Accelerated Depreciation:
|
A bookkeeping method that depreciates property faster in the early
years of ownership.
|
Acceleration Clause
|
A clause in your mortgage which allows the lender to demand payment
of the outstanding loan balance for various reasons. The most common reasons
for accelerating a loan are if the borrower defaults on the loan or transfers
title to another individual without informing the lender.
|
Acceptance:
|
The seller’s written approval of a buyer’s offer.
|
Acre:
|
A measurement of land equal to 43,500 square feet.
|
Add-On Interest:
|
The interest a borrower pays on the principal for the length of
the loan.
|
Adjustable-Rate Mortgage (ARM):
|
A loan with an interest rate that is periodically adjusted to reflect
changes in a specified financial index.
|
Adjustment Date
|
The date on which the interest rate changes for an adjustable-rate
mortgage (ARM).
|
Adjustment Period:
|
The time between interest rate adjustments on an adjustable-rate
mortgage.
|
Agency:
|
The relationship that exists between sellers and buyers and their
agents formed as a result of a written contract.
|
Agreement Of Sale:
|
The document initiated by a buyer for the seller to approve outlining
the details of price and terms of the transaction.
|
American Society Of Home Inspectors (ASHI):
|
Professional association of independent home inspectors whose members.
|
Americans With Disabilities Act:
|
A law that outlaws discrimination against a person with a disability
in housing, public accommodations, employment, government services, transportation
and telecommunications.
|
Amortization
|
The loan payment consists of a portion which will be applied to
pay the accruing interest on a loan, with the remainder being applied
to the principal. Over time, the interest portion decreases as the loan
balance decreases, and the amount applied to principal increases so that
the loan is paid off (amortized) in the specified time.
|
Amortization Schedule
|
A table which shows how much of each payment will be applied toward
principal and how much toward interest over the life of the loan. It also
shows the gradual decrease of the loan balance until it reaches zero.
|
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)
|
This is not the note rate on your loan. It is a value created according
to a government formula intended to reflect the true annual cost of borrowing,
expressed as a percentage. It works sort of like this, but not exactly,
so only use this as a guideline: deduct the closing costs from your loan
amount, then using your actual loan payment, calculate what the interest
rate would be on this amount instead of your actual loan amount. You will
come up with a number close to the APR. Because you are using the same
payment on a smaller amount, the APR is always higher than the actual
not rate on your loan.
|
Annuity:
|
A payment of a fixed amount to an investor at regularly established
intervals.
|
Application
|
The form used to apply for a mortgage loan, containing information
about a borrower’s income, savings, assets, debts, and more.
|
Appraisal
|
A written justification of the price paid for a property, primarily
based on an analysis of comparable sales of similar homes nearby.
|
Appraised Value
|
An opinion of a property's fair market value, based on an appraiser's
knowledge, experience, and analysis of the property. Since an appraisal
is based primarily on comparable sales, and the most recent sale is the
one on the property in question, the appraisal usually comes out at the
purchase price.
|
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.
|
ASHI (American Society Of Home Inspectors):
|
Association of independent home inspectors.
|
Asking Price:
|
The price the seller is asking for a property.
|
Assessed Value
|
The valuation placed on property by a public tax assessor for purposes
of taxation.
|
Assessment
|
The placing of a value on property for the purpose of taxation.
|
Assessor
|
A public official who establishes the value of a property for taxation
purposes.
|
Asset
|
Anything of monetary value that is owned by a person. Assets include
real property, personal property, and enforceable claims against others
(including bank accounts, stocks, mutual funds, and so on).
|
Assignment
|
The transfer of a mortgage from one person to another.
|
Assumable Mortgage
|
A mortgage that can be assumed by the buyer when a home is sold.
Usually, the borrower must "qualify" in order to assume the
loan.
|
Assumption
|
The transfer of the seller's existing mortgage to the buyer.
|
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.
|
Balance Sheet
|
A financial statement that shows assets, liabilities, and net worth
as of a specific date.
|
Balloon Loan:
|
A loan, in which monthly installments are not enough to repay the
full amount of the loan by the end of the loan term, therefore a final
lump sum payment is made at the end of the loan to cover the remaining
principal amount. Balloon payment:
|
Balloon Payment
|
The final lump sum payment that is made at the maturity date of
a balloon mortgage.
|
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
|
By filing in federal bankruptcy court, an individual or individuals
can restructure or relieve themselves of debts and liabilities. Bankruptcies
are of various types, but the most common for an individual seem to be
a "Chapter 7 No Asset" bankruptcy which relieves the borrower
of most types of debts. A borrower cannot usually qualify for an "A"
paper loan for a period of two years after the bankruptcy has been discharged
and requires the re-establishment of an ability to repay debt.
|
Basis Point:
|
A basis point is one one-hundredth of one percentage point. A loan
of 6.75 percent versus a loan of 6.82 percent has a difference of 7 basis
points.
|
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.
|
Bill Of Sale
|
A written document that transfers title to personal property. For
example, when selling an automobile to acquire funds which will be used
as a source of down payment or for closing costs, the lender will usually
require the bill of sale (in addition to other items) to help document
this source of funds.
|
Binder
|
A preliminary agreement, secured by the payment of an earnest money
deposit, under which a buyer offers to purchase real estate.
|
Biweekly Mortgage
|
A mortgage in which you make payments every two weeks instead of
once a month. The basic result is that instead of making twelve monthly
payments during the year, you make thirteen. The extra payment reduces
the principal, substantially reducing the time it takes to pay off a thirty
year mortgage. Note: there are independent companies that encourage you
to set up bi-weekly payment schedules with them on your thirty year mortgage.
They charge a set-up fee and a transfer fee for every payment. Your funds
are deposited into a trust account from which your monthly payment is
then made, and the excess funds then remain in the trust account until
enough has accrued to make the additional payment which will then be paid
to reduce your principle. You could save money by doing the same thing
yourself, plus you have to have faith that once you transfer money to
them that they will actually transfer your funds to your lender.
|
Blanket Mortgage
|
The mortgage that is secured by a cooperative project, as opposed
to the share loans on individual units within the project.
|
Bona Fide:
|
A legal term used to describe actions or persons that are honest
and in good faith.
|
Bond
|
An interest-bearing certificate of debt with a maturity date. An
obligation of a government or business corporation. A real estate bond
is a written obligation usually secured by a mortgage or a deed of trust.
|
Bond Market
|
Usually refers to the daily buying and selling of thirty year treasury
bonds. Lenders follow this market intensely because as the yields of bonds
go up and down, fixed rate mortgages do approximately the same thing.
The same factors that affect the Treasury Bond market also affect mortgage
rates at the same time. That is why rates change daily, and in a volatile
market can and do change during the day as well.
|
Boundary:
|
The dividing line between two adjacent properties.
|
Breach
|
A violation of any legal obligation.
|
Bridge Loan
|
Not used much anymore, bridge loans are obtained by those who have
not yet sold their previous property, but must close on a purchase property.
The bridge loan becomes the source of their funds for the down payment.
One reason for their fall from favor is that there are more and more second
mortgage lenders now that will lend at a high loan to value. In addition,
sellers often prefer to accept offers from buyers who have already sold
their property.
|
Broker
|
Broker has several meanings in different situations. Most Realtors
are "agents" who work under a "broker." Some agents
are brokers as well, either working form themselves or under another broker.
In the mortgage industry, broker usually refers to a company or individual
that does not lend the money for the loans themselves, but broker loans
to larger lenders or investors. (See the Home Loan Library that discusses
the different types of lenders). As a normal definition, a broker is anyone
who acts as an agent, bringing two parties together for any type of transaction
and earns a fee for doing so.
|
Buydown
|
Usually refers to a fixed rate mortgage where the interest rate
is "bought down" for a temporary period, usually one to three
years. After that time and for the remainder of the term, the borrower’s
payment is calculated at the note rate. In order to buy down the initial
rate for the temporary payment, a lump sum is paid and held in an account
used to supplement the borrower’s monthly payment. These funds usually
come from the seller (or some other source) as a financial incentive to
induce someone to buy their property. A "lender funded buydown"
is when the lender pays the initial lump sum. They can accomplish this
because the note rate on the loan (after the buydown adjustments) will
be higher than the current market rate. One reason for doing this is because
the borrower may get to "qualify" at the start rate and can
qualify for a higher loan amount. Another reason is that a borrower may
expect his earnings to go up substantially in the near future, but wants
a lower payment right now.
|
Buyers Agent:
|
Represents the buyer in a property purchase, as either a single
agent or as an exclusive buyer’s broker.
|
Bylaws:
|
Rules and regulations established by a homeowners association or
corporation to govern activities.
|
California Real Estate Inspection Association (CREIA):
|
Trade organization of home inspectors whose members must meet the
group’s education and performance requirements.
|
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.
|
Cancellation Clause:
|
Conditions under which either party may terminate an agreement.
|
Cap
|
Adjustable Rate Mortgages have fluctuating interest rates, but
those fluctuations are usually limited to a certain amount. Those limitations
may apply to how much the loan may adjust over a six month period, an
annual period, and over the life of the loan, and are referred to as "caps."
Some ARMs, although they may have a life cap, allow the interest rate
to fluctuate freely, but require a certain minimum payment which can change
once a year. There is a limit on how much that payment can change each
year, and that limit is also referred to as a cap.
|
Capital Improvement
|
Any structure or component erected as a permanent improvement to
real property that adds to its value and useful life.
|
Capital Improvement:
|
Any improvement that increase the value of a piece of property
or extends the property life.
|
Capitalization:
|
A formula used by investors to determine the value of a property
based on the income derived from the property.
|
Cash Flow:
|
Remaining cash from rental property gross income after deducting
operating expenses and loan payments.
|
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.
|
Certificate Of Deposit
|
A time deposit held in a bank which pays a certain amount of interest
to the depositor. (top)
|
Certificate Of Deposit Index
|
One of the indexes used for determining interest rate changes on
some adjustable rate mortgages. It is an average of what banks are paying
on certificates of deposit. (top)
|
Certificate Of Eligibility
|
A document issued by the Veterans Administration that certifies
a veteran’s eligibility for a VA loan.(top)
|
Certificate Of Occupancy:
|
A document stating that a property is suitable for habitation and
has met all building codes.
|
Certificate Of Reasonable Value (CRV)
|
Once the appraisal has been performed on a property being bought
with a VA loan, the Veterans Administration issues a CRV.
|
Certificate Of Sale:
|
Entitles the property buyer to receive a property deed after court
confirmation of the purchase of the property. The document is issued by
a judicial sale.
|
Chain Of Title
|
An analysis of the transfers of title to a piece of property over
the years.
|
Change Frequency
|
The frequency (in months) of payment and/or interest rate changes
in an adjustable-rate mortgage (ARM).
|
Classified Property Tax:
|
A tax rate that varies depending on the use of the property.
|
Clear Title
|
A title that is free of liens or legal questions as to ownership
of the property.
|
Closing
|
This has different meanings in different states. In some states
a real estate transaction is not consider "closed" until the
documents record at the local recorders office. In others, the "closing"
is a meeting where all of the documents are signed and money changes hands.
|
Closing Costs
|
Closing costs are separated into what are called "non-recurring
closing costs" and "pre-paid items." Non-recurring closing
costs are any items which are paid just once as a result of buying the
property or obtaining a loan. "Pre-paids" are items which recur
over time, such as property taxes and homeowners insurance. A lender makes
an attempt to estimate the amount of non-recurring closing costs and prepaid
items on the Good Faith Estimate which they must issue to the borrower
within three days of receiving a home loan application.
|
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
|
Any conditions revealed by a title search that adversely affect
the title to real estate. Usually clouds on title cannot be removed except
by deed, release, or court action.
|
Co-Borrower
|
IAn additional individual who is both obligated on the loan and
is on title to the property.
|
Collateral
|
In a home loan, the property is the collateral. The borrower risks
losing the property if the loan is not repaid according to the terms of
the mortgage or deed of trust.
|
Collection
|
When a borrower falls behind, the lender contacts them in an effort
to bring the loan current. The loan goes to "collection." As
part of the collection effort, the lender must mail and record certain
documents in case they are eventually required to foreclose on the property.
|
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.
See endorser.
|
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 unpaid principal balances of all the mortgages on a property
(first and second usually) divided by the property's appraised value.
|
Commercial Property:
|
An area zoned for business.
|
Commission
|
Most salespeople earn commissions for the work that they do and
there are many sales professionals involved in each transaction, including
Realtors, loan officers, title representatives, attorneys, escrow representative,
and representatives for pest companies, home warranty companies, home
inspection companies, insurance agents, and more. The commissions are
paid out of the charges paid by the seller or buyer in the purchase transaction.
Realtors generally earn the largest commissions, followed by lenders,
then the others.
|
Commitment Letter
|
A formal offer by a lender stating the terms under which it agrees
to lend money to a home buyer. Also known as a "loan commitment."
|
Commitment:
|
Commitment by a lender to fund a loan with specific terms for a
specified period.
|
Common Area Assessments
|
In some areas they are called Homeowners Association Fees. They
are charges paid to the Homeowners Association by the owners of the individual
units in a condominium or planned unit development (PUD) and are generally
used to maintain the property and common areas. (top)
|
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.
|
Common Law
|
An unwritten body of law based on general custom in England and
used to an extent in some states.
|
Common-Area Assessments:
|
Fees paid to maintain, operate, improve or, maintain common areas
by condominium owners.
|
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.
|
Community Property:
|
A classification of property specific to certain states. Relates
to property accumulated by a husband and wife.
|
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.
|
Compound Interest:
|
Interest paid on the principal balance of a loan and on the accrued
and unpaid interest of the loan.
|
Condominium
|
A type of ownership in real property where all of the owners own
the property, common areas and buildings together, with the exception
of the interior of the unit to which they have title. Often mistakenly
referred to as a type of construction or development, it actually refers
to the type of ownership.
|
Condominium Conversion
|
Changing the ownership of an existing building (usually a rental
project) to the condominium form of ownership.
|
Condominium Hotel
|
A condominium project that has rental or registration desks, short-term
occupancy, food and telephone services, and daily cleaning services and
that is operated as a commercial hotel even though the units are individually
owned. These are often found in resort areas like Hawaii.
|
Conforming Loan
|
The current conforming loan limit is $300,700 and below. Conforming
loan limits change annually.
|
Conservator:
|
A court-appointed guardian.
|
Construction Loan
|
A short-term, interim loan for financing the cost of construction.
The lender makes payments to the builder at periodic intervals as the
work progresses.
|
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.
|
Contiguous Lots:
|
Properties that are adjoined.
|
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.
|
Contract
|
An oral or written agreement to do or not to do a certain thing.
|
Contract To Purchase:
|
This is also known as an agreement of sale. Details the purchase
price and conditions of the transaction by the buyer and is accepted by
the seller.
|
Conventional Loan:
|
A long-term loan made by a lender for the purchase of a home.
|
Conventional Mortgage
|
Refers to home loans other than government loans (VA and FHA).
|
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.
|
Conveyance Tax:
|
A tax imposed on the transfer of property.
|
Conveyance:
|
The transfer of title of property.
|
Cooperating Broker:
|
A real estate broker who finds a buyer for property that was listed
by another broker.
|
Cooperative (Co-Op)
|
A type of multiple ownership in which the residents of a multiunit
housing complex own shares in the cooperative corporation that owns the
property, giving each resident the right to occupy a specific apartment
or unit.
|
Corporate Relocation
|
Arrangements under which an employer moves an employee to another
area as part of the employer's normal course of business or under which
it transfers a substantial part or all of its operations and employees
to another area because it is relocating its headquarters or expanding
its office capacity.
|
Cost Of Funds Index (COFI)
|
One of the indexes that is used to determine interest rate changes
for certain adjustable-rate mortgages. It represents the weighted-average
cost of savings, borrowings, and advances of the financial institutions
such as banks and savings & loans, in the 11th District of the Federal
Home Loan Bank.
|
Covenant
|
A clause in a mortgage that obligates or restricts the borrower
and that, if violated, can result in foreclosure.
|
Credit
|
An agreement in which a borrower receives something of value in
exchange for a promise to repay the lender at a later date.
|
Credit History
|
A record of an individual's open and fully repaid debts. A credit
history helps a lender to determine whether a potential borrower has a
history of repaying debts in a timely manner.
|
Credit Rating:
|
The credit worthiness of an individual based upon past credit history
and financial status.
|
Credit Report:
|
Details of an individual's credit history, employment and residence
history. Used by lenders to determine the credit worthiness of an individual.
|
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:
|
The loan of money by a lender to buyer for a commitment to repay
the loan in a certain period of time.
|
Creditor:
|
An institution or individual to whom a debt is owed.
|
Days On The Market:
|
The time period from when a property is listed for sale and then
sold or taken off the market.
|
Debt:
|
An amount owed by one person to another.
|
Deed
|
The legal document conveying title to a property.
|
Deed Of Trust
|
Some states, like California, do not record mortgages. Instead,
they record a deed of trust which is essentially the same thing.
|
Deed:
|
The legal document transferring ownership of a piece of property.
|
Deed-In-Lieu
|
Short for "deed in lieu of foreclosure," this conveys
title to the lender when the borrower is in default and wants to avoid
foreclosure. The lender may or may not cease foreclosure activities if
a borrower asks to provide a deed-in-lieu. Regardless of whether the lender
accepts the deed-in-lieu, the avoidance and non-repayment of debt will
most likely show on a credit history. What a deed-in-lieu may prevent
is having the documents preparatory to a foreclosure being recorded and
become a matter of public record.
|
Default
|
Failure to make the mortgage payment within a specified period
of time. For first mortgages or first trust deeds, if a payment has still
not been made within 30 days of the due date, the loan is considered to
be in default.
|
Delinquency
|
Failure to make mortgage payments when mortgage payments are due.
For most mortgages, payments are due on the first day of the month. Even
though they may not charge a "late fee" for a number of days,
the payment is still considered to be late and the loan delinquent. When
a loan payment is more than 30 days late, most lenders report the late
payment to one or more credit bureaus.
|
Delinquent Mortgage:
|
A mortgage where the borrower is delinquent on its payments.
|
Deposit
|
A sum of money given in advance of a larger amount being expected
in the future. Often called in real estate as an "earnest money deposit."
|
Depreciation
|
A decline in the value of property; the opposite of appreciation.
Depreciation is also an accounting term which shows the declining monetary
value of an asset and is used as an expense to reduce taxable income.
Since this is not a true expense where money is actually paid, lenders
will add back depreciation expense for self-employed borrowers and count
it as income.
|
Disclosure:
|
Disclosure statement to a potential buyer listing information relevant
to a piece of property.
|
Discount Points
|
In the mortgage industry, this term is usually used in only in
reference to government loans, meaning FHA and VA loans. Discount points
refer to any "points" paid in addition to the one percent loan
origination fee. A "point" is one percent of the loan amount.
|
Discount Points:
|
Fees paid by the borrower to the lender to get a lower interest
rate. One point is equal to one percent of the loan.
|
Distressed Property:
|
Property that is in poor physical or financial condition.
|
Domicile:
|
An individual’s primary or permanent home.
|
Down Payment:
|
The difference between the purchase price of a piece of property
and the amount to be financed by the lender.
|
Dual Agency:
|
When the real estate agent or broker represents both the buyer
and seller in a transaction.
|
Due-On-Sale Clause:
|
Requirement that the outstanding loan amount on a piece of property
must be paid when the property is sold.
|
Due-On-Sale Provision
|
A provision in a mortgage that allows the lender to demand repayment
in full if the borrower sells the property that serves as security for
the mortgage.
|
Earnest Money:
|
Money provided by the buyer with an offer to purchase a piece of
property. Also known a deposit.
|
Easement:
|
A right given to a third party allowing the use of a portion of
a property for specific purposes.
|
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.
|
Eminent Domain
|
The right of a government to take private property for public use
upon payment of its fair market value. Eminent domain is the basis for
condemnation proceedings.
|
Encroachment:
|
Structures that extend into the property of another owner.
|
Encumbrance
|
Anything that affects or limits the fee simple title to a property,
such as mortgages, leases, easements, or restrictions.
|
Endorser
|
A person who signs ownership interest over to another party. Contrast
with co-maker.
|
Equal Credit Opportunity Act (ECOA)
|
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
|
A homeowner's financial interest in a property. Equity is the difference
between the fair market value of the property and the amount still owed
on its mortgage and other liens.
|
Escrow
|
An item of value, money, or documents deposited with a third party
to be delivered upon the fulfillment of a condition. For example, the
deposit by a borrower with the lender of funds to pay taxes and insurance
premiums when they become due, or the deposit of funds or documents with
an attorney or escrow agent to be disbursed upon the closing of a sale
of real estate.
|
Escrow Account
|
Once you close your purchase transaction, you may have an escrow
account or impound account with your lender. This means the amount you
pay each month includes an amount above what would be required if you
were only paying your principal and interest. The extra money is held
in your impound account (escrow account) for the payment of items like
property taxes and homeowner’s insurance when they come due. The lender
pays them with your money instead of you paying them yourself.
|
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 Closing:
|
Escrow closes when all conditions of a real estate transaction
are fulfilled and title to the property is transferred to the buyer.
|
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. Known as "impounds"
or "reserves" in some states.
|
Escrow:
|
A process where documents and money for a real estate transaction
are held by a third party to ensure that all conditions of the sale are
met.
|
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.
|
Exclusive Listing
|
A written contract that gives a licensed real estate agent the
exclusive right to sell a property for a specified time.
|
Executor
|
A person named in a will to administer an estate. The court will
appoint an administrator if no executor is named. "Executrix"
is the feminine form.
|
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.
|
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.
|
Fannie Mae (FNMA)
|
The Federal National Mortgage Association, which is a congressionally
chartered, shareholder-owned company that is the nation's largest supplier
of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie
Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.
|
Fannie Mae's Community Home Buyer's Program
|
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.
|
Federal Housing Administration (FHA)
|
An agency of the U.S. Department of Housing and Urban Development
(HUD). Its main activity is the insuring of residential mortgage loans
made by private lenders. The FHA sets standards for construction and underwriting
but does not lend money or plan or construct housing.
|
Fee Simple
|
The greatest possible interest a person can have in real estate.
|
Fee Simple Estate
|
An unconditional, unlimited estate of inheritance that represents
the greatest estate and most extensive interest in land that can be enjoyed.
It is of perpetual duration. When the real estate is in a condominium
project, the unit owner is the exclusive owner only of the air space within
his or her portion of the building (the unit) and is an owner in common
with respect to the land and other common portions of the property.
|
FHA Loans:
|
Mortgages insured by the Federal Housing Administration. FHA provides
for low rate mortgages to buyer who can make a down payment as small as
3 percent. FHA also operates loan plans for investors and buyers or rural
property.
|
FHA Mortgage
|
A mortgage that is insured by the Federal Housing Administration
(FHA). Along with VA loans, an FHA loan will often be referred to as a
government loan.
|
Financed Closing Costs:
|
Closing costs that you wish to avoid paying out of pocket can be
financed by adding them to the loan amount.
|
Finder's Fee
|
A fee or commission paid to a mortgage broker for finding a mortgage
loan for a prospective borrower.
|
Firm Commitment
|
A lender’s agreement to make a loan to a specific borrower on a
specific property.
|
First Adjustment
|
When you can expect the first rate adjustment in your ARM loan.
|
First Mortgage
|
The mortgage that is in first place among any loans recorded against
a property. Usually refers to the date in which loans are recorded, but
there are exceptions.
|
Fixed Installment:
|
The monthly payment on a home loan.
|
Fixed-Rate Mortgage (FRM)
|
A mortgage in which the interest rate does not change during the
entire term of the loan.
|
Fixture
|
Personal property that becomes real property when attached in a
permanent manner to real estate.
|
Flat Fee:
|
A set fee charged by a broker instead of a commission percent.
|
Flood Insurance
|
Insurance that compensates for physical property damage resulting
from flooding. It is required for properties located in federally designated
flood areas.
|
For Sale By Owner (FSBO):
|
The seller acts as his own sales agent and handles the sales process
directly with the buyer or buyer’s agent.
|
Foreclosure
|
The legal process by which a borrower in default under a mortgage
is deprived of his or her interest in the mortgaged property. This usually
involves a forced sale of the property at public auction with the proceeds
of the sale being applied to the mortgage debt.
|
Fully Amortized ARM (Adjustable-Rate Mortgage)
|
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.
|
Good–Faith Estimate:
|
An estimate from a lender to a borrower that shows the cost to
the borrower including loan processing fees and inspection fees.
|
Government Loan (Mortgage)
|
A mortgage that is insured by the Federal Housing Administration
(FHA) or guaranteed by the Department of Veterans Affairs (VA) or the
Rural Housing Service (RHS). Mortgages that are not government loans are
classified as conventional loans.
|
Government National Mortgage Association (Ginnie Mae)
|
A government-owned corporation within the U.S. Department of Housing
and Urban Development (HUD). Created by Congress on September 1, 1968,
GNMA performs the same role as Fannie Mae and Freddie Mac in providing
funds to lenders for making home loans. The difference is that Ginnie
Mae provides funds for government loans (FHA and VA)
|
Graduated-Payment Mortgage (GPM):
|
A mortgage that requires a borrower to make larger monthly payments
over the term of the loan.
|
Grantee
|
The person to whom an interest in real property is conveyed.
|
Grantor
|
The person conveying an interest in real property
|
Gross Income:
|
The total income for a household before taxes or expenses are deducted.
|
Guarantee Mortgage:
|
A loan guaranteed by a third party.
|
Hazard Insurance
|
Insurance coverage that in the event of physical damage to a property
from fire, wind, vandalism, or other hazards.
|
High Density:
|
The concentration of housing units in a specific area on a specific
property.
|
Home Equity Conversion Mortgage (HECM)
|
Usually referred to as a reverse annuity mortgage, what makes this
type of mortgage unique is that instead of making payments to a lender,
the lender makes payments to you. It enables older home owners to convert
the equity they have in their homes into cash, usually in the form of
monthly payments. Unlike traditional home equity loans, a borrower does
not qualify on the basis of income but on the value of his or her home.
In addition, the loan does not have to be repaid until the borrower no
longer occupies the property.
|
Home Equity Line Of Credit
|
a credit line that is secured by a second deed of trust on a house.
Equity lines of credit are revolving accounts that work like a credit
card, which can be paid down or charged up for the term of the loan. The
minimum payment due each month is interest only.
|
Home Equity Loan
|
a loan secured by a second deed of trust on a house, typically
used as a home improvement loan.
|
Home Inspection
|
A thorough inspection by a professional that evaluates the structural
and mechanical condition of a property. A satisfactory home inspection
is often included as a contingency by the purchaser.
|
Home Price:
|
The sale price agreed upon by the buyer and seller.
|
Homeowners' Association
|
A nonprofit association that manages the common areas of a planned
unit development (PUD) or condominium project. In a condominium project,
it has no ownership interest in the common elements. In a PUD project,
it holds title to the common elements.
|
Homeowner's Insurance
|
An insurance policy that combines personal liability insurance
and hazard insurance coverage for a dwelling and its contents.
|
Homeowner's Warranty
|
A type of insurance often purchased by homebuyers that will cover
repairs to certain items, such as heating or air conditioning, should
they break down within the coverage period. The buyer often requests the
seller to pay for this coverage as a condition of the sale, but either
party can pay.
|
Housing Discrimination:
|
An illegal practice of denying the rights to buy or rent a home
to and individual or group based on race, color, religion, national origin,
sex, disability or family status.
|
Housing Ratio
|
The ratio of the monthly housing payment 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
|
The U.S. Department of Housing and Urban Development.
|
HUD Median Income
|
Median family income for a particular county or metropolitan statistical
area (MSA), as estimated by the Department of Housing and Urban Development
(HUD).
|
HUD-1 Settlement Statement
|
A document that provides an itemized listing of the funds that
were paid at closing. Items that appear on the statement include real
estate commissions, loan fees, points, and initial escrow (impound) amounts.
Each type of expense goes on a specific numbered line on the sheet. The
totals at the bottom of the HUD-1 statement define the seller's net proceeds
and the buyer's net payment at closing. It is called a HUD1 because the
form is printed by the Department of Housing and Urban Development (HUD).
The HUD1 statement is also known as the "closing statement"
or "settlement sheet."
|
Impound Account
|
An impound account is an account established by the lender to pay
a borrower's tax and insurance costs. The borrower's monthly mortgage
payment is then increased to cover these costs, with the additional amount
being held in the impound account and disbursed by the lender when the
payments are due. Lenders typically prefer this arrangement because it
reduces the possibility of a lapse in tax or insurance payments that could
diminish the value of the lender's investment (your house). Therefore,
while it is often possible to opt out of an impound account it will result
in additional charges.
|
Impounds:
|
A portion of the monthly loan fee that is set aside in an account
and used to pay for insurance, property taxes and private mortgage insurance.
|
Income Property:
|
Property used to generate income and is also occupied by the owner.
|
Index
|
A published interest rate to which the interest rate on an Adjustable
Rate Mortgage (ARM) is tied. Some commonly used indices include the 1
Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds
(COFI).
|
Initial Rate Cap:
|
Some adjustable-rate loans put a specific limit on the maximum
amount the interest rate may increase after the initial interest of the
loan has expired.
|
Inspection Fee:
|
A fee paid to determine the current physical condition of a home.
|
Inspection Report:
|
An examination of a home covering the exterior, foundation, plumbing,
framing, electrical, heating and air conditioning, fireplace, bathroom,
roofing kitchen and interior.
|
Interest Accrual Rate:
|
Rate at which interest accrues on a mortgage.
|
Interest Paid Over The Life Of The Loan:
|
The total amount of interest paid to the lender for the use of
the money during the loan period.
|
Interest Rate:
|
The interest rate expressed as percentage that is charged for a
loan.
|
Interest:
|
The fee borrowers pay to obtain a loan.
|
Interest-Only Loan:
|
The monthly payments only pay for the interest that accrues each
month on the loan, therefore the outstanding loan balance does not decline.
|
Investment Property:
|
Real estate property that is used to generate income.
|
Joint Tenancy
|
A form of ownership or taking title to property which means each
party owns the whole property and that ownership is not separate. In the
event of the death of one party, the survivor owns the property in its
entirety.
|
Judgment
|
A decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's real
property as collateral for the judgment's creditor.
|
Judicial Foreclosure
|
A type of foreclosure proceeding used in some states that is handled
as a civil lawsuit and conducted entirely under the auspices of a court.
Other states use non-judicial foreclosure.
|
Jumbo Loan
|
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits,
currently at $227,150. Also called a nonconforming loan. Freddie Mac and
Fannie Mae loans are referred to as conforming loans.
|
Jumbo Mortgage
|
The current loan limit for a conforming loan is $300,700. Loan
amounts of $300,701 and above are considered non-conforming or jumbo mortgages
and are usually subject to higher pricing.
|
Late Charge
|
The penalty a borrower must pay when a payment is made a stated
number of days. On a first trust deed or mortgage, this is usually fifteen
days.
|
Late Payment:
|
A payment received by a lender after the due date has passed.
|
Lease
|
A written agreement between the property owner and a tenant that
stipulates the payment and conditions under which the tenant may possess
the real estate for a specified period of time.
|
Lease Option
|
An alternative financing option that allows home buyers to lease
a home with an option to buy. Each month's rent payment may consist of
not only the rent, but an additional amount which can be applied toward
the down payment on an already specified price.
|
Leasehold Estate
|
A way of holding title to a property wherein the mortgagor does
not actually own the property but rather has a recorded long-term lease
on it.
|
Legal Description
|
A property description, recognized by law, that is sufficient to
locate and identify the property without oral testimony.
|
Lender
|
A term which can refer to the institution making the loan or to
the individual representing the firm. For example, loan officers are often
referred to as "lenders."
|
Letter Of Intent:
|
Buyer’s statement that he intends to purchase a piece of property
for a specified amount on a certain date.
|
Liabilities
|
A person's financial obligations. Liabilities include long-term
and short-term debt, as well as any other amounts that are owed to others.
|
Liability Insurance
|
Insurance coverage that offers protection against claims alleging
that a property owner's negligence or inappropriate action resulted in
bodily injury or property damage to another party. It is usually part
of a homeowner’s insurance policy.
|
LIBOR
|
LIBOR stands for London Inter-Bank Offered Rate. This is a favorable
interest rate offered for U.S. dollar deposits between a group of London
banks. There are several different LIBOR rates, defined by the maturity
of their deposit. The LIBOR is an international index that follows world
economic conditions. LIBOR-indexed ARMs offer borrowers aggressive initial
rates and have proven to be competitive with popular ARM indexes like
the Treasury bill.
|
Lien
|
A legal claim against a property that must be paid off when the
property is sold. A mortgage or first trust deed is considered a lien.
|
Life Cap
|
For an adjustable-rate mortgage (ARM), a limit on the amount that
the enterest rate can increase or decrease over the life of the mortgage.
|
Line Of Credit
|
An agreement by a commercial bank or other financial institution
to extend credit up to a certain amount for a certain time to a specified
borrower.
|
Liquid Asset
|
A cash asset or an asset that is easily converted into cash.
|
Listing Agent:
|
A broker or sales agent who contracts with a seller to handle the
sale and marketing of piece of property.
|
Listing:
|
A piece of property placed on the market by a listing agent.
|
Loan
|
A sum of borrowed money (principal) that is generally repaid with
interest.
|
Loan Application Fee:
|
A fee charged by lenders to borrowers for making a loan application.
|
Loan Application:
|
The beginning step in submitting an application for a home loan.
Requires the borrowers to itemize their financial information.
|
Loan Officer
|
Also referred to by a variety of other terms, such as lender, loan
representative, loan "rep," account executive, and others. The
loan officer serves several functions and has various responsibilities:
they solicit loans, they are the representative of the lending institution,
and they represent the borrower to the lending institution.
|
Loan Officer:
|
A representative of a lender who is empowered to act on behalf
of the lender.
|
Loan Origination
|
How a lender refers to the process of obtaining new loans.
|
Loan Origination Points
|
- Charge by a lender or broker connected with originating a loan.
This is different from discount points which are used to buy down the
rate of interest.
|
Loan Processing Fee:
|
A fee charged by some lenders for the gathering of information
necessary to enable the lender to process the loan.
|
Loan Servicing
|
After you obtain a loan, the company you make the payments to is
"servicing" your loan. They process payments, send statements,
manage the escrow/impound account, provide collection efforts on delinquent
loans, ensure that insurance and property taxes are made on the property,
handle pay-offs and assumptions, and provide a variety of other services.
|
Loan To Value Ratio (LTV)
|
The unpaid principal balance of the mortgage on a property divided
by the property's appraised value. The LTV will affect programs available
to the borrower and generally, the lower the LTV the more favorable the
terms of the programs offered by lenders.
|
Loan-To-Value (LTV)
|
The percentage relationship between the amount of the loan and
the appraised value or sales price (whichever is lower).
|
Loan-To-Value Ratio:
|
The ratio of the total loan amount to the value of the property.
For lending purposes, the value is the purchase price or the appraised
valve, whichever is lower.
|
Lock Period
|
The amount of time that a lender will guarantee a loan's interest
rate. Once you've locked in the interest rate on a loan, the lender will
guarantee that rate for a certain period of time, usually for 30, 45 or
60 days.
|
Lock-In
|
An agreement in which the lender guarantees a specified interest
rate for a certain amount of time at a certain cost.
|
Low-Down-Payment Loan:
|
A mortgage that requires only a small down payment.
|
Maintenance Fee:
|
The monthly fees assessed to members of a homeowner’s association
to pay for the maintenance or repair of common areas.
|
Margin
|
The number of percentage points a lender adds to the index value
to calculate the ARM interest rate at each adjustment period.
|
Market Value:
|
The price that a property is sold for at a specific point in time.
|
Maturity
|
The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable.
|
Median Price:
|
The price of a home that is in the middle of the total number or
homes for sale in an area.
|
Merged Credit Report
|
A credit report which reports the raw data pulled from two or more
of the major credit repositories. Contrast with a Residential Mortgage
Credit Report (RMCR) or a standard factual credit report.
|
Mixed-Income Housing:
|
A neighborhood that has homes of widely varying price ranges.
|
MLS (Multiple Listing Service):
|
A service that contains the listings of available homes in an area
in one directory or database. Does not contain (FSBO) For-Sale-By-Owner
properties.
|
Modification
|
Occasionally, a lender will agree to modify the terms of your mortgage
without requiring you t refinance. If any changes are made, it is called
a modification.
|
Monthly Association Dues:
|
Homeowners that are part of a townhouse or condominium complex
may required to pay a monthly association dues for maintenance and repair
of common areas.
|
Mortgage
|
A legal document that pledges a property to the lender as security
for payment of a debt. Instead of mortgages, some states use First Trust
Deeds.[
|
Mortgage Banker
|
For a more complete discussion of mortgage banker, see "Types
of Lenders." A mortgage banker is generally assumed to originate
and fund their own loans, which are then sold on the secondary market,
usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather
loosely apply this term to themselves, whether they are true mortgage
bankers or simply mortgage brokers or correspondents.
|
Mortgage Broker
|
A mortgage company that originates loans, then places those loans
with a variety of other lending institutions with whom they usually have
pre-established relationships.
|
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.
|
Mortgage Insurance (MI)
|
Insurance that covers the lender against some of the losses incurred
as a result of a default on a home loan. Often mistakenly referred to
as PMI, which is actually the name of one of the larger mortgage insurers.
Mortgage insurance is usually required in one form or another on all loans
that have a loan-to-value higher than eighty percent. Mortgages above
80% LTV that call themselves "No MI" are usually a made at a
higher interest rate. Instead of the borrower paying the mortgage insurance
premiums directly, they pay a higher interest rate to the lender, which
then pays the mortgage insurance themselves. Also, FHA loans and certain
first-time homebuyer programs require mortgage insurance regardless of
the loan-to-value.
|
Mortgage Insurance Premium (MIP)
|
The amount paid by a mortgagor for mortgage insurance, either to
a government agency such as the Federal Housing Administration (FHA) or
to a private mortgage insurance (MI) company.
|
Mortgage Life And Disability Insurance
|
A type of term life insurance often bought by borrowers. The amount
of coverage decreases as the principal balance declines. Some policies
also cover the borrower in the event of disability. In the event that
the borrower dies while the policy is in force, the debt is automatically
satisfied by insurance proceeds. In the case of disability insurance,
the insurance will make the mortgage payment for a specified amount of
time during the disability. Be careful to read the terms of coverage,
however, because often the coverage does not start immediately upon the
disability, but after a specified period, sometime forty-five days.
|
Mortgage:
|
A legal document that specified the amount of money paid for a
home with the specified interest rate. The property is the collateral
for the mortgage.
|
Mortgagee
|
The person or company who receives the mortgage as a pledge for
repayment of the loan. The mortgage lender.
|
Mortgagor
|
The mortgage borrower who gives the mortgage as a pledge to repay.
|
Move-In Condition:
|
A house that is in move-in condition for a new occupant.
|
Multidwelling Units
|
Properties that provide separate housing units for more than one
family, although they secure only a single mortgage.
|
Multiple Offers:
|
When a seller gets multiple offers to purchase his property.
|
NAR (National Association Of Realtors):
|
(NAR) National Association of Realtors is the leading trade organization
for real estate agents and brokers who become members by agreeing to abide
by the organization’s code of ethics.
|
Negative Amortization
|
Some adjustable rate mortgages allow the interest rate to fluctuate
independently of a required minimum payment. If a borrower makes the minimum
payment it may not cover all of the interest that would normally be due
at the current interest rate. In essence, the borrower is deferring the
interest payment, which is why this is called "deferred interest."
The deferred interest is added to the balance of the loan and the loan
balance grows larger instead of smaller, which is called negative amortization.
|
Net Cash Flow:
|
The income from investment property that remains after all expenses
are subtracted.
|
No Cash-Out Refinance
|
A refinance transaction which is not intended to put cash in the
hand of the borrower. Instead, the new balance is caculated to cover the
balance due on the current loan and any costs associated with obtaining
the new mortgage. Often referred to as a "rate and term refinance."
|
No Documentation Loan:
|
A loan application that does not require income verification. Often
this is granted with the buyer is providing a large down payment.
|
No-Cost Loan
|
Many lenders offer loans that you can obtain at "no cost."
You should inquire whether this means there are no "lender"
costs associated with the loan, or if it also covers the other costs you
would normally have in a purchase or refinance transactions, such as title
insurance, escrow fees, settlement fees, appraisal, recording fees, notary
fees, and others. These are fees and costs which may be associated with
buying a home or obtaining a loan, but not charged directly by the lender.
Keep in mind that, like a "no-point" loan, the interest rate
will be higher than if you obtain a loan that has costs associated with
it.
|
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 loans usually incur a rate
and origination fee premium. The current non-conforming loan limit is
$300,701 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.
|
Note Rate
|
The interest rate stated on a mortgage note.
|
Notice Of Default
|
A formal written notice to a borrower that a default has occurred
and that legal action may be taken.
|
Online Real Estate Listings:
|
Properties listed for sale on the Internet.
|
Open House:
|
A marketing tool used by agents whereby they open a house for viewing.
|
Open Listing:
|
Property given to more than one broker to market at the same time.
|
Original Principal Balance
|
The total amount of principal owed on a mortgage before any payments
are made.
|
Origination Fee
|
On a government loan the loan origination fee is one percent of
the loan amount, but additional points may be charged which are called
"discount points." One point equals one percent of the loan
amount. On a conventional loan, the loan origination fee refers to the
total number of points a borrower pays.
|
Owner Financing
|
A property purchase transaction in which the property seller provides
all or part of the financing.
|
Partial Payment
|
A payment that is not sufficient to cover the scheduled monthly
payment on a mortgage loan. Normally, a lender will not accept a partial
payment, but in times of hardship you can make this request of the loan
servicing collection department.
|
Payment Cap:
|
A legal limit on the amount a month payment can increase on an
adjustable-rate mortgage.
|
Payment Change Date
|
The date when a new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment
change date occurs in the month immediately after the interest rate adjustment
date.
|
Periodic Cap
|
The maximum rate increase for a specific period for a specific
loan (ARM) only.
|
Periodic Payment Cap
|
For an adjustable-rate mortgage where the interest rate and the
minimum payment amount fluctuate independently of one another, this is
a limit on the amount that payments can increase or decrease during any
one adjustment period.
|
Periodic Rate Cap
|
For an adjustable-rate mortgage, a limit on the amount that the
interest rate can increase or decrease during any one adjustment period,
regardless of how high or low the index might be.
|
Personal Property
|
Any property that is not real property.
|
PITI
|
This stands for principal, interest, taxes and insurance. If you
have an "impounded" loan, then your monthly payment to the lender
includes all of these and probably includes mortgage insurance as well.
If you do not have an impounded account, then the lender still calculates
this amount and uses it as part of determining your debt-to-income ratio.
|
PITI Reserves
|
A cash amount that a borrower must have on hand after making a
down payment and paying all closing costs for the purchase of a home.
The principal, interest, taxes, and insurance (PITI) reserves must equal
the amount that the borrower would have to pay for PITI for a predefined
number of months.
|
Planned Unit Development (PUD)
|
A type of ownership where individuals actually own the building
or unit they live in, but common areas are owned jointly with the other
members of the development or association. Contrast with condominium,
where an individual actually owns the airspace of his unit, but the buildings
and common areas are owned jointly with the others in the development
or association.
|
PMI (Private Mortgage Insurance):
|
Required by lenders if the down payment or home equity percentage
is less than 20 percent of the home value.
|
Points
|
Fees paid to lenders. 1 point = 1% of the loan amount. On a $100,000
loan 1 point is $1000. Points may be further classified into origination
points or discount points.
|
Power Of Attorney
|
A legal document that authorizes another person to act on one’s
behalf. A power of attorney can grant complete authority or can be limited
to certain acts and/or certain periods of time.
|
Pre-Approval
|
A loosely used term which is generally taken to mean that a borrower
has completed a loan application and provided debt, income, and savings
documentation which an underwriter has reviewed and approved. A pre-approval
is usually done at a certain loan amount and making assumptions about
what the interest rate will actually be at the time the loan is actually
made, as well as estimates for the amount that will be paid for property
taxes, insurance and others. A pre-approval applies only to the borrower.
Once a property is chosen, it must also meet the underwriting guidelines
of the lender. Contrast with pre-qualification
|
Prepaid Fees:
|
Funds the lender collect from the borrower to pay specified recurring
items in advance.
|
Prepaids
|
Those expenses of property which are paid in advance of their due
date and will usually be prorated upon sale, such as taxes, insurance,
rent, etc.
|
Prepayment
|
Any amount paid to reduce the principal balance of a loan before
the due date. Payment in full on a mortgage that may result from a sale
of the property, the owner's decision to pay off the loan in full, or
a foreclosure. In each case, prepayment means payment occurs before the
loan has been fully amortized.
|
Prepayment Penalty
|
A charge imposed by a mortgage lender on a borrower who wants to
pay off part or all of a mortgage loan in advance of schedule.
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Pre-Qualification
|
This usually refers to the loan officer’s written opinion of the
ability of a borrower to qualify for a home loan, after the loan officer
has made inquiries about debt, income, and savings. The information provided
to the loan officer may have been presented verbally or in the form of
documentation, and the loan officer may or may not have reviewed a credit
report on the borrower.
|
Pre-Sold Home:
|
Homes that are sold prior to being built.
|
Prime Rate
|
The interest rate that banks charge to their preferred customers.
Changes in the prime rate are widely publicized in the news media and
are used as the indexes in some adjustable rate mortgages, especially
home equity lines of credit. Changes in the prime rate do not directly
affect other types of mortgages, but the same factors that influence the
prime rate also affect the interest rates of mortgage loans.
|
Principal
|
The amount borrowed or remaining unpaid. The part of the monthly
payment that reduces the remaining balance of a mortgage.
|
Principal And Interest:
|
The amount of the total repayment during the loan’s term.
|
Principal Balance
|
The outstanding balance of principal on a mortgage. The principal
balance does not include interest or any other charges. See remaining
balance.
|
Principal, Interest, Taxes, And Insurance (PITI)
|
The four components of a monthly mortgage payment on impounded
loans. Principal refers to the part of the monthly payment that reduces
the remaining balance of the mortgage. Interest is the fee charged for
borrowing money. Taxes and insurance refer to the amounts that are paid
into an escrow account each month for property taxes and mortgage and
hazard insurance.
|
Private Mortgage Insurance (MI)
|
Mortgage insurance that is provided by a private mortgage insurance
company to protect lenders against loss if a borrower defaults. Most lenders
generally require MI for a loan with a loan-to-value (LTV) percentage
in excess of 80 percent.
|
Promissory Note
|
A written promise to repay a specified amount over a specified
period of time.
|
Property Taxes:
|
Property taxes are usually paid semi-annually, and are based on
local tax rates and assessed property value.
|
Public Auction
|
A meeting in an announced public location to sell property to repay
a mortgage that is in default.
|
Purchase Agreement
|
A written contract signed by the buyer and seller stating the terms
and conditions under which a property will be sold.
|
Purchase Money Transaction
|
The acquisition of property through the payment of money or its
equivalent.
|
Qualifying Ratios
|
Calculations that are used in determining whether a borrower can
qualify for a mortgage. There are two ratios. The "top" or "front"
ratio is a calculation of the borrower’s monthly housing costs (principle,
taxes, insurance, mortgage insurance, homeowner’s association fees) as
a percentage of monthly income. The "back" or "bottom"
ratio includes housing costs as will as all other monthly debt.
|
Quitclaim Deed
|
A deed that transfers without warranty whatever interest or title
a grantor may have at the time the conveyance is made.
|
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.
|
Rate Lock
|
A commitment issued by a lender to a borrower or other mortgage
originator guaranteeing a specified interest rate for a specified period
of time at a specific cost.
|
Rate Lock-In
|
A written agreement in which the lender guarantees the borrower
a specified interest rate, provided the loan closes within a set period
of time.
|
Real Estate Agent
|
A person licensed to negotiate and transact the sale of real estate.
|
Real Estate Professional:
|
Real estate brokers, sales agents and attorneys that hold a real
estate license.
|
Real Estate Settlement Procedures Act (RESPA)
|
A consumer protection law that requires lenders to give borrowers
advance notice of closing costs.
|
Real Estate:
|
Land and anything permanently affixed to it.
|
Real Property
|
Land and appurtenances, including anything of a permanent nature
such as structures, trees, minerals, and the interest, benefits, and inherent
rights thereof.
|
Real Property:
|
Land and anything permanently affixed to it.
|
Realtor®
|
A real estate agent, broker or an associate who holds active membership
in a local real estate board that is 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. Loans with rebates
often carry higher interest rates than loans with "points" (see
above).
|
Reconveyance:
|
When a mortgage is completely paid off the property is reconveyed
from the lender to the buyer.
|
Recorder
|
The public official who keeps records of transactions that affect
real property in the area. Sometimes known as a "Registrar of Deeds"
or "County Clerk."
|
Recording
|
The noting in the registrar’s office of the details of a properly
executed legal document, such as a deed, a mortgage note, a satisfaction
of mortgage, or an extension of mortgage, thereby making it a part of
the public record.
|
Recording Fee:
|
A fee charged for conveying the sale of property onto the public
record.
|
Refinance Transaction
|
The process of paying off one loan with the proceeds from a new
loan using the same property as security.
|
Refinancing
|
The process of paying off one loan with the proceeds from a new
loan using the same property as security.
|
Remaining Balance
|
The amount of principal that has not yet been repaid. See principal
balance.
|
Remaining Term
|
The original amortization term minus the number of payments that
have been applied.
|
Rent Loss Insurance
|
Insurance that protects a landlord against loss of rent or rental
value due to fire or other casualty that renders the leased premises unavailable
for use and as a result of which the tenant is excused from paying rent.
|
Repayment Plan
|
An arrangement made to repay delinquent installments or advances.
|
Replacement Reserve Fund
|
A fund set aside for replacement of common property in a condominium,
PUD, or cooperative project -- particularly that which has a short life
expectancy, such as carpeting, furniture, etc.
|
Repossession:
|
When a lender takes back a home due to borrower default.
|
Residential Mortgage Credit Report (RMCR)
|
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.
|
Restructured Loan:
|
A loan in which new terms are negotiated.
|
Revolving Debt
|
A credit arrangement, such as a credit card, that allows a customer
to borrow against a preapproved line of credit when purchasing goods and
services. The borrower is billed for the amount that is actually borrowed
plus any interest due.
|
Right Of First Refusal
|
A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease the property
before he or she offers it for sale or lease to others.
|
Right Of First Refusal:
|
An agreement by a property owner to give another person the right
to buy or rent a piece of property before it goes on the open market.
|
Right Of Ingress Or Egress
|
The right to enter or leave designated premises.
|
Right Of Survivorship
|
In joint tenancy, the right of survivors to acquire the interest
of a deceased joint tenant.
|
Right To Recission:
|
The federal truth-in-lending act allows borrowers to cancel certain
kinds of loans within three days of signing.
|
Sale-Leaseback
|
A technique in which a seller deeds property to a buyer for a consideration,
and the buyer simultaneously leases the property back to the seller.
|
Sales Contract:
|
A contract agreed to by the buyer and seller that provide the terms
for a home purchase.
|
Second Mortgage
|
A mortgage that has a lien position subordinate to the first mortgage.
|
Secondary Market
|
The buying and selling of existing mortgages, usually as part of
a "pool" of mortgages.
|
Secured Loan
|
A loan that is backed by collateral.
|
Security
|
The property that will be pledged as collateral for a loan.
|
Seller Carry Back
|
An agreement in which the owner of a property provides financing,
often in combination with an assumed mortgage.
|
Seller Carry-Back
|
An agreement in which the owner of a property provides financing,
often in combination with an assumable mortgage.
|
Sellers Broker:
|
Represents the interest of the seller.
|
Servicer
|
An organization that collects principal and interest payments from
borrowers and manages borrowers’ escrow accounts. The servicer often services
mortgages that have been purchased by an investor in the secondary mortgage
market.
|
Servicing
|
The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
|
Single Agent:
|
An agent that represents either the buyer or the seller in a transaction.
|
Square Footage:
|
The amount of livable square footage in a home or building.
|
Stated/Documented Income
|
Some loan products require only that applicants "state"
the source of their income without providing supporting documentation
such as tax returns.
|
Step-Rate Mortgage:
|
A loan that allows a gradual increase in the interest rate during
the first few years of the loan.
|
Subdivision
|
A housing development that is created by dividing a tract of land
into individual lots for sale or lease.
|
Subordinate Financing
|
Any mortgage or other lien that has a priority that is lower than
that of the first mortgage.
|
Subordinate Loan:
|
A second or third mortgage on a piece of property.
|
Survey
|
A drawing or map showing the precise legal boundaries of a property,
the location of improvements, easements, rights of way, encroachments,
and other physical features.
|
Sweat Equity
|
Contribution to the construction or rehabilitation of a property
in the form of labor or services rather than cash.
|
Tax Sale:
|
Property that is sold by the government for nonpayment of taxes.
|
Tenancy By The Entirety:
|
Property owned by a husband and wife in which they together hold
title with the right of survivorship.
|
Tenancy In Common
|
As opposed to joint tenancy, when there are two or more individuals
on title to a piece of property, this type of ownership does not pass
ownership to the others in the event of death.
|
Tenants-In-Common
|
An undivided interest in property taken by two or more persons.
The interest need not be equal. Upon death of one or more persons, there
is no right of survivorship.
|
Term
|
The period of time which covers the life of the loan. For example,
a 30 year fixed loan has a term of 30 years.
|
Third-Party Origination
|
A process by which a lender uses another party to completely or
partially originate, process, underwrite, close, fund, or package the
mortgages it plans to deliver to the secondary mortgage market.
|
Title
|
A legal document evidencing a person's right to or ownership of
a property.
|
Title Company:
|
Companies that ensure that the title to a piece of property and
provide insurance.
|
Title Insurance
|
Insurance that protects the lender (lender's policy) or the buyer
(owner's policy) against loss arising from disputes over ownership of
a property.
|
Title Search
|
A check of the title records to ensure that the seller is the legal
owner of the property and that there are no liens or other claims outstanding.
|
Total Debt Ratio
|
Monthly debt and housing payments divided by gross monthly income.
Also known as Obligations-to-Income Ratio or Back-End Ratio.
|
Total Loan Amount:
|
The total amount of a loan, which includes the base amount plus
any, financed closing costs included in the loan.
|
Transfer Fee:
|
A fee charged by the state or local government at the time a piece
of property changes hands.
|
Transfer Of Ownership
|
Any means by which the ownership of a property changes hands. Lenders
consider all of the following situations to be a transfer of ownership:
the purchase of a property "subject to" the mortgage, the assumption
of the mortgage debt by the property purchaser, and any exchange of possession
of the property under a land sales contract or any other land trust device.
|
Transfer Tax
|
State or local tax payable when title passes from one owner to
another.
|
Treasury Index
|
An index that is used to determine interest rate changes for certain
adjustable-rate mortgage (ARM) plans. It is based on the results of auctions
that the U.S. Treasury holds for its Treasury bills and securities or
is derived from the U.S. Treasury's daily yield curve, which is based
on the closing market bid yields on actively traded Treasury securities
in the over-the-counter market.
|
Trust Account:
|
Accounts used by escrow agents and brokers to safeguard the funds
for a buyer or seller.
|
Trustee
|
A fiduciary who holds or controls property for the benefit of another.
|
Truth-In-Lending
|
A federal law that requires lenders to fully disclose, in writing,
the terms and conditions of a mortgage, including the annual percentage
rate (APR) and other charges.
|
Truth-In-Lending Act
|
A federal law requiring a disclosure of credit terms using a standard
format. This is intended to facilitate comparisons between the lending
terms of different financial institutions.
|
Two-Step Mortgage
|
An adjustable-rate mortgage (ARM) that has one interest rate for
the first five or seven years of its mortgage term and a different interest
rate for the remainder of the amortization term.
|
Underwriting Fee:
|
Fees charged the borrower to verify information on the loan application,
the value of the property and determine whether to grant the loan.
|
Underwriting:
|
The process that lenders go through to evaluate risks associated
with a borrower and to establish appropriate conditions for the loan.
|
Unsecured Loan:
|
A loan that is not backed by collateral.
|
VA Loans:
|
A program designed to provide veterans the ability to purchase
homes without a down payment.
|
VA Mortgage
|
A mortgage that is guaranteed by the Department of Veterans Affairs
(VA).
|
Variable Interest Rate:
|
A loan whose rate changes up or down based on changes in the rate
paid on Treasury bills or certificates of deposit.
|
Vested
|
Having the right to use a portion of a fund such as an individual
retirement fund. For example, individuals who are 100 percent vested can
withdraw all of the funds that are set aside for them in a retirement
fund. However, taxes may be due on any funds that are actually withdrawn.
|
Veterans Administration (VA)
|
An agency of the federal government that guarantees residential
mortgages made to eligible veterans of the military services. The guarantee
protects the lender against loss and thus encourages lenders to make mortgages
to veterans.
|
Warranty:
|
A legally binding promise to do something in the future.
|
Will:
|
A legal document covering the disposition of a person’s estate
in the event of death.
|
Wraparound Mortgage:
|
A loan to a buyer for the balance on seller’s current first mortgage
and an additional amount requested by the seller.
|
Zoning Variance:
|
A one-time modification of existing zoning law.
|
Zoning:
|
Regulations that control how land is used within a given jurisdiction.
|