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INTRO
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WEATHER
TODAY
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READY TO DEAL? LEARN
THE MORTGAGE LINGO!
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Acceleration Clause - provision of a mortgage or note giving the
holder the right to demand that the entire outstanding balance
is immediately due and usually payable in the event of default.
Accrued Interest - Interest earned and due but not yet paid.
ARM - Adjustable Rate Mortgage - loans with interest rates
that are adjusted periodically based on changes in a pre-selected
index.
Agreement of Sale - signed by buyer and seller stating the
terms and conditions under which property is sold.
Amortization - repayment of a loan with periodic payments of both
principal and interest.
APR - the annual percentage rate or cost of credit expressed
as a yearly rate.
Application - an initial statement of personal and financial information
required to apply for a loan.
Application Fee - fee charged by a lender to cover the initial
costs of processing a loan application.
Appraisal - an impartial written estimate of a property's
current market value done by someone with a knowledge of real
estate
Assignment - transfer of ownership, rights, or interests
in property by one person to another.
Assumption - when the buyer of the property agrees to become
responsible for the repayment of an existing loan on the property.
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Balloon Mortgage - short-term fixed-rate loans with fixed monthly payments
for a set number of years followed by one large final balloon
payment ('the balloon') for all of the remainder of the principal.
Bankruptcy - a legal proceeding in a federal court to relieve
certain debts of a person or a business unable to pay its debts.
Bearer - legal owner of a piece of property.
Bequest - gift of property by will.
Blanket Mortgage - a mortgage covering more than one piece of
real estate.
Bona Fide - in good faith.
Borrower - a mortgager or individual who applies for and receives
funds in the form of a loan and is obligated to repay the loan
in full under the terms of the loan.
Buy-Down Mortgage - loan with a below-market rate for a period
of time.
Buyer's Market Market - conditions, such as more sellers than
buyers, that favor buyers.
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Call
Option - allows the lender to require repayment of the loan in
full before the end of the loan term. Cash Out - cash received
when you receive a new loan that is larger than the remaining
balance of your current mortgage, based upon the equity you have
already built up in the house.
Ceiling - maximum allowable interest rate in an adjustable rate
mortgage.
Certificate of Eligibility - issued by the Veterans Administration
to qualified veterans; verifies a veteran's eligibility for a
VA guaranteed loan.
Certificate of Title - a written opinion of the status of title
to a property, given by an attorney or title company.
Closing - the conclusion of your real estate transaction which
includes the delivery of your security instrument, signing your
legal documents and disbursement of the funds necessary to the
sale.
Closing Costs - the cost for services such as title fees, recording
fees, appraisal fee, credit report fee, pest inspection, attorney's
fees, and surveying fees that must be performed before your loan
can be initiated.
Collateral - assets, such as your home, pledged as security for
a debt.
Commission - fee paid to a real estate agent or broker for negotiating
a real estate or loan transaction.
Commitment - promise to lend and a statement by the lender of
the terms and conditions under which a loan is made.
Condominium - a form of property ownership in which the homeowner
holds title to an individual dwelling unit as well as a proportionate
interest in common areas and facilities of a multi-unit project.
Conforming Loan - a mortgage loan which meets all requirements
of federal agencies such as FNMA and FHLMC.
Consumer Reporting Agency - a company which collects and sells
information to creditors to facilitate their decisions to extend
credit.
Contingency - some condition which must be satisfied before a
contract becomes legally binding.
Contract of Sale - an agreement between a buyer and seller on
the purchase price, terms, and conditions of a sale.
Conventional Loan - a loan not made under any government housing
program and not subject to government housing programs restrictions.
Convertible ARMs - a type of ARM loan with the option to convert
to a fixed-rate loan during a given time period.
Conveyance - a document used to effect a transfer, typically a
deed or mortgage.
COFI - the cost of funds index measures the weighted-average interest
rate paid by savings institutions for sources of funds.
Credit Bureau - a clearinghouse for credit history information.
Credit grantors provide the bureau with factual information on
how their credit customers pay their bills. This data plus public
record information obtained from courthouses around the country,
are kept in a file on each consumer.
Credit Report - report detailing the credit history of a
prospective borrower that's used to help determine a borrower
creditworthiness.
Credit Score - statistical method of assessing your creditworthiness.
Your credit card history; amount of outstanding debt; the type
of credit you use; negative information such as bankruptcies or
late payments; collection accounts and judgments determine your
credit score.
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Deed
- a legal document by which title to real property is transferred
from one owner to another. Deed of Trust - conveys title
of real property to a third party. The third party holds title
until the owner of the property has repaid the debt in full.
Default - failure to meet legal obligations in a contract, including
failure to make payments on a loan.
Down Payment - the portion of your home's purchase price you need
to supply up front in cash to get your loan. For conventional
loans, you should strive for a down payment that's at least 20%
of your home's value.
Earnest
Money - deposit made by a buyer towards the down payment in evidence
of good faith when the purchase agreement is signed.
ECOA - Equal Credit Opportunity Act - a federal law requiring
creditors to make credit equally available without discrimination
based on race, color, religion, national origin, age, sex, marital
status or receipt of public assistance income.
Equity - difference between the current market value of a property
and the total debt obligations against the property. The down
payment of a new mortgage loan represents the equity in the property.
Escrow - a transaction in which a third party acts as the agent
for seller and buyer, or for borrower and lender, in handling
legal documents and disbursement of funds.
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FDIC
- Federal Deposit Insurance Corporation - independent deposit
insurance agency created by Congress to maintain stability and
public confidence in the nation's banking system. FHLMC
- Freddie Mac - Federal Home Loan Mortgage Corporation -
an agency that buys loans underwritten to its specific guidelines.
These guidelines are an industry standard for residential conventional
lending.
FHA - Federal Housing Administration - a federal agency within
the Department of Housing and Urban Development (HUD), which insures
residential mortgage loans made by private lenders and sets standards
for underwriting mortgage loans.
FNMA - Fannie Mae - Federal National Mortgage Association - an
agency buys loans that are underwritten to its specific guidelines.
These guidelines are an industry standard for residential conventional
lending.
Fee Simple - absolute ownership of real property.
FHA Loans - fixed or adjustable-rate loans insured by the
U.S. Department of Housing and Urban Development. FHA loans are
designed to make housing more affordable, particularly for first-time
homebuyers.
FICO - the most common credit-scoring model used by lenders,
it is also known as a Fair, Isaac score. Your FICO can range from
200 to 900. According to this model, the higher your score, the
less likely you are to default on your loan.
First Mortgage - a mortgage which is in first lien position,
taking priority over all other liens. In the case of a foreclosure,
the first mortgage will be repaid before any other mortgages.
Fixed Rate - an interest rate which is fixed for the term
of the loan.
Fixed-Rate Loans - have interest rates that do not change
over the life of the loan. With a fixed-rate loan, you will
have predictable monthly mortgage payments for as long as you
have the loan.
Flood Insurance - compensates for physical damage to a property
by flood.
Forbearance - the act by the lender of refraining from taking
legal action on a mortgage loan that is delinquent.
Foreclosure - Legal process by which a mortgaged property may
be sold to pay off a mortgage loan that is in default.
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Grace Period -
period of time during which a loan payment may be made after its
due date without incurring a late penalty. The grace period is
specified as part of the terms of the loan in the Note.
Gross Income - total income before taxes or expenses are deducted.
Hazard Insurance - protects the insured
against loss due to fire or other natural disaster.
HUD
- Housing and Urban Development - A U.S. government agency established
to implement federal housing and community development programs;
oversees the Federal Housing Administration.
HUD-1 Uniform Settlement Statement - standard form
which itemizes the closing costs associated with purchasing a
home or refinancing a loan.
Impound
Account - account held by the lender to which the borrower pays
monthly installments, collected as part of the monthly mortgage
payment, for annual expenses such as taxes and insurance. The
lender disburses impound account funds on behalf of the borrower
when they become due. (Also called an Escrow Account.)
Initial Cap - limits the amount the interest rate on an adjustable
rate mortgage can change during the first adjustment period.
Initial Rate - rate charged during the first interval of an ARM
loan.
Interest - charge paid for borrowing money, calculated as a percentage
of the remaining balance of the amount borrowed.
Interest Rate - annual rate of interest on the loan, expressed
as a percentage of 100.
Interest Rate Cap - consumer safeguards which limit the
amount the interest rate on an ARM loan can change in an adjustment
interval and/or over the life of the loan.
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Joint
Liability - liability shared among two or more people, each of
whom is liable for the full debt. Joint Tenancy -
ownership of property giving each person equal interest in the
property, including rights of survivorship.
Jumbo Loan A - mortgage larger than the $275,000 limit set
by the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation.
Junior Mortgage - a mortgage subordinate to the claim of a prior
lien or mortgage. In the case of a foreclosure, a senior mortgage
or lien will be paid first.
Late
Charge - a penalty paid by a borrower when a payment is made after
the due date.
Lender - a bank, mortgage company, or mortgage broker offering
the loan.
Lien - legal claim by one person on the property of another
for security for payment of a debt.
Loan Application Fee - fee charged by a lender to cover the initial
costs of processing a loan application. The fee may include the
cost of obtaining a property appraisal, a credit report, and a
lock-in fee or other closing costs incurred during the process
or the fee may be in addition to these charges.
Loan Origination Fee - charged by a lender to cover administrative
costs of processing a loan.
Lock or Lock-In - lender's guarantee of an interest rate for a
set period of time. The time period is usually that between loan
application approval and loan closing. The lock-in protects you
against rate increases during that time.
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Margin - percentage difference between the index for a particular loan
and the interest rate charged; predetermined by the lender.
Mortgage - legal document by which real property is pledged as
security for the repayment of a loan.
Mortgage Banker - individual or company that originates and/or
services mortgage loans.
Mortgage Broker - individual or company that arranges financing
for borrowers.
Mortgage Insurance - protects the lender in case you default on
your loan. With conventional loans, mortgage insurance is generally
not required if you make a down payment of at least 20% of the
home's appraised value.
Mortgage Loan - loan for which real estate serves as collateral
to provide for repayment in case of default.
Mortgage Note - legal document obligating a borrower to
repay a loan at a stated interest rate during a specified period
of time. The agreement is secured by a mortgage or deed of trust
or other security instrument.
Mortgagee - the lender in a mortgage loan transaction.
Mortgagor - the borrower in a mortgage loan transaction.
Negative Amortization - loan
payment schedule in which the outstanding principal balance of
a loan goes up rather than down because the payments do not cover
the full amount of interest due. The monthly shortfall in payment
is added to the unpaid principal balance of the loan. Non-Assumption
Clause - statement in a mortgage contract forbidding the
assumption of the mortgage by another borrower without the prior
approval of the lender.
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Origination Fee - charged by a lender to cover administrative costs of
processing a loan. Payment Cap - a consumer safeguard which limit the amount monthly
payments on an adjustable-rate mortgage may change. Since they
do not limit the amount of interest the lender is earning, they
may cause negative amortization.
Per Diem Interest - interest calculated per day. (Depending on
the day of the month on which closing takes place, you will have
to pay interest from the date of closing to the end of the month.
Your first mortgage payment will probably be due the first day
of the following month.)
Periodic Cap - a consumer safeguard which limits the amount the
interest rate on an adjustable rate mortgage (ARM) can change
in an adjustment interval.
PITI - an abbreviation for Principal, Interest, Taxes and Insurance,
the parts of a monthly mortgage payment.
Points - an up-front fee paid to the lender at the time that you
get your loan. Each point equals one percent of your total loan
amount. Points and interest rates are connected: the more points
you pay, the lower the interest rate you get. But, the more points
you pay, the more cash you need up front since points are paid
in cash at closing.
Power of Attorney - a legal document authorizing one person to
act on behalf of another.
Pre-approval - process of determining how much money a prospective
homebuyer or refinancer will be eligible to borrow prior to application
for a loan. A pre-approval includes a preliminary screening of
a borrower's credit history. Information submitted during pre-approval
is subject to verification at application.
Prepaid Expenses - taxes, insurance and assessments paid in advance
of their due dates. These expenses are included at closing.
Prepaid Interest - is paid in advance of when it is due. Typically
charged to a borrower at closing to cover interest on the loan
between the closing date and the first payment date.
Prepayment - full or partial repayment of the principal before
the contractual due date.
Prepayment Penalty - a fee charged by a lender for a loan
paid off in advance of the contractual due date.
Pre-qualification - process of determining how much money a prospective
homebuyer will be eligible to borrow prior to application for
a loan.
Principal - amount of debt, not counting interest, left
on a loan.
PMI - Private Mortgage Insurance - protects the lender in case
you default on your loan. With conventional loans, mortgage insurance
is generally not required if you make a down payment of at least
20% of the home's purchase price.
Purchase Agreement - signed by buyer and seller stating the terms
and conditions under which a property will be sold.
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Real
Financing Cost - a consumer-oriented rate that takes into
account the projected amount of time you tell us you will actually
have the loan, as well as the specific costs, fees, and potential
rate changes associated with it. The fees and costs are distributed
over the time you plan to be in the house, allowing you to do
an apples-to-apples comparison of a variety of loan types.
Real Property - land and any improvements permanently affixed
to it, such as buildings.
Reconveyance - transfer of property back to the owner when
a mortgage loan is fully repaid. Recording The act of entering
documents concerning title to a property into the public records.
Recording Fee - paid to an agent for entering the sale of
a property into the public records. Refinancing The process of
paying off one loan with the proceeds from a new loan secured
by the same property.
RESPA - Real Estate Settlement
Procedures Act - federal law that gives consumers the right to
review information about loan settlement costs.
Right to Rescission - the borrower's right, on certain kinds of
loans, to cancel the loan within three days of signing a mortgage.
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Sales
Agreement Contract - signed by buyer and seller stating the terms
and conditions under which a property will be sold. Second
Mortgage - additional mortgage placed on a property that has rights
that are subordinate to the first mortgage.
Settlement (or Closing) - is the conclusion of your real estate
transaction. It includes the delivery of your security instrument,
signing of your legal documents and the disbursement of the funds
necessary to the sale of your home or loan transaction (refinance).
Settlement Costs - or closing costs - costs are for services
that must be performed before your loan can be initiated. Examples
include title fees, recording fees, appraisal fee, credit report
fee, pest inspection, attorney's fees, taxes, and surveying fees.
Survey - measurement of land, prepared by a licensed surveyor,
showing a property's boundaries, elevations, improvements, and
relationship to surrounding tracts.
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Tax
Sale - public sale of property by a government authority as a
result of non-payment of taxes. Term - period of time
between the beginning loan date on the legal documents and the
date the entire balance of the loan is due.
Title Company - insures title to property. Title Insurance Insurance
which protects the lender (lender's policy) or the buyer (owner's
policy) against loss due to disputes over ownership of a property.
Title Search - an examination of municipal records to ensure
that the seller is the legal owner of a property and that there
are no liens or other claims against the property.
Trade lines - the different credit accounts listed on your credit
report.
Transfer Tax - paid when title passes from one owner to another.
Truth-in-Lending Act - a federal law requiring written disclosure
of the terms of a mortgage by a lender to a borrower after application.
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Underwriting - process of determining the risks involved in a particular
loan and establishing suitable terms and conditions for the loan.
Usury - excessively high interest which is above the legal rate
established by law.
VA Loans -
fixed-rate loans guaranteed by the U.S. Department of Veterans
Affairs designed to make housing affordable for eligible U.S.
veterans.
Variable Rate Interest - a rate that changes periodically in relation
to an index.
VOD - Verification Of Deposit - document signed by the borrower's
bank or financial institution verifying the borrower's account
balance and history.
VOE - Verification Of Employment - a document signed by the borrower's
employer verifying the borrower's occupation and salary.
Waiver - a voluntary relinquishment or surrender of a right or
privilege.
Walk-through - final inspection of a home to check for problems
that may need correcting before the closing.
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