A summary of the public records relating to the
title to a particular piece of land. If there are any title defects
they must be cleared before a buyer can purchase clear, marketable,
and insurable title.
Acceleration Clause
Allows the lender to speed up the rate at which
your loan comes due or even to demand immediate payment of the entire
balance of the loan should you default on you loan.
Adjustment Date
The date on which the interest rate changes for
an adjustable-rate mortgage (ARM).
Adjustment Interval
On an adjustable rate mortgage, the time between
changes in the interest rate and/or monthly payment, usually one,
three or five years.
Adjustment Period
The period that elapses between the adjustment
dates for an adjustable-rate mortgage (ARM).
A mortgage in which the interest rate is adjusted
periodically based on an index. Also known as the renegotiable rate
mortgage, the variable rate mortgage or the Canadian rollover mortgage.
Agreement of Sale
Known by various names, such as contract of purchase,
purchase agreement, or sales agreement according to location or jurisdiction.
A contract in which a seller agrees to sell and a buyer agrees to
buy, under specific terms spelled out in writing and signed by both
parties.
Amortization
Loan payment calculated to pay off the debt at
the end of a fixed period, including interest on the outstanding balance.
Amortization Term
The amount of time required to amortize the mortgage
loan. The amortization term is expressed as a number of months.
For example, for a 30-year fixed-rate mortgage, the amortization term
is 360 months.
Annual Percentage Rate (APR)
Is a way to compare different loan programs.
The cost of credit as a yearly rate. The percentage results from an
equation considering the total amount financed, the finance charges,
and the term of the loan. This rate is the true rate and is not the
same as the interest rate.
Application
A form, commonly referred to as a 1003 form,
used to apply for a mortgage and to provide information regarding
a prospective mortgagor and the proposed security.
Appraisal
An estimate of the value of property, made by
a professional appraiser.
Appraisal Fee
The charge for estimating the value of property.
Appraiser
A person qualified by education, training, and
experience to estimate the value of real property and personal property.
Appreciation
An increase in the value of a property due to
changes in market conditions or other causes. The opposite of
depreciation.
Asset
Property that can be used to repay debt, such
as stocks and bonds or a car.
Assignment
The transfer of a mortgage from one person to
another.
Assumable Mortgage
A mortgage that can be taken over (“assumed”)
by the buyer when a home is sold.
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.
Assumption Clause
A provision in an assumable mortgage that allows
a buyer to assume responsibility for the mortgage from the seller.
The loan does not need to be paid in full by the original borrower
upon sale or transfer of the property.
Assumption Fee
The fee paid to a lender (usually by the purchaser
of real property) resulting from the assumption of an existing mortgage.
Automated Teller Machines (ATMs)
Electronic terminals through which customers
may make deposits, withdrawals, or other transactions as they would
through a bank teller.
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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 specific time.
Bankrupt
A person, firm, or corporation that, through
a court proceeding, is relieved from the payment of all debts after
the surrender of all assets to a court-appointed trustee.
Bankruptcy
A proceeding in a federal court in which a debtor
who owes more than his or her assets can relieve the debts by transferring
his or her assets to a trustee.
Basis Point
A basis point is 1/100th of a percentage point.
For example, a fee calculated as 50 basis points of a loan amount
of $100,000 would be 0.50% or $500.
Before-Tax Income
Income before taxes are deducted.
Beneficiary
The person designated to receive the income from
a trust, estate, or a deed of trust.
Billing Error
Any mistake in your monthly statement as defined
by the Fair Credit Billing Act.
Binder or "Offer to Purchase"
A preliminary agreement, secured by the payment
of earnest money, between a buyer and seller as an offer to purchase
real estate. A binder secures the right to purchase real estate upon
agreed terms for a limited period of time. If the buyer changes his
mind or is unable to purchase, the earnest money is forfeited unless
the binder expressly provides that it is to be refunded.
Biweekly Payment Mortgage
A mortgage that requires payments to reduce the
debt every two weeks (instead of the standard monthly payment schedule).
Blanket Mortgage
The mortgage that is secured by a cooperative
project, as opposed to the share loans on individual units within
the project.
Bond
An interest-bearing certificate of debt with
a maturity date. An obligation of a government or business corporation.
Breach
A violation of any legal obligation.
Bridge Loan
A form of second trust that is collateralized
by the borrower’s present home (which is usually for sale) in
a manner that allows the proceeds to be used for closing on a new
house before the present home is sold. Also known as “swing
loan.”
Broker
An individual in the business of assisting in
arranging funding or negotiating contracts for a client but who does
not loan the money himself.
Building Line or Setback
Distances from the ends and/or sides of the lot
beyond which construction may not extend. The building line may be
set by a filed plat of subdivision, by restrictive covenants in deeds
or leases, by building codes, or by zoning ordinances.
Business Days
Find out from your institution to find out what
days it counts as business days under the Truth in Lending and Electronic
Fund Transfer Acts.
Buydown
When the lender and/or the home builder subsidizes
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.
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Call Option
A provision in the mortgage that gives the mortgagee
the right to call the mortgage due and payable at the end of a specified
period for whatever reason.
Capital Improvement
Any structure or component erected as a permanent
improvement to real property that adds to its value and useful life.
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.
Cash-Out Refinance
A refinance transaction in which the amount of
money received from the new loan exceeds the total of the money needed
to repay the existing first mortgage, closing costs, points, and the
amount required to satisfy any outstanding subordinate mortgage liens.
In other words, a refinance transaction in which the borrower receives
additional cash that can be used for any purpose
Cash Reserves
Is the amount of money left in the bank after
your loan funds.
Certificate of Eligibility
A document issued by the federal government certifying
a veteran’s eligibility for a Department of Veterans Affairs
(VA) mortgage.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans
Affairs (VA) that establishes the maximum value and loan amount for
a VA mortgage.
Certificate of Title
A certificate issued by a title company or a
written opinion by an attorney that the seller has good marketable
and insurable title to the property which he is offering for sale.
A certificate of title offers no protection against any hidden defects
in the title which an examination of the records could not reveal.
The issuer of a certificate of title is liable only for damages due
to negligence.
Chain of Title
The history of all of the documents that transfer
title to a parcel of real property, starting with the earliest existing
document and ending with the most recent.
Change Frequency
The frequency (in months) of payments and/or
interest rate changes in an adjustable-rate mortgage (ARM)
Clear Title
A title that is free of liens or legal questions
as to ownership of the property.
Includes a loan origination fee, points, appraisal
fee, title search and insurance, survey, taxes, deed recording fee,
credit report charge and other costs assessed at settlement. The closing
costs usually are about 2 percent to 6 percent of the mortgage amount.
Closing Day
The day on which the formalities of a real estate
sale are finished. The certificate of title, abstract, and deed are
generally prepared for the closing by an attorney and this cost charged
to the buyer. The buyer signs the mortgage, and closing costs are
paid. The final closing merely reiterates the original agreement reached
in the agreement of sale.
Closing Statement
Also referred to as the HUD-1. The final
statement of costs incurred to close on a loan or to purchase a home.
Cloud (On Title)
An outstanding claim which negatively affects
the marketability of title.
Collateral
Property offered to support a loan that can be
seized if you default.
Collection
The efforts used to bring a delinquent mortgage
current and to file the necessary notices to proceed with foreclosure
when necessary.
Combination Loan
With this type of loan, you receive a first mortgage
for 80 percent of the loan amount, and a second mortgage at the same
time for the remainder of the balance. If avoiding PMI (mortgage
insurance) is important to you, consider combination loans –
known as 80/10/10 loans or 80/20’s.
Combined loan-to-value (CLTV)
The relationship between the unpaid principal
balances of all the mortgages on a property (first and second usually)
and the property’s appraised value (or sales price, if it is
lower.)
Co-maker
A person who signs a promissory note along with
the borrower. A CO-maker’s signature guarantees that the
loan will be repaid, because the borrower and the CO-maker are equally
responsible for the repayment.
Commission
Money paid to a real estate agent or broker by
the seller as compensation for finding a buyer and completing the
sale.
Commitment
An agreement, often in writing, between a lender
and a borrower to loan money at a future date subject to the stated
conditions.
Common Areas
Those portions of a building, land, and amenities
owned (or managed) by a planned unit development (PUD) or condominium
project's homeowners' association (or a cooperative project's cooperative
corporation) that are used by all of the unit owners, who share in
the common expenses of their operation and maintenance. Common areas
include swimming pools, tennis courts, and other recreational facilities,
as well as common corridors of buildings, parking areas, means of
ingress and egress, etc.
Community Home Improvement Mortgage Loan
An alternative financing option that allows low-
and moderate-income home buyers to obtain 95 percent financing for
the purchase and improvement of a home in need of modest repairs.
The repair work can account for as much as 30 percent of the appraised
value.
Comparables
An abbreviation for "comparable properties";
used for comparative purposes in the appraisal process. Comparables
are properties like the property under consideration; they have reasonably
the same size, location, and amenities and have recently been sold.
Comparables help the appraiser determine the approximate fair market
value of the subject property.
Condemnation
A determination by a governmental agency that
a particular building is unsafe or unfit for use.
Conditions
Tasks that must be completed prior to your loan
being funded.
Condominium
Individual ownership of a unit and an individual
interest in the common areas and facilities which serve the project.
Condominium Conversion
Changing the ownership of an existing building
(usually a rental project) to the condominium form of ownership.
Conforming Loan
Loans that conform to the criteria and limits
set forth by the largest buyers of loans, FNMA
(Fannie Mae) and FHLMC
(Freddie Mac).
Consumer Reporting Agency (or
bureau)
An organization that prepares reports that are
used by lenders to determine a potential borrower's credit history.
The agency obtains data for these reports from a credit repository
as well as from other sources.
Contingency
A condition that must be met before a contract
is legally binding. For example, home purchasers often include a contingency
that specifies that the contract is not binding until the purchaser
obtains a satisfactory home inspection report from a qualified home
inspector.
Construction Loan
A short term interim loan for financing the cost
of construction. The lender advances funds to the builder as the work
progresses.
Contractor
A person who contracts to erect buildings. There
are also contractors for each phase of construction: heating, electrical,
plumbing, air conditioning, road building and others.
Conventional Loan
A mortgage not insured by FHA or guarantee by
the VA or Farmers Home Administration (FmHA).
Convertibility Clause
A provision in some adjustable-rate mortgages
(ARMs) that allows the borrower to change the ARM to a fixed-rate
mortgage at specified timeframes after loan origination.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be
converted to a fixed-rate mortgage under specified conditions.
Cooperative Housing
An apartment building or a group of dwellings
owned by a corporation, the stockholders of which are the residents
of the dwellings. It is operated for their benefit by their elected
board of directors. In a cooperative, the corporation or association
owns title to the real estate. A resident purchases stock in the corporation
which entitles him to occupy a unit in the building or property owned
by the cooperative. While the resident does not own his unit, he has
an absolute right to occupy his unit for as long as he owns the stock.
Cosigner
Another person who signs your loan and assumes
equal responsibility for it.
Cost of Funds Index (COFI)
An index that is used to determine interest rate
changes for certain adjustable-rate mortgage (ARM) plans. It represents
the weighted-average cost of savings, borrowings, and advances of
the 11th District members of the Federal Home Loan Bank of San Francisco.
Covenant
A clause in a mortgage that obligates or restricts
the borrower and that, if violated, can result in foreclosure.
Credit
The right granted by a creditor to pay in the
future in order to buy or borrow in the present; also, a sum of money
owed to a person or business.
Credit Bureau
An agency that keeps your credit record.
Credit Card
Any card used from time to time to borrow money
or buy goods or services on credit.
Credit History
The record of the timeliness with which you've
borrowed and repaid debts.
Credit 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 net income (FHA/VA loans) or gross monthly income
(Conventional loans). See Housing
Expenses-to-Income Ratio.
Credit-related Insurance
Health, life, or accident insurance designed
to pay the outstanding balance of debt.
Credit Report
An agreement in which a borrower receives something
of value in exchange for a promise to repay the lender at a later
date.
Credit Repository
An organization that gathers, records, updates,
and stores financial and public records information about the payment
records of individuals who are being considered for credit.
Credit Scoring System
A statistical system used to rate credit applicants
according to various characteristics relevant to creditworthiness.
Creditor
A person or business from whom you borrow or
to whom you owe money.
Creditworthiness
Past and future ability to repay debts.
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A plastic card, looks similar to a credit card,
that consumers may use to make purchases, withdrawals, or other types
of electronic fund transfers.
Debt
An amount owed to another.
Deed
A formal written instrument by which title to
real property is transferred from one owner to another. The deed should
contain an accurate description of the property being conveyed, should
be signed and witnessed according to the laws of the State where the
property is located, and should be delivered to the purchaser at closing
day. There are two parties to a deed: the grantor and the grantee.
(See also deed
of trust , general
warranty deed , quitclaim
deed , and special
warranty deed)
Failure to make mortgage payments when mortgage
payments are due.
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.
Deposit
A sum of money given to bind the sale of real
estate, or a sum of money given to ensure payment or an advance of
funds in the processing of a loan.
Depreciation
Decline in value of a house due to wear and tear,
adverse changes in the neighborhood, or any other reason.
Disclosures
Information and documents that must be given
to consumers about their financial dealings. They have to be
signed and returned to your broker/lender.
Documentary Stamps
A State tax, in the forms of stamps, required
on deeds and mortgages when real estate title passes from one owner
to another. The amount of stamps required varies with each State.
Down Payment
Money paid to make up the difference between
the purchase price and mortgage amount. Down payments usually are
10 percent to 20 percent of the sales price on Conventional loans,
and no money down up to 5 percent on FHA and VA loans.
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.
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Money given by a buyer to a seller as part of
the purchase price to bind a transaction or assure payment.
Easement Rights
A right-of-way granted to a person or company
authorizing access to or over the owner's land. An electric company
obtaining a right-of-way across private property is a common example.
Effective Age
An appraiser's estimate of the physical condition
of a building. The actual age of a building may be shorter or longer
than its effective age.
Effective Gross Income
Normal annual income including overtime that
is regular or guaranteed. The income may be from more than one source.
Salary is generally the principal source, but other income may qualify
if it is significant and stable.
Elderly Applicant
As defined in the Equal Credit Opportunity Act,
a person 62 or older.
Electronic Fund Transfer (EFT) Systems
A variety of systems and technologies for transferring
funds electronically rather than by check.
Encroachment
An obstruction, building, or part of a building
that intrudes beyond a legal boundary onto neighboring private or
public land, or a building extending beyond the building line.
Encumbrance
A legal right or interest in land that affects
a good or clear title, and diminishes the land's value. It can take
numerous forms, such as zoning ordinances, easement rights, claims,
mortgages, liens, charges, a pending legal action, unpaid taxes, or
restrictive covenants. An encumbrance does not legally prevent transfer
of the property to another. A title search is all that is usually
done to reveal the existence of such encumbrances, and it is up to
the buyer to determine whether he wants to purchase with the encumbrance,
or what can be done to remove it
Equal Credit Opportunity Act (ECOA)
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.
Escrow
Refers to a neutral third party who carries out
the instructions of both the buyer and seller to handle all the paperwork
of settlement or "closing." Escrow may also refer to an
account held by the lender into which the home buyer pays money for
tax or insurance payments.
Escrow Analysis
The periodic examination of escrow accounts to
determine if current monthly deposits will provide sufficient funds
to pay taxes, insurance, and other bills when due.
Escrow Collections
Funds collected by the servicer and set aside
in an escrow account to pay the borrower's property taxes, mortgage
insurance, and hazard insurance.
Escrow Disbursements
The use of escrow funds to pay real estate taxes,
hazard insurance, mortgage insurance, and other property expenses
as they become due.
Escrow Payment
The portion of a mortgagor's monthly payment
that is held by the servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due.
Estate
The ownership interest of an individual in real
property. The sum total of all the real property and personal property
owned by an individual at time of death.
Eviction
The lawful expulsion of an occupant from real
property.
Examination of Title
The report on the title of a property from the
public records or an abstract of the title.
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Fair Credit Reporting Act
A consumer protection law that regulates the
disclosure of consumer credit reports by consumer/credit reporting
agencies and establishes procedures for correcting mistakes on one's
credit record. The report on the title of a property from the public
records or an abstract of the title.
Fair Market Value
The highest price that a buyer, willing but not
compelled to buy, would pay, and the lowest a seller, willing but
not compelled to sell, would accept.
An income-based community lending model, under
which mortgage insurers and Fannie Mae offer flexible underwriting
guidelines to increase a low- or moderate-income family's buying power
and to decrease the total amount of cash needed to purchase a home.
Borrowers who participate in this model are required to attend pre-purchase
home-buyer education sessions.
See Federal
National Mortgage Association.
Farmers Home Administration
(FmHA)
Provides financing to farmers and other qualified
borrowers who are unable to obtain loans elsewhere.
Also called Freddie Mac, is a quasi-governmental
agency that purchases conventional mortgages 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 standard for underwriting
mortgages.
Also known as Fannie Mae. A taxpaying 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.
Fee Simple
The greatest possible interest a person can have
in real estate.
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, they are generous enough to handle moderate-priced
homes almost anywhere in the country.
Requires a small fee (up to 3 percent of the
loan amount) paid at closing or a portion of this fee added to each
monthly payment of an FHA loan to insure the loan with FHA. On a 9.5
percent $75,000 30-year fixed-rate FHA loan, this fee would amount
t o either $2,250 at closing or an extra $31 a month for the life
of the loan. In addition, FHA mortgage insurance requires an annual
fee of 0.5 percent of the current loan amount, the more years the
fee must be paid.
Finder’s Fee
A fee or commission paid to a mortgage broker
for finding a mortgage loan for a prospective borrower.
Finance Charge
The total dollar amount credit will cost.
First Adjustment
When you can expect the first rate adjustment
in you ARM loan.
First Mortgage
A mortgage that is the primary lien against a
property.
Fixed-Rate Mortgage
A mortgage on which the interest rate is set
for the term of the loan.
Floating Rate
Interest rate is not locked. It’s
floating with the market.
Flood Insurance
Insurance that compensates for physical property
damage resulting from flooding. It is required for properties
located in federally designated flood areas.
Foreclosure
A legal procedure in which property securing
debt is sold by the lender to pay a defaulting borrower's debt.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with a monthly
payment that is sufficient to amortize the remaining balance, at the
interest accrual rate, over the amortization term.
A deed which conveys not only all the grantor's
interests in and title to the property to the grantee, but also warrants
that if the title is defective or has a "cloud" on it (such
as mortgage claims, tax liens, title claims, judgments, or mechanic's
liens against it) the grantee may hold the grantor liable.
Also known as Ginnie Mae, provides sources of
funds for residential mortgages, insured or guaranteed by FHA or VA.
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.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Gross Monthly Income
The total amount the borrower earns per month,
before any expenses are deducted.
Guarantee
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
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The ratio, expressed as a percentage, which results
when your housing expenses are divided by your net effective income
(FHA/VA loans) or gross monthly income (Conventional loans).
Housing Ratio
The ratio of the monthly housing in total (PITI-Principal,
Interest, Taxes, and Insurance) divided by the gross monthly income.
This ratio is sometimes referred to as the top ratio or front end
ratio.
HUD
US Department of Housing and Urban Development.
Office of Housing/Federal Housing Administration within HUD insures
home mortgage loans made by lenders and sets minimum standards for
such homes.
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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 US 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.
Interest
A charge paid for borrowing money.
Interest Rate
The annual rate of interest on the loan, expressed
as a percentage of 100.
Investor
Money source for a lender.
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A claim upon a piece of property for the payment
or satisfaction of a debt or obligation.
Lifetime Cap
A provision of an ARM that limits the highest
rate that can occur over the life of the loan.
Loan Program
Term that describes whether the rate can change
or not and how long the loan will last. For example a “30
year fixed” means that the loan is going to fixed for 30 years
and that rate will never change. An Adjustable Rate Mortgage
is usually a 30 year loan with a rate that will change after one year.
Loan-To-Value Ratio
Ratio, expressed as a percentage is the amount
of the mortgage loan divided by the appraised value of the property.
For example, your house is valued at $100,000 with a loan of $90,000;
your LTV is 90%.
Lock-In
A written agreement guaranteeing the home buyer
a specified interest rate provided the loan is closed within a set
period of time. The lock-in also usually specifies the number
of points to be paid at closing.
Lock Term
A lender's guarantee of an interest rate for
a set period of time. The time period is usually that between loan
application approval and loan closing. The lock-in protects you against
rate increases during that time.
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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.
Marketable Title
A title that is free and clear of objectionable
liens, clouds, or other title defects. A title which enables an owner
to sell his property freely to others and which others will accept
without objection.
Mortgage
A lien or claim against real property given by
the buyer to the lender as security for money borrowed. Under government-insured
or loan-guarantee provisions, the payments may include escrow amounts
covering taxes, hazard insurance, water charges, and special assessments.
Mortgages generally run from 10 to 30 years, during which the loan
is to be paid off.
Mortgage Commitment
A written notice from the bank or other lending
institution saying it will advance mortgage funds in a specified amount
to enable a buyer to purchase a house.
Mortgage Disability Insurance
A disability insurance policy which will pay
the monthly mortgage payment in the event of a covered disability
of an insured borrower for a specified period of time.
The payment made by a borrower to the lender
for transmittal to HUD to help defray the cost of the FHA mortgage
insurance program and to provide a reserve fund to protect lenders
against loss in insured mortgage transactions. In FHA insured mortgages
this represents an annual rate of one-half of one percent paid by
the mortgagor on a monthly basis.
Mortgage Note
A written agreement to repay a loan. The agreement
is secured by a mortgage, serves as proof of an indebtedness, and
states the manner in which it shall be paid. The note states the actual
amount of the debt that the mortgage secures and renders the mortgagor
personally responsible for repayment.
Mortgage (Open-end)
A mortgage with a provision that permits borrowing
additional money in the future without refinancing the loan or paying
additional financing charges. Open-end provisions often limit such
borrowing to no more than would raise the balance to the original
loan figure.
Mortgagee
The lender.
Mortgagor
The borrower or homeowner.
MSRP
Stands for Manufacturer's Suggested Retail Price.
It represents the manufacturer's recommended selling price for a vehicle
and each of its options.
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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.
Non-Conforming Loan
Also called a jumbo loan. Conventional
home mortgages not eligible for sale and delivery to either Fannie
Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including
loan amount, loan characteristics or underwriting guidelines.
Non-conforming loan limit is $252,700 and above.
Note
A written agreement containing a promise of the
signer to pay to a named person, or order, or bearer, a definite sum
of money at a specified date or on demand.
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A line of credit that may be used over and over
again, including credit cards, overdraft credit accounts, and home
equity lines.
Open-end Lease
A lease which may involve a balloon payment based
on the value of the property when it is returned.
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 face value of the loan.
Overdraft Checking
A line of credit that allows you to write checks
or draw funds by means of an EFT card for more than your actual balance,
with an interest charge on the overdraft.
Owner Financing
A property purchase transaction in which the
property seller provides all or part of the financing.
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Periodic Cap
The maximum rate increase for a specific period
for a specific loan (ARM) only.
Principal, interest, taxes, and insurance. Also
called monthly housing expense.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned
lots with one or more other parcels owned in common or with reciprocal
rights in one or more other parcels.
Plat
A map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines, buildings, improvements
on the land, and easements.
Points
Are fees paid up front that are used to lower
the interest rate. Each point is 1 percent of the loan balance.
A loan of $150,000 equals $1,500 points. So, if you don’t
intend to keep the property for a long time or if you are thinking
about refinancing paying points is not beneficial.
Point-of-Sale (POS)
A method by which consumers can pay for purchases
by having their deposit accounts debited electronically without the
use of checks.
Power of Attorney
A legal document authorizing one person to act
on behalf of another.
Pre-Approval
The process that lets you get approved for your
loan before you buy a house.
Prepaids
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 36 states and the District of Columbia.
Preliminary approval
Income and credit meet the guidelines of the
loan program you’ve chosen.
Principal
The amount of debt, not counting interest, left
on a loan.
In the event that you do not have a 20 percent
down payments, lenders will allow a smaller down payment-as low as
5 percent in some cases. With the smaller down payments loans, however,
borrowers are usually required to carry private mortgage insurance.
Private mortgage insurance will require an initial premium payment
of 1.0 percent to 5.0 percent of your mortgage amount and may require
an additional monthly fee depending on your loan's structure. On a
$75,000 house with a 10 percent down payments, this would mean either
an initial premium payment of $2,025 to $3,375, or an initial premium
of $675 to $1,130 combined with a monthly payment of $25 to $30.
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A Q-form is series of questions that you complete
in order to request a loan. What does the Q stand for? You choose
- quality, quick, qualification, questionnaire. Our unique Q-forms
have been designed by LendingTree specifically for the Internet to
make your experience as easy as possible.
Qualifying Ratios
The ratio of your fixed monthly expenses to your
gross monthly income, used to determine how much you can afford to
borrow. The fixed monthly expenses would include PITI along
with other obligations such as student loans, car loans, or credit
card payments.
A deed which transfers whatever interest the
maker of the deed may have in the particular parcel of land. A quitclaim
deed is often given to clear the title when the grantor's interest
in a property is questionable. By accepting such a deed the buyer
assumes all the risks. Such a deed makes no warranties as to the title,
but simply transfers to the buyer whatever interest the grantor has.
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Rate
The annual rate of interest on a loan, expressed
as a percentage of 100.
Rate Cap
A limit on how much the interest rate can change,
either at each adjustment period or over the life of the loan.
When you want a guarantee the rate you lock
it in. This will be the rate when you close.
Rates change constantly and the decision to lock in or not is yours.
Real Estate Broker
A middle man or agent who buys and sells real
estate for a company, firm, or individual on a commission basis. The
broker does not have title to the property, but generally represents
the owner.
Real Estate Settlement Procedures Act (RESPA)
RESPA is a federal law that allows consumers
to review information on known or estimated settlement costs once
after application and once prior to or at settlement. The law requires
lenders to furnish information after application only.
Realtor
A real estate broker or an associate holding
active membership in a local real estate board affiliated with the
National Association of Realtors.
Rebate
Compensation received from a wholesale lender
which can be used to cover closing costs or as a refund to the borrower.
Loan with rebates often carry higher interest rates than loans with
“points”
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.
Refinancing
The process of the same mortgagor paying off
one loan with the proceeds from another loan.
A report requested by your lender that utilizes
information from at least two of the three national credit bureaus
and information provided on your loan application.
Restrictive Covenants
Private restrictions limiting the use of real
property. Restrictive covenants are created by deed and may "run
with the land," binding all subsequent purchasers of the land,
or may be "personal" and binding only between the original
seller and buyer. The determination whether a covenant runs with the
land or is personal is governed by the language of the covenant, the
intent of the parties, and the law in the State where the land is
situated. Restrictive covenants that run with the land are encumbrances
and may affect the value and marketability of title. Restrictive covenants
may limit the density of buildings per acre, regulate size, style
or price range of buildings to be erected, or prevent particular businesses
from operating or minority groups from owning or occupying homes in
a given area. (This latter discriminatory covenant is unconstitutional
and has been declared unenforceable by the US Supreme Court.)
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 security.
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Property pledged to the creditor in case of a
default on a loan; see collateral.
Security Interest
The creditor's right to take property or a portion
of property offered as security.
Seller Carry Back
An agreement in which the owner of a property
provides financing, often in combination with an assumed mortgage.
Service Charge
A component of some finance charges, such as
the fee for triggering an overdraft checking account into use.
Servicing
All the steps and operations a lender perform
to keep a loan in good standing, such as collection of payments, payment
of taxes, insurance, property inspections and the like.
