|
|
| |
|
|
- A -
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically, based on the movement of a pre-selected financial index. Also known as the variable rate mortgage. Generally, ARMs have lower rates than fixed-rate mortgages and are easier to qualify for but, because they're based on changing interest rates, payment amounts can be unpredictable.
Amortization
Repayment of a loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.
Annual Fee
An amount charged annually for having the line of credit available, regardless of whether or not the borrower draws against the credit line.
Annual Percentage Rate (APR)
The annual percentage rate is a measure of the cost of credit expressed as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR helps the borrower compare different types of mortgages based on the annual cost for each loan.
Application Fee
That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.
Appraisal
A report made by a qualified professional (appraiser) as to the value of a property as of a given date.
APR
See Annual Percentage Rate
ARM
See Adjustable Rate Mortgage |
|
| |
 |
|
- B -
Balloon Mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one lump sum payment for the remaining amount of the principal at the end of the term.
Bankruptcy
A legal procedure petitioned either by the debtor (voluntary) or by creditors (involuntary) when the debtor is unable to make his or her payments, in which the court distributes the debtor's property to creditors to fulfill repayment of debts.
Base Income
The borrower's salary. If the borrower is self-employed, it is the net income, the income after expenses
Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
Broker
A professional who arranges financing and contracts with a lender and client. Brokers typically do not loan the money themselves and usually charge a fee or receive a commission for their services.
|
|
| |
|
|
- C -
Cap (interest rate)
The maximum interest rate increase allowable on an adjustable rate mortgage per year and/or the life of the loan. Caps serve as consumer safeguards on adjustable-rate mortgages. These safeguards protect the borrower as interest rates rise.
Capital Gains Tax
The tax on the taxable profit derived from the sale of a capital asset. The capital gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fixing up expenses, capital improvements, allowable depreciation, etc.
Cash Reserves
The amount of liquid assets the borrower has remaining after the mortgage loan transaction is completed.
Cash-out Refinance
A transaction where the borrower can refinance with a loan amount greater than the current mortgage and keep the difference. This typically requires that the equity in the property be higher than the current loan.
Certificate of Title
A statement that shows ownership of property, stating that the seller has clear legal title.
Closing
The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.
Closing Costs
Expenses incurred by the borrowers and sellers in transferring ownership of the property. These costs usually include such items as origination fees, discount fees, appraisal fees and credit report fees. When looking at mortgage options, consider that closing fees usually run from 3 percent to 6 percent of the loan amount. Also known as settlement costs.
Closing Statement
A document that provides an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account. This is required for the completion of every real estate transaction. Also called a HUD-1 or a settlement statement
Co-borrower
A person who is jointly and equally liable for repayment of the mortgage obligation.
COFI (Cost of Funds Index)
An index used to determine interest rate changes for certain ARMs. It represents the weighted average cost of savings, borrowings, and advances of the 11 th District members of the Federal Home Loan Bank of San Francisco .
Collateral
An object that a borrower offers as security to a creditor to guarantee repayment of a loan. In the case of home loans, collateral is a piece of real property (land and/or a building). Borrowers are bound to repay loans (plus interest) to their lender(s). If they fail to do so, or default, the lender can take possession of, or foreclosure on, the collateral.
Commission
An agent's or broker's fee for bringing the principals together and helping to negotiate a transaction, often a percentage of the sales price or flat fee.
Construction Loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.
Contingency
A condition that must be met for a contract or a commitment to remain binding.
Contract Sale or Deed
A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.
Conventional Mortgage
Any mortgage loan that is not insured by FHA, guaranteed by VA, or funded by a government authorized bond sale or grant.
Convertible ARM
A type of adjustable rate mortgage that includes an option for the borrower to change the mortgage to a fixed-rate mortgage at specified intervals during a predetermined time.
Credit
The ability of a person to borrow money or goods based on an opinion held by lenders in reference to the person's financial situation and reliability.
Credit Limit
The maximum amount a borrower is allowed to borrow under the home equity plan. The limit can depend upon their income, debts, equity in their home and the bank's program guidelines.
Credit Report
A report to a prospective lender documenting the credit history and current status of a borrower's credit standing.
Credit Score
A computer-generated number that summarizes an individual's credit record.
|
|
| |
|
|
- D -
Debt-to-Income Ratio
The ratio of the borrower's total monthly obligations - including housing expenses and recurring debts- to monthly income. This ratio is used by lenders to determine the borrower's financial capacity to assume and repay debt. This ratio is crucial when calculating the loan amount for which the borrower can qualify.
Deed
A legal written document by which title to property is transferred. Also know as the Deed of Trust.
Default
Failure to meet the legal obligations in a loan contract by not providing monthly mortgage payments.
Deferred Interest
See Negative Amortization
Delinquency
Failure to make payments on time. This can lead to foreclosure.
Down Payment
Money paid to make up the difference between the sale price of a property and the mortgage amount. |
|
| |
|
|
- E -
Equal Credit Opportunity Act (ECOA)
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
Equity
The difference between the fair market value (appraised value) of the borrower's home and the debts claimed against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in the property.
Escrow
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specific event, after which the funds are released to a designated individual.
Escrow Account
An account in which a portion of the monthly payment is held by the lender on the borrower's behalf for the payment of future taxes, mortgage and hazard insurance, special assessments insurance, and other on-going payments as they occur.
Escrow Closing
The deposit of funds or documents with an attorney or escrow agent to be disbursed upon closing of the real estate transaction. |
|
| |
|
|
- F -
Fannie Mae (FNMA)
A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. Also known as the Federal National Mortgage Association.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.
First Mortgage
A mortgage that has a primary lien against a property.
Fixed-Rates Mortgage
A mortgage with an interest rate and monthly payments that remain constant over the life of the loan.
Flood Certification
An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.
Foreclosure
The legal process by which a borrower in default under a mortgage or deed of trust loses all rights to, and interest in, the mortgaged property. Also known as a repossession of property.
Freddie Mac (FHLMC)
Is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers. Also known as Federal Home Loan Mortgage Corporation.
|
|
| |
|
|
- G -
Gift Funds
Funds donated on behalf of the borrower from certain eligible sources to assist the borrower in meeting closing costs. Generally, eligible sources are relatives, churches, municipalities, or nonprofit organizations.
Good Faith Estimate
It is an estimate of the fees the borrower will pay to close their loan.
Gross Income
Normal income earned, including overtime, prior to any payroll deductions such as taxes. This income may come from more than one source.
|
|
| |
|
|
- H -
HELOC (Home Equity Line of Credit)
A real estate loan, usually in a second lien position, allowing a borrower to withdraw equity in real estate owned with specific limitations. Basically, one can draw cash against his or her line of credit to use when needed.
Home Equity Loan
A loan in which the lender acquires in one's home up to the amount of this loan, giving the borrower the funds he or she needs for a purchase opportunity, home maintenance, debt consolidation. Or major expenses.
Housing Debt-to-Income Ratio
The sum of all monthly housing mortgage expenses, such as PITI, homeowner's dues, private mortgage insurance, and any special assessments, as a percentage of the borrower's gross qualifying income.
Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his or her gross monthly income. See debt-to-income ratio.
|
|
| |
|
| - I -
Impound
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.
Index
The index is the base rate used by the lender to calculate the interest rate a borrower pays on their loan.
Interest
A charge paid for the use of money.
Interest Rate
The factor applied to the debt to determine the charge for borrowing money. The interest rate is expressed as a percentage.
Investor
A money source for a lender.
|
|
| |
|
|
- J -
Judgments
Formal court orders displayed on a credit report when a debt or loan obligation has gone unpaid.
Junior Lien
Any lien that is subordinate or subsequent to the claims of a prior lien. A second mortgage is a junior lien
|
|
| |
|
|
- K -
No Terms Listed
|
|
| |
|
|
- L -
Lender
An entity that provides credit or a loan to a borrower for specific terms and conditions. Also known as a creditor.
Lien
A legal claim on a property to guarantee payment of a loan.
Loan Application
A document required by a lender before issuing a loan commitment. It includes information such as the name of the borrower, terms and amount of the loan, and details of the property being mortgaged.
Loan Commitment
An agreement to lend money, usually for a specific amount to be repaid by a specific date. This commitment is contingent upon the accuracy of the information submitted by the applicant.
Loan-To-value Ratio
The relationship between the amount of the mortgage and appraised value of the property, usually shown as a percentage. Used to determine the equity in a property.
Lock In Rate
The interest rate percentage for the loan that will remain the same until funding.
|
|
| |
|
|
- M -
Margin
The spread added to the index to determine the interest rate a borrower is charged for borrowing money. The margin is expressed as a percentage.
Maturity
The date when the loan is paid in full.
Mortgage
A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis. Also referred to as a Deed of Trust, Trust Deed, or Security Instrument.
Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent.
Mortgage Note
A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.
Mortgagee
The lender in a mortgage contract.
Mortgagor
The borrower in a mortgage contract. |
|
| |
|
|
- N -
Negative Amortization
A loan in which the outstanding principal balance goes up instead of down because the monthly payments are not large enough to cover the full amount of interest due. Also called deferred interest.
Note
A legal instrument in which a borrower promises to repay his or her loan under a specific set circumstances (e.g., interest rate or late charge information).
|
|
| |
|
|
- O -
Origination Fee
A fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property and other work involved in the evaluation, preparation and submission of a proposed mortgage loan.
|
|
| |
|
- P -
Piggyback
Borrowers often use a piggyback second mortgage in conjunction with a first mortgage so that they do not have to provide a 20 percent down payment in order to avoid PMI.
PITI
An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.
Point
A fee paid to the lender on closing day to increase the effective yield of the mortgage. A point is one percent of the amount of the mortgage loan. Also called a discount point. Also may be recognized as interest by the IRS.
Prepayment Penalty
A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.
Pre-Approval
A commitment by a lender to extend a certain amount of credit to a buyer for use in purchasing a home. Pre-approval allows the buyer to negotiate like a cash buyer. The pr-approval process is also used to assist the buyer in locating problems they need to resolve prior to securing a loan.
Pre-qualification
Providing financial information (credit ratings, employment status and income, and outstanding debts) to a lender in order to calculate a suitable mortgage for the buyer. This is not a guarantee or commitment by the lender to extend credit. It is helpful in showing how large a mortgage the potential buyer can handle and how much house they can afford.
Prime Rate
The interest rate charged by banks to their preferred corporate customers.
Principal
The remaining debt on a loan, not counting interest.
PMI (Private Mortgage Insurance)
Insurance written by a private company to protect the lender against loss caused by mortgage default.
|
|
| |
|
|
- Q -
Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a home buyer.
|
|
| |
|
| - R -
Recording Fee
Fees charged by a county recorder's office to record a mortgage or deed of trust, thereby making it public
Refinancing
Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property and to take advantage of lower interest rates or better terms or to get cash. An alternative is taking out a second mortgage, which involves the same process as refinancing, but adds a junior lien on the property, thus two monthly payments.
Revolving Debt
A debt that does not have a fixed payment, although repayment is usually a percentage of the outstanding balance and made at regular intervals; most common are credit cards issued by banks and department stores.
|
|
| |
|
- S -
Second Mortgage
A loan on property which already has an existing mortgage (the first mortgage). The second mortgage is subordinate to the first. Generally at a higher interest rate and shorter terms than a first mortgage. It's a good alternative to refinancing when the borrower has an original first mortgage with a low interest rate. A second mortgage will give the borrower a lump sum of funds to use as needed. The qualification process and debt-to-income ratio requirement are the same as refinancing.
Security Interest
Security Interest is the type of interest a lender has in the property of the borrower. The borrower's property is set aside so that the lender can sell it if the borrower defaults on the loan. A mortgage and deed of trust are security instruments.
Settlement or Settlement Costs
See closing/closing costs
Supplemental Income
Income derived from sources such as interest/dividends, capital gains, and rental properties; these sources require tax returns to support the qualifying income.
|
|
| |
|
| - T -
Temporary Buy down
A loan on which the interest rate has been bought down for a temporary period of time at the beginning of the loan by escrowing funds at the time of closing, which will be applied to the total monthly mortgage payment as each becomes due.
Title
A document that gives evidence of an individual's ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances which could impair the title.
Title Insurance Policy
Protection against financial loss arising from defects in the title occurring before purchase.
Title Search
A process providing proof of legal ownership of a property by researching municipal record. Usually this service is performed by a title company.
Transaction Fee
The fee charged each time a borrower draws on their credit line.
Truth-In-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges. Also known as Regulation Z. |
|
| |
|
|
- U -
Underwriter
An analyst who reviews the supportive documentation to determine the risk associated with the loan request. The person who gives the final approval for a loan.
Underwriting
The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount
|
|
| |
|
|
- V -
VA (Veterans Administration)
A government agency designed to encourage mortgage lenders to offer long-term, low-down-payment financing to eligible veterans by partially guaranteeing the lender against loss from default.
VA Loan
A long-term, no-down-payment or low-down-payment loan guaranteed by the Department of Veterans Affairs. Individuals usually qualify by proof of military service.
Variable Rate Mortgage
See Adjustable Rate Mortgage
|
|
| |
|
|
- W -
No Terms Listed
- X -
No Terms Listed
- Y -
No Terms Listed
- Z -
No Terms Listed |
|
| |
|