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Adjustable Rate Mortgage Loan (ARM): A type of alternative mortgage instrument which the interest rate adjusts periodically according to a predetermined index and margin, this adjustment results in the payment either increasing or decreasing. In some situations, the adjustment is made to the outstanding principal.
Amortization: Repayment of a debt in equal installments of the principal interest in full.
Annual Percentage Rate (APR): A measure of the cost of credit, expressed as a yearly rate. Including interest and other charges. This provides consumers with a good basis for comparing the cost of loans and mortgage plans.
Appraisal: A report by a certified person who would give estimate to the value of the house with his knowledge and opinion.
Appraised Value: An estimate of the market value of the property used as security for the mortgage. Based on the facts regarding the location, improvements, etc., to the property and surroundings.
Assumption of Mortgage: Agreement by a buyer to the lender, to assume liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor from liability.
Balloon Note: A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principle sum known as a "Balloon" is due at maturity.
Bi-weekly mortgage: A mortgage with payments due every two weeks totaling 26 payments a year.
Blended Mortgage Payment: The mortgage payment consisting of both principal and interest. This is applied towards the accumulated interest and the remainder of the interest would be applied towards the principal loan.
Bridge Financing: A loan required to provide the funds needed for the closing of a purchase property and to the time of the closing of the sold property.
Buydown: A payment made to the lender to reduce the interest rate on a mortgage.
Call provision: A clause in the mortgage or deed of trust giving the mortgagee or beneficiary the right to accelerate payment of the mortgage debt in full on a certain date or on the happening of specified conditions.
Cap: The maximum increase the an Adjustable Rate Mortgage (ARM) can change, either at each adjustment or during the life of the mortgage. Example: If the original loan was made at 10% with a 5% cap, the interest on the loan may not exceed 15% regardless of market conditions.
Certificate of eligibility: A document used by the VA to certify a veteran’s eligibility for a VA loan.
Certificate of reasonable value (CRV): A document issued by the VA establishing maximum value and loan amount for a VA-guaranteed mortgage.
Certified Mortgage Banker (CMB): A professional designation of the mortgage banking industry.
Closed Mortgage: Mortgages that are locked in for a specific time period. If a borrower(s) wishes to get out of this mortgage usually requires a pre-payment penalty from the lender agreement.
Closing Date: The date the purchase of the property becomes final and the sale of the property is closed. The buyer(s) are now the new owners and obtain title to the sales property.
Commitment: A written promise to make or insure a loan for a specified amount and on specified items.
Comparables: Properties used as comparisons to determine the value of a specified property.
Conventional Mortgage: A mortgage or deed of trust not obtained under a government insured program (such as FHA or VA), but may require private mortgage insurance. The responsibility of the property and borrower rests upon the mortgage broker. Thus require many more requirements for approval.
Convertible Mortgage: An adjustable rate mortgage where the mortgagor can convert the mortgage to a fixed rate mortgage during a predetermined time period.
Conveyance: The transfer of the property title from the vendor (seller) to the purchaser on the records at the Recorder’s Office.
Credit report: A report on the credit standing of prospective borrower or tenant. This is used to help determine credit worthiness for a loan approval and interest rate from a lender.
Deed in lieu: A deed given by a mortgagor to a mortgagee to satisfy a debt and avoid foreclosure.
Deed: A legal document that transfers ownership of the property to the buyer.
Discharge: The removal of the mortgage from the title. The house is then free of that mortgage debt.
Down payment: The difference of money between the purchase price and the mortgage.
Earnest Money Deposit: The amount of money deposited with the listing realtor as good faith to carry through with the offer to purchase and is applied toward the down payment.
Encroachment: Generally construction onto the property of another, as of a wall, fence, building, etc.
Encumbrance: A claim, lien, charge, or liability attached to and binding real property.
Equal Credit Opportunity Act (ECOA): 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, receipt of income from public assistance programs or reliance on any consumer protection law. Also known as Regulation B.
Equity: The difference between the market value of a property and any outstanding mortgage amount on the property.
Escrow: Title company officer whom collect all the necessary papers from lenders and Loan Officers for the signing to the documents and funding.
Federal Housing Administration (FHA): A federal Agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.
First Mortgage: A mortgage loan that is the first against the property.
Fixed Rate Mortgage: The rate of interest that is fixed for the term.
Foreclosure: A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.
Freddie Mac (FHLMC): Federal Home Loan Mortgage Corporation. A federal Agency purchasing first mortgages, both conventional and federally insured, form members of the Federal Reserve System, and the Federal Home Loan Bank System.
Ginnie Mac (GNMA): Government National MortgageAssociation. A federal association working withFHA which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.
Gross Debt Service Ratio: The total amount of the mortgage payments (principal and interest), heating costs and property taxes (and condominium fees when applicable) divided by the total gross income.
Index Rate: An index used to adjust the interest rate of an adjustable mortgage loan.
Insured Mortgage: A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.
Interest Rate: The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage.
Late Charge: An additional charge a borrower is required to pay as penalty for failure to pay a regular installment when due.
Lending Value: The appraised value of property or the purchase price, whichever is the least.
Lien: An encumbrance against property for money, either voluntary or involuntary.
Loan To Value Ratio (LTV): The amount of the mortgage as compared to the appraised value or purchase price.
Margin: The number of percentage points the lender adds to the Index rate to calculate the ARM interest rate at each adjustment.
Market Value: The highest price that a buyer, willing but no compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Maturity Date: The expired date to the term of the mortgage. The interest rate is in effect until this time.
Maturity: The termination or due date of a note, time, draft, acceptance, bill of exchange, or bond. The date a time instrument or indebtedness becomes due and payable.
Mortgage banker: A firm or individual active in the field of mortgage banking. Mortgage bankers, as local representatives of regional or national institutional lenders, act as correspondents between lenders and borrowers. Mortgage bankers need to borrow the funds they lend out.
Mortgage banking: The packaging or mortgage loans secured by real property to be sold to a permanent investor with servicing retained for the life of the loan for a fee. The origination, sale, and servicing of mortgage loans by a firm or individual. The investor-correspondent system is the foundation of the mortgage banking industry.
Mortgage insurance: The function of mortgage insurance (whether government or private) is to insure a mortgage lender against loss caused by a mortgagor’s default. This insurance may cover a percentage of or virtually all of the mortgage loan depending on the type of mortgage insurance.
Mortgage Payment: The regular principal and interest payments of the mortgage loan to be repaid.
Mortgage: To Hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property.
Mortgagee: The party lending the money and receiving the mortgage. The lender or beneficiary.
Mortgagor: The party who borrows the money and gives the mortgage. The borrower(s).
Open Mortgage: A mortgage that can be prepaid or renegotiated at any time without penalty.
Origination Fee: A fee or charge made by a lender for making a real estate loan. Usually a percentage of the amount loaned
PITI (principal, interest, taxes, and insurance)
PMI Private Mortgage Insurance: Insurance similar to FHA or VA insurance, insuring part of the first mortgage or deed of trust, enabling a lender to make a conventional loan of higher percentage of the property value.
Points: A point is equal to one percent of the loan.
Pre-Approval: A mortgage approval for a pre-determined amount and interest rate arranged prior to the borrower’s purchasing a property. A pre-approval will determine the borrower’s purchasing power and hold the interest rate for up to 120 days.
Prepayment Options: The amount that allows the borrower to prepay a portion of the original mortgage amount every year and increase payments, without penalty.
Prepayment Penalty: A fee charged to a mortgagor who pays off the principal balance on a loan before it is due.
Principal balance: The outstanding balance of a mortgage, exclusive of interest and any other charges.
Principal: Amount of debt, not including interest. The face value of a note, mortgage, etc.
Prorate: To divide in proportionate shares, such as taxes, insurance, rent, or other items which the buyer and seller share as of the time of closing, or other agreed upon time.
Purchase Agreement: An unconditional sales contract that defines the terms and conditions under which real property is conveyed.
Quit claim deed: A deed that transfers (with no warranty) only such interest, title, or right a grantor may have at the time the conveyance is executed.
Real Estate: Land and anything permanently affixed to the land, and those things attached to the building.
Realtor: A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
Recession of Contract: Annulling a contract and placing the parties to it in a position as if there had not been a contract.
Recording: The noting in the registrar’s office of the details of a property executed legal document, such as a deed, mortgage, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
Refinance: The repayment of a debt from the proceeds of a new loan using the same property as security.
Reissue Rate: A charge for a title insurance policy if previous policy on the same property was issued within a specified period. Reissue is less than the original charge.
RESPA (Real Estate Settlement Procedures Act): A federal statute requiring disclosure of certain costs in the sale of residential improved property which is to be financed by a federally insured lender.
Second Mortgage: The mortgage next in line after the first mortgage. A second mortgage is usually offered at a higher interest rate than the first mortgage. The amount of the second mortgage is a portion of the difference between the first and the appraised value of the property. It is a method to obtain more money at a later period, or have a lower down payment from the property’s value. The buying and selling of first mortgages of trust deeds by banks, insurance companies, government agencies, and other mortgagees.
Securities and Exchange Commission (SEC): The federal agency which regulates securities and the securities business. It is involved in real estate and mortgage lending when MBS are issued.
Security: The property being purchased or refinanced forms the security for the mortgage. Real or personal property pledged by a borrower, as additional protection for the lender’s interest.
Settlement Statement: A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale.
Tax lien: A claim against property for the amount of its due and unpaid taxes.
Term: The period of time between the commencement date and termination date of a note, mortgage, legal document, or other contract. The principal and interest payment on most loans is fixed for the term of he loan; the tax and insurance portion may be adjusted to reflect changes in taxes or insurance costs.
Title Insurance: An insurance policy which protects the insured (purchaser and lender) against loss arising from defects in title.
Title: Often used interchangeably with the work ownership. It indicates the accumulation of all rights in property, the owner and others.
Total Debt Service Ratio: The total amount of the mortgage payments (principal and interest), heating costs and property taxes (and condominium fees when applicable) plus all other contractual debts of the borrower divided by the total gross income.
Underwriting Fees: A charge levied by money lenders to offset their expenses incurred to set up the mortgage loan.
Underwriting: The analysis and matching of risk to an appropriate rate and term. The process of deciding whether to make a mortgage loan.
Variable Rate Mortgage: The rate of interest will fluctuate in accordance with a bank trend setting rate. This is typically the bank prime rate. Adjusted on a predetermined basis, usually monthly, the rate can be set below, equal to or above the trend setting rate and will move up and down accordingly with that rate.
Vendor: The seller in a real estate transaction. |
