxes, hazard
insurance, mortgage insurance, lease payments, and other items as they become
due. Also known as reserves. Index A published interest rate
against which lenders measure the difference between the current interest rate
on an adjustable rate mortgage and that earned by other investments (such as
one- three-, and five-year U.S. Treasury security yields, the monthly average
interest rate on loans closed by savings and loan institutions, and the monthly
average costs-of-funds incurred by savings and loans), which is then used to
adjust the interest rate on an adjustable mortgage up or down. Interim Financing A construction loan made during
completion of a building or a project. A permanent loan usually replaces this
loan after completion. Investor
Jumbo Loan
A loan which is larger (more
than $214,600 as of Lien A claim upon a piece of
property for the payment or satisfaction of a debt or obligation. Loan-to-Value Ratio The relationship between the
amount of the mortgage loan and the appraised value of the property expressed
as a percentage. Margin The amount a lender adds to the
index on an adjustable rate mortgage to establish the adjusted interest rate. Market Value The highest price that a buyer
would pay and the lowest price a seller would accept on a property. Market
value may be different from the price a property could actually be sold for at
a given time. MIP (Mortgage Insurance Premium) It is insurance from FHA to the
lender against incurring a loss on account of the borrower's default. Mortgage Insurance Money paid to insure the
mortgage when the down payment is less than 20 percent. See private mortgage
insurance, FHA mortgage insurance. Mortgagee
The lender. Mortgagor
Negative Amortization Occurs when your monthly
payments are not large enough to pay all the interest due on the loan. This
unpaid interest is added to the unpaid balance of the loan. The danger of
negative amortization is that the home buyer ends up owing more than the
original amount of the loan. Net Effective Income The borrower's gross income
minus federal income tax. Non Assumption Clause A statement in a mortgage
contract forbidding the assumption of the mortgage without the prior approval
of the lender. Note: The signed obligation to pay a debt, as a mortgage note. Office of Thrift Supervision (OTS) The regulatory and supervisory
agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank
Board. Origination Fee The fee charged by a lender to
prepare loan documents, make credit checks, inspect and sometimes appraise a
property; usually computed as a percentage of the face value of the loan. Permanent Loan A long term mortgage, usually
ten years or more. Also called an "end loan." PITI Principal, Interest, Taxes and
Insurance. Also called monthly housing expense. Pledged account Mortgage (PAM): Money is placed in a pledged
savings account and this fund plus earned interest is gradually used to reduce
mortgage payments. Points (loan discount points) Prepaid interest assessed at
closing by the lender. Each point is equal to 1 percent of the loan amount
(e.g., two points on a $100,000 mortgage would cost $2,000). Power of Attorney A legal document authorizing
one person to act on behalf of another. Prepaid Expenses Necessary to create an escrow
account or to adjust the seller's existing escrow account. Can include taxes,
hazard insurance, private mortgage insurance and special assessments. Prepayment
A privilege in a mortgage
permitting the borrower to make payments in advance of their due date. Prepayment Penalty Money charged for an early
repayment of debt. Prepayment penalties are allowed in some form (but not
necessarily imposed) in many states. Primary Mortgage Market Lenders making mortgage loans
directly to borrower's such as savings and loan associations, commercial banks,
and mortgage companies. These lenders sometimes sell their mortgages into the
secondary mortgage markets such as to FNMA or GNMA, etc. Principal
The amount of debt, not
counting interest, left on a loan. Private Mortgage Insurance (PMI) In the event that you do not
have a 20 percent down payment, lenders will allow a smaller down payment - as
low as 5 percent in some cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage insurance. Private
mortgage insurance will usually require an initial premium payment and may
require an additional monthly fee depending on you loan's structure. Realtor A real estate broker or an
associate holding active membership in a local real estate board affiliated
with the National Association of Realtors.
Recision
The cancellation of a contract.
With respect to mortgage refinancing, the law that gives the homeowner three
days to cancel a contract in some cases once it is signed if the transaction
uses equity in the home as security. Recording Fees Money paid to the lender for
recording a home sale with the local authorities, thereby making it part of the
public records. Refinance
Obtaining a new mortgage loan
on a property already owned. Often to replace existing loans on the property. Renegotiable Rate Mortgage A loan in which the interest
rate is adjusted periodically. See adjustable rate mortgage. RESPA Short for the Real Estate
Settlement Procedures Act. RESPA is a federal law that allows consumers to
review information on known or estimated settlement cost once after application
and once prior to or at a settlement. The law requires lenders to furnish the
information after application only. Reverse Annuity Mortgage (RAM) A form of mortgage in which the
lender makes periodic payments to the borrower using the borrower's equity in
the home as Satisfaction of Mortgage: The document issued by the mortgagee when
the mortgage loan is paid in full. Also called a "release of
mortgage." Second Mortgage A mortgage made subsequent to
another mortgage and subordinate to the first one. Secondary Mortgage Market The place where primary
mortgage lenders sell the mortgages they make to obtain more funds to originate
more new loans. It provides liquidity for the lenders. Security. Servicing
All the steps and operations a
lender performs to keep a loan in good standing, such as collection of
payments, payment of taxes, insurance, property inspections and the like. Settlement/Settlement Costs See closing/closing costs. Shared Appreciation Mortgage (SAM) A mortgage in which a borrower
receives a below-market interest rate in return for which the lender (or
another investor such as a family member or other partner) receives a portion
of the future appreciation in the value of the property. May also apply to
mortgage where the borrowers shares the monthly principal and interest payments
with another party in exchange for part of the appreciation. Simple Interest Interest which is computed only
on the principle balance. Survey A measurement of land, prepared
by a registered land surveyor, showing the location of the land with reference
to know points, its dimensions, and the location and dimensions of any
buildings. Sweat Equity Equity created by a purchaser
performing work on a property being purchased. Title A document that gives evidence
of an individual's ownership of property.
Title Insurance A policy, usually issued by a
title insurance company, which insures a home buyer against errors in the title
search. The cost of the policy is usually a function of the value of the
property, and is often borne by the purchaser and/or seller. Policies are also
available to protect the lender's interests. Title Search An examination of municipal records
to determine the legal ownership of property. Usually is performed by a title
company. Truth-In-Lending A federal law requiring
disclosure of the Annual Percentage Rate to home buyers shortly after they
apply for the loan. Also known as Regulation Z. Two-Step Mortgage A mortgage in which the
borrower receives a below-market interest rate for a specified number of years
(most often seven or 10), and then receives a new interest rate adjusted
(within certain limits) to market conditions at that time. The lender sometimes
has the option to call the loan due with 30 days notice at the end of seven or
10 years. Also called "Super Seven" or "Premier" mortgage. Underwriting The
decision whether to make a loan to a potential home buyer based on credit,
employment, assets, and other factors and the matching of this risk to an
appropriate rate and term or loan amount. USURY Interest charged in excess of
the legal rate established by law. VA Loan A long-term, low-or no-down
payment loan guaranteed by the Department of Veterans Affairs. Restricted to
individuals qualified by military service or other entitlements. VA Mortgage Funding Fee A premium of up to 1-7/8
percent (depending on the size of the down payment) paid on a VA-backed loan.
On a $75,000 fixed-rate mortgage with no down payment, this would amount to
$1,406 either paid at closing or added to the amount financed. Variable Rate Mortgage (VRM) See adjustable rate mortgage. Verification of Deposit (VOD) A document signed by the
borrower's financial institution verifying the status and balance of his/her
financial accounts. Verification of Employment (VOE) A document signed by the
borrower's employer verifying his/her position and salary. Warehouse Fee Many mortgage firms must borrow
funds on a short term basis in order to originate loans which are to be sold
later in the secondary mortgage market (or to investors). When the prime rate
of interest is higher on short term loans than on mortgage loans, the mortgage
firm has an economic loss which is offset by charging a warehouse fee. Wraparound mortgage Results when an existing
assumable loan is combined with a new loan, resulting in an interest rate
somewhere between the old rate and the current market rate. The payments are
made to a second lender or the previous homeowner, who then forwards the
payments to the first lender after taking the additional amount off the top. |
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