A B C D
E F G H
I J K L
M N O P
Q R S T
U V W X
Y Z
A
Abstract of Title—A summary of recorded transactions concerning
a property. (An attorney or title insurance company examines an
abstract of title for any title defects that must be cleared before
a buyer can purchase clear, marketable, and insurable title.)
Acceleration Clause—Condition in a mortgage that gives the
lender the right to require immediate repayment of the loan balance
if regular mortgage payments are not made or for breach of other
conditions of the mortgage.
Accrued Interest—Interest earned but not yet paid.
Adjustable Rate—An interest rate that changes periodically
according to an index.
Adjustable-Rate Mortgage (ARM)—A mortgage in which the interest
rate is adjusted periodically based on a preselected index. Thus,
interest rate and payments rise and fall with the market.
Adjustment Interval—The time between changes in the interest
rate and monthly payments on an ARM.
Agreement of Sale—Contract signed by buyer and seller stating
the terms and conditions under which a property will be sold.
Alternative Documentation—A method of documenting a loan file
that relies on information the borrower is likely to be able to
provide instead of waiting on verification sent to third parties
for confirmation of statements made in the application.
Amortization—A monthly repayment schedule according to which
a loan is repaid in fixed payments of principal and interest. For
the first few years, most of each payment is applied toward interest.
During the final years of the loan, payment amounts are applied
almost exclusively to the remaining principal.
Annual Percentage Rate (APR)—The cost of a mortgage expressed
as a yearly rate. This percentage takes into account interest, points,
origination fees, and mortgage insurance, so will be slightly higher
than the interest rate on the loan.
Application—An initial statement of personal and financial
information required to approve your loan.
Application Fee—Fees charged by lender a to cover initial
costs of processing a loan application, often including charges
for property appraisal and a credit report.
Appraisal—A written estimate of a property’s current
market value, based on recent sales information for similar properties,
the condition of the property, and how the neighborhood might affect
future property value.
Appraisal Fee—A fee charged by a licensed, certified appraiser
to render an opinion of market value as of a specific date.
APR—See Annual Percentage Rate.
ARM—See Adjustable-Rate Mortgage.
Assessment—A local tax levied against a property for a specific
purpose, such as road or sidewalk construction, a sewer, or street
lights.
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 property rights by one person,
the assignor, to another, the assignee.
Assumability—A feature of a loan which allows it to be transferred
to the new purchaser of a home. Assumable mortgages can help attract
buyers because assumption of a loan requires lower fees and/or qualifying
standards than a new loan.
Assumption—Agreement between buyer and seller for the buyer
to take over the payments on an existing mortgage.
>>back to top<<
B
Balance Sheet—A document showing the financial situation—assets,
liabilities, and net worth—of a company at a specific point
in time.
Balloon Mortgage—A short-term fixed-rate loan with low payments
for a set number of years and one large final balloon payment of
the remainder of the principal.
Bank Check—See cashier's check.
Bankruptcy—Proclamation by a court of an individual’s
(or organization’s) state of insolvency, or inability, to pay
debts. Petition may be brought by an individual or his creditors,
with a goal of orderly and equitable settlement of obligations.
Bearer—The legal owner of a piece of property.
Bequest—A gift of personal property by will.
Bill of Sale—A document by which one transfers ownership of
goods to another.
Bi-Weekly Mortgage—A payment plan under which one pays one-half
of a monthly payment every two weeks, saving substantially over
the life of the loan.
Blanket Mortgage—A mortgage covering at least two pieces of
real estate, both of which serve as collateral for the loan.
Bona Fide—In good faith.
Bond—A document representing a right to certain payments on
underlying collateral.
Borrower (Mortgagor)—An individual who applies for and receives
a loan in the form of a mortgage with the intention of repaying
the loan in full.
Bridge loan (Swing loan)—A form of second trust that is collateralized
by the borrower’s present home (which is usually for sale)
in a manner that allows the proceeds to be used for closing on a
new house before the present home is sold.
Broker—An individual who assists in arranging funding or negotiating
contracts for a client but does not loan money himself.
Buy-down—A situation in which the seller contributes money
that allows the lender to give the buyer a lower rate and payment,
usually in exchange for an increase in sales price.
Buyer’s Broker—An agent hired by a buyer to locate a
property for purchase and to represent the buyer in negotiations
with the seller’s broker for the best possible deal for the
buyer.
Buyer’s Market—Market conditions that favor buyers. With
more sellers than buyers in the market, buyers have ample choice
of properties and can negotiate lower prices.
>>back
to top<<
C
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.
Caps—Limits on changes in ARM interest rates or monthly payments,
either in an adjustment period or over the life of the loan.
Caps (interest)—Consumer safeguards that limit the amount
the interest rate on an adjustable-rate mortgage may change in an
adjustment interval and/or over the life of the loan.
Caps (payment)—Consumer safeguards may limit the amount monthly
payments on an adjustable-rate mortgage may change. Because they
do not limit the amount of interest the lender is earning, they
may cause negative amortization.
Cash Out—A refinance for more than the balance of the original
mortgage, so that money is taken out of the equity built up in the
house.
Cashier’s Check (or Bank Check)—A check whose payment
is guaranteed because it was paid for in advance and is drawn on
the bank’s account instead of the customer’s.
CC & Rs—See Covenants, Conditions, and Restrictions.
Ceiling—The maximum allowable interest rate of an adjustable-rate
mortgage.
Certificate of Eligibility—Document issued by the Veterans
Administration to qualified veterans that entitles them to VA guaranteed
loans. Obtainable through local VA office by submitting form DD-214
(Separation Paper) and VA form 1880 (request for Certificate of
Eligibility).
Certificate of Occupancy—Document issued by local government
agency stating that a property meets the requirements of health
and building codes.
Certificate of Reasonable Value (CRV)—A property appraisal
performed by a VA-approved appraiser that establishes the limit
on the principal of the VA loan.
Certificate of Title—Written opinion of the status of title
to a property, given by an attorney or title company. This certificate
does not offer the protection given by title insurance.
Certificate of Veteran Status—Document given to veterans or
reservists who have served 90 days of continuous active duty (including
training time) which enables them to obtain lower down payments
on certain FHA-insured loans. Obtainable through local VA office
by submitting form DD 214 (Separation Paper) with form 26-8261a
(request for Certificate of Veteran Status).
Certified Check—A check drawn on the issuer’s account
for funds that have been segregated by the bank, guaranteeing payment.
Chain of Title—The chronological order of conveyance of a
property from the original owner to the present owner.
Clear Title—A marketable title, free of clouds and disputes.
Closing (or Settlement)—Meeting between the buyer, seller,
and lender or their agents at which property and funds legally change
hands.
Closing Costs—Fees incurred in a real estate or mortgage transaction
and paid by borrower and/or seller during the closing of the mortgage
loan. These typically include a loan origination fee, discount points,
attorney’s fees, title insurance, appraisal, survey, and any
items that must be prepaid, such as taxes and insurance escrow payments.
The cost of closing is usually about 3 percent to 6 percent of the
mortgage amount.
Closing Statement—Financial disclosure statement that lists
the funds received and expected at the closing.
Cloud on Title—An outstanding claim or encumbrance that, if
valid, would affect or impair the owner’s title.
CLTV—See Combined Loan-to-Value.
COFI—See Cost of Funds Index.
Collateral—Assets that back a mortgage loan.
Combined Loan-to-Value (CLTV)—the ratio of the total mortgage
liens against the subject property to the lesser of either the appraised
value or the sales price.
Commission—Money paid to a real estate agent or broker by
the seller (usually 6 to 7% of the sale price of the house).
Commitment—A formal offer by a lender to make a loan under
certain terms or conditions to a borrower.
Condominium—A form of property ownership in which the homeowner
holds title to an individual dwelling unit and an interest in common
areas and facilities of a multi-unit project.
Conforming Loan—A mortgage loan under the maximum amount of
loans FNMA and FHLMC are legally allowed to buy (up to $322,700
for a one-unit property).
Construction Loan—A short-term interim loan to fund the construction
of buildings or homes, which usually advances the money to the builder
as work progresses. After completion a permanent loan is used to
pay off the construction loan.
Contingency—A condition that must be satisfied before a contract
is legally binding—before a sale can close.
Contract of Sale—The agreement between the buyer and seller
on the purchase price, terms, and conditions of a sale.
Conventional Loan—A mortgage not insured by the FHA or guaranteed
by the VA.
Conversion Clause—A provision in some ARMs that allows you
to change an ARM to a fixed-rate loan, usually after the first adjustment
period. The new fixed rate will be set at current rates, and there
may be a charge for the conversion feature.
Convertible ARMs—ARMs with the option of conversion to a fixed
loan during a given time period.
Conveyance—The transfer of a deed or possibly a lease or mortgage.
Cost of Funds Index (COFI)—An index of the weighted-average
interest rate paid by savings institutions for sources of funds,
usually by members of the 11th Federal Home Loan Bank District.
Covenants, Conditions, and Restrictions (CC&Rs)— A document
that defines the use, requirements, and restrictions of a property.
Credit Report—A report detailing the credit history of a prospective
borrower, used to help determine creditworthiness.
Credit Risk—The possibility that the borrower may default
on financial obligations to the investor.
CRV—Certificate of Reasonable Value.
>>back
to top<<
D
Debt-to-Income Ratio—The ratio, expressed as a percentage,
that results when a borrower’s monthly payment obligation on
long-term debts is divided by his or her gross monthly income.
Deed—Legal document by which title to a property is transferred
from one owner to another. The deed contains a description of the
property, and is signed, witnessed, and delivered to the buyer at
closing.
Deed of Trust—Agreement to pledge property as security for
a loan, used in many states in place of a mortgage. In such an arrangement,
the borrower transfers legal title to a trustee who holds the property
in trust as security for the repayment of the debt. The deed of
trust becomes void if the debt is repaid, but if the borrower defaults
on the loan, the trustee may sell the property to pay the debt.
Default—Failure to meet legal obligations in a contract, including
failure to make payments on a loan. A mortgage is generally considered
to be in default when a payment is 30 days past due.
Deferred Interest—Interest added to the balance of a loan
when monthly payments are not sufficient to cover it. (See Negative
Amortization.)
Delinquency—Failure to make payments on time.
Deposit—Cash paid to the seller when a formal sales contract
is signed.
Depreciation—When the value of property declines.
Discount Points (or Points)—Money paid to a lender at closing
in exchange for lower interest rates. Each point is equal to 1%
of the loan amount.
Documentary Stamps—A state tax, in the forms of stamps, required
on deeds and mortgages when real estate title passes from one owner
to another.
Document Review—Fee charged by a lender for review of documents
necessary to fund a loan.
Down Payment—Money paid for a house from one’s own funds
at closing. The down payment will be in the amount of the difference
between the purchase price and mortgage amount.
Due-on-Sale Clause—Provision in a mortgage or deed of trust
allowing the lender to demand immediate payment of the loan balance
upon sale of the property.
>>back
to top<<
E
Earnest Money—Deposit made by a buyer towards the down payment
in evidence of good faith when the purchase agreement is signed.
ECOA—See Equal Credit Opportunity Act.
Effective Interest Rate—The cost of a mortgage expressed as
a yearly rate, usually higher than the interest rate on the mortgage
because this figure includes up-front costs of acquiring the loan.
Encumbrance—A legal right or interest in a property that affects
title and lessens the property value. Encumbrances can take the
form of claims, liens, unpaid taxes, and so on. These will usually
have to be taken care of before a buyer will want to purchase the
property.
Equal Credit Opportunity Act (ECOA)—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 income from public assistance programs.
Equity—The percentage of property value held by the owner;
the difference between the current market value of a property and
the outstanding mortgage balance.
Equity Loan—A loan based on the borrower’s equity in
his or her home.
Escrow Account—Account held by a lender containing funds collected
as part of mortgage payments for annual expenses such as taxes and
insurance, so that the homeowner does not have to collect a large
sum when these fall due.
Escrow Waiver—When a buyer borrows less than 80% of the cost
of the house, he may pay a one-time fee and elect not to open an
escrow account, but to pay the hazard insurance and property taxes
himself.
>>back
to top<<
F
Fannie Mae—See Federal National Mortgage Association.
Farmer’s Home Administration (FmHA)—An agency, within
the U.S. Department of Agriculture, that provides financing for
purchasers of homes and farms in small towns and rural areas.
FDIC—See Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (FDIC)—Independent deposit
insurance agency created by Congress to maintain stability and public
confidence in the nation’s banking system.
Federal Home Loan Bank Board (FHLBB)—Former name for the regulatory
and supervisory agency for federally chartered savings institutions,
now called the Office of Thrift Supervision.
Federal Home Loan Mortgage Corporation (FHLMC, or Freddie
Mac)—Quasi-governmental
agency that purchases conventional mortgages from insured depository
institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)—Government agency, division
of the Department of Housing and Urban Development, that insures
residential mortgage loans made by private lenders and sets standards
for underwriting mortgage loans.
Federal National Mortgage Association (FNMA, or Fannie
Mae)—Corporation
created by Congress that buys and sells residential mortgages, providing
funds for one in seven mortgages.
Federal Reserve—Central bank of the United States and major
regulatory agency for many commercial banks.
Fee Simple—Absolute ownership of real property.
FHA—See Federal Housing Administration.
FHA Loan—Loan insured by the FHA for low- to middle-income
homes, open to all qualified home purchasers.
FHLBB—See Federal Home Loan Bank Board.
FHLMC—See Federal Home Loan Mortgage Corporation.
First Mortgage—A mortgage that 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 that is fixed for the term of
the loan.
Fixed-Rate Mortgage—A mortgage whose interest rate does not
change for the life of the loan. Payments are also fixed.
Flood Insurance—A form of hazard insurance required by lenders
to cover properties in flood zones.
Floor—The minimum rate of interest payable on an adjustable-rate
mortgage.
FmHA—See Farmer’s using Administration.
FNMA—See Federal National Mortgage Association.
Forbearance—Grace period given when a lender postpones foreclosure
to give the borrower time to catch up on overdue payments.
Foreclosure (or Repossession)—Legal process by which the lender
forces the sale of a property because the borrower has not met the
mortgage terms.
Freddie Mac—See Federal Home Loan Mortgage Corporation.
>>back
to top<<
G
Ginnie Mae—See Government National Mortgage Association.
GNMA—See Government National Mortgage Association.
Good Faith Estimate—Written estimate of costs the borrower
will have to pay at closing, provided by a lender within three days
of a loan application.
Government National Mortgage Association (GNMA, or Ginnie
Mae)—Government
agency that provides funds for VA and FHA loans.
GPM—See Graduated Payment Mortgage.
Graduated Payment Mortgage (GPM)—Mortgage in which initial
low payments (with potential negative amortization) increase regularly
for several years and then level off.
Grace Period—Period of time during which a loan payment may
be made after its due date without incurring a late penalty.
Gross—Before taxes.
Gross Income—Total income before taxes or expenses are deducted.
Gross Monthly Income—The total amount earned by the borrower
each month.
Growing Equity Mortgage—A fixed-rate loan in which payments
increase by some predetermined amount each year, which reduces the
outstanding balance of the loan. This accelerated payment plan allows
repayment of a 30-year loan in 15 to 20 years.
Guarantee—To assume liability for another’s debts in
the event of his default.
Guaranty—A promise by one party to pay a debt or perform an
obligation contracted by another in case of that person’s default.
H
Hazard Insurance—Protects the insured against loss due to
fire or other natural disaster in exchange for a premium paid to
the insurer.
Home Equity Loan—A loan secured by the equity in your home.
These are sought for a variety of purposes, including home improvements,
major purchases or expenses, and debt consolidation. Interest paid
is usually tax-deductible.
Homeowners Warranty—A type of insurance that covers repairs
to specified parts of a house for a specific period of time.
Housing and Urban Development (HUD)—A U.S. government agency
established to implement federal housing and community development
programs; oversees the Federal Housing Administration.
Housing Code—Local government ordinance that sets minimum
standards of safety and sanitation for existing residential buildings.
Housing Expense-to-Income Ratio—The ratio, expressed as a
percentage, that results when a borrower’s housing expenses
are divided by his/her gross monthly income.
HUD—See Housing and Urban Development.
HUD-I Settlement Statement—A form that itemizes the closing
costs associated with purchasing a home.
>>back
to top<<
I
Impound (or Reserves)—Portion of a borrower’s monthly
payments held by the lender to pay for taxes, insurance, and other
items as they become due.
Impound Account—Savings account for accumulating that portion
of a borrowers monthly payments designated for future payments of
taxes and insurance. (Required by certain lenders or with certain
types of financing.)
Index—A published rate used by lenders to calculate interest
adjustments on ARMs (Index + Margin = Interest Rate). Some indexes
are more volatile than others. Some common indices are 1-year Treasury
bills, COFI (Cost of Funds Index ) and 6-month LIBOR (London Interbank
Offered Rate).
Initial Rate—The rate charged during the first interval of
an ARM.
Insolvency—Condition of a person who is unable to pay his
debts as they fall due.
Interest—Charge paid for borrowing money, calculated as a
percentage of the amount borrowed.
Interest Rate—The periodic charge, expressed as a percentage,
for use of credit.
Interest Rate Cap—A safeguard built into ARMs to prevent drastic
changes in interest rates.
>>back
to top<<
J
Joint Liability—Liability shared among two or more people,
each of whom is liable for the full debt.
Joint Tenancy—The ownership of property by two or more persons
with the survivor taking the share of the deceased.
Jumbo Loan—A mortgage larger than the limits set by the Federal
National Mortgage Association and the Federal Home Loan Mortgage
Corporation, currently more than $322,700. Because jumbo loans cannot
be funded by these two agencies, they usually carry a higher interest
rate.
Junior Mortgage—A mortgage subordinate or secondary to another
mortgage. In the case of a foreclosure a senior mortgage will be
paid first.
>>back
to top<<
K
[no items present for the letter K]
>>back
to top<<
L
Late Charge—Penalty paid by a borrower when a payment is made
after the due date.
Lease-Purchase Mortgage Loan—An alternative financing option
that allows low- and moderate-income homebuyers to lease a home
from a nonprofit organization with an option to buy. Monthly rental
payments cover mortgage payments, and also include an additional
amount that is saved toward a down payment.
Lender—The bank, mortgage company, or mortgage broker offering
the loan.
LIBOR (London Interbank Offered Rate)—The interest rate charged
among banks for short-term Eurodollar loans, and a common index
for ARMs.
Lien—A claim by one person on the property of another for
payment of a debt.
Loan Administration (or Loan Servicing)—The collection of
mortgage payments from borrowers and related responsibilities (such
as handling escrows for property tax and insurance, foreclosing
on defaulted loans and remitting payments to investors).
Loan Application—Document required by lenders prior to loan
approval containing detailed information about the borrower and
property.
Loan Application Fee—Fee paid by prospective buyer to lender
when applying for a mortgage.
Loan Origination Fee—Fee charged by a lender for processing
a mortgage, usually expressed as a percentage of the loan (or points),
which pays for the work in evaluating and processing the loan.
Loan Servicing (or Loan Administration)—The collection of
mortgage payments from borrowers and related responsibilities (such
as handling escrows for property tax and insurance, foreclosing
on defaulted loans and remitting payments to investors).
Loan to Value Ratio (LTV)—The percentage of the property value
borrowed. (Loan amount/property value=LTV)
Lock or Lock In—A lender’s guarantee of an interest rate
for a set period of time, usually between loan application and loan
closing; protects borrower against rate increases during that time.
London Interbank Offered Rates—See LIBOR.
LTV—See Loan to Vaue Ratio.
>>back
to top<<
M
Margin—The number of percentage points added to an index to
calculate the interest rate on an ARM at each adjustment.
Marketable Title—A title that is free and clear of liens,
clouds, or other defects that would prevent the sale of the property.
Market Rate—The average rate charged by lenders for conventional,
fixed-rate loans.
Market Value—The highest price that a buyer would pay for
a property and the lowest price a seller would accept.
Monthly Housing Expense—Total monthly expense of principal,
interest, taxes, and insurance.
Mortgage—Document creating a lien on a property as security
for the payment of a debt.
Mortgage Banker—Originates and services mortgage loans, funding
them with their own money.
Mortgage Broker—Arranges financing for borrowers, but places
loans with lenders rather than funding them with their own money.
Mortgagee—The lender in a mortgage loan transaction.
Mortgage Insurance—Insurance purchased by a buyer to cover
the lender’s risk when a down payment is less than 20 percent
of the purchase price.
MIP (Mortgage Insurance Premium)—Insurance purchased by borrower
to insure against default on government (FHA or VA) loans.
Mortgage Loan—A 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.
Mortgagor—The borrower in a mortgage loan transaction.
>>back
to top<<
N
Negative Amortization—Increase in principal balance that occurs
when monthly payments are not large enough to pay all interest due
on a loan, usually caused when payment caps prevent sufficient payment
increases. Unpaid deferred interest is added to the loan balance,
which means that the borrower ends up owing more than the original
amount of the loan.
Net—After taxes.
Net Effective Income—Gross income minus federal income tax.
NonAssumption Clause—A statement in a mortgage contract forbidding
the assumption of the mortgage by another borrower without the prior
approval of the lender.
NonConforming Loan—Loan that does not comply with Fannie Mae
or Freddie Mac guidelines, but is larger than $240,000.
Nondischargeable Debt—Debt, such as taxes, that cannot be
forgiven in a bankruptcy liquidation.
Note—Legal document stating the terms of a debt and a promise
to repay it.
Notice of Default—Written notice to a borrower that a default
has occurred and that legal action may be taken.
>>back
to top<<
O
Office of Comptroller Currency—The oldest federal financial
regulatory body, which oversees the nation’s federally chartered
banks.
Office of Thrift Supervision—Regulatory and supervisory agency
for federally chartered savings institutions.
Origination Fee—Fee charged by a lender for processing a mortgage,
usually expressed as a percentage of the loan (or points), which
pays for the work in evaluating and processing the loan.
Owner Financing—A purchase in which the seller provides all
or part of the financing.
>>back
to top<<
P
PAM—See Pledged Account Mortgage.
Payment Cap—Limit on the amount by which a borrower’s
ARM payments may increase, regardless of rise in interest rates;
may result in 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 of the
following month.)
Permanent Loan—A long-term mortgage of 10 years or more.
PITI—Abbreviation for Principal, Interest, Taxes and Insurance,
the components of a monthly mortgage payment; also called monthly
housing expenses.
Pledged Account Mortgage (PAM)—Money is placed in a pledged
savings account and this fund plus earned interest is gradually
used to reduce mortgage payments.
PMI—See Private Mortgage Insurance.
Points (or Discount Points)—Interest prepaid to the lender
at closing. Each point is equal to 1% of the loan amount. Paying
more points at closing generally reduces the interest rate (and
therefore monthly payments) on a loan.
Power of Attorney—Legal document authorizing one person to
act on behalf of another.
Prepaid Expenses—Taxes, insurance, and assessments paid in
advance of their due dates, including at closing.
Prepaid Interest—Charged to a borrower at closing to cover
interest on the loan between closing and the first payment.
Prepayment—Full or partial payment of the principal before
the due date. This might occur if the borrower makes extra payments,
sells the property, or refinances the existing loan.
Prepayment Penalty—Fee charged by a lender for early payment
of debt.
Prequalification—The process of determining how much money
a prospective homebuyer will be eligible to borrow prior to application
for a loan.
Primary Mortgage Market—Includes banks, savings and loans,
credit unions, and mortgage bankers who make mortgage loans directly
to borrowers. These lenders sometimes sell their mortgages to lenders
such as FNMA in the secondary mortgage market.
Prime Rate—Lowest commercial interest rate charged by a bank
on short-term loans to its most credit-worthy customers.
Principal—The amount of debt, not counting interest, left
on a loan.
Private Mortgage Insurance (PMI)—Insurance purchased by a
buyer when a down payment is less than 20% of the purchase price
to protect the lender against default.
Profit and Loss Statement—Financial statement showing sales,
expenses, and profits over a period of time.
Property Tax—A government tax based on the market value of
a property.
Purchase Agreement—Contract signed by buyer and seller stating
the terms and conditions under which a property will be sold.
>>back
to top<<
Q
Qualifying Ratio—Comparison of a borrower’s expenses
(housing or total debt) to his income.
>>back
to top<<
R
RAM—Reverse Annuity Mortgage.
Real Estate Broker—An agent who represents a buyer or seller
in a real estate transaction.
Real Estate Settlement Procedures Act—Law requiring lenders
to give borrowers advance notice of closing costs.
Real Property—Land and everything that is permanently affixed
to it.
Realtor—Real estate professional who is a member of the National
Association of Realtors.
Recision—The cancellation of a contract, permitted by law
within three days of signing a mortgage not used to purchase a home.
Reclamation—The right of the person with title to a property
to recover it from the debtor in case of a bankruptcy.
Reconveyance—The transfer of property back to the owner when
a mortgage is fully repaid.
Recording—The act of entering documents concerning title to
a property into the public records.
Recording Fee—Money 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.
Rent with Option to Buy—See Lease-Purchase Mortgage Loan.
Repossession (or Foreclosure)—Legal process by which the lender
forces the sale of a property because the borrower has not met the
mortgage terms.
Reserves—See Impound.
RESPA—See Real Estate Settlement Procedures Act.
Reverse Annuity Mortgage (RAM)—Mortgage used by the elderly
in which the lender makes periodic payments to the borrower using
the borrower’s equity in the home.
>>back
to top<<
S
Sale Agreement—Contract signed by buyer and seller stating
the terms and conditions under which a property will be sold.
SAM—See Shared Appreciation Mortgage.
Satisfaction—The payment of a debt that satisfies an obligation.
Secondary Mortgage Market—The market into which primary mortgage
lenders sell the mortgages they make to obtain funds to originate
more new loans; includes investors such as Fannie Mae and Freddie
Mac.
Second Mortgage—A subordinate mortgage made in addition to
a first mortgage.
Seller’s Broker—An agent hired by a seller to represent
the seller in negotiations with the Buyer’s Broker for the
best possible deal for the seller.
Seller’s Market—Market conditions that favor sellers.
With more buyers than sellers in the market, sellers have the negotiating
power as demand exceeds supply.
Servicing (or Loan Administration)—The collection of mortgage
payments from borrowers and related responsibilities (such as handling
escrows for property tax and insurance, foreclosing on defaulted
loans, and remitting payments to investors).
Settlement (or Closing)—Meeting between the buyer, seller,
and lender or their agents at which property and funds legally change
hands.
Settlement Cost (HUD guide)—Booklet that provides an overview
of the lending process, given to consumers after completing loan
application.
Settlement Costs—See Closing Costs.
Settlement Sheet—The computation of costs payable at closing
which determines the seller’s net proceeds and the buyer’s
net payment.
Shared Appreciation Mortgage (SAM)—Loan in which the borrower
is given a below-market interest rate and the lender receives a
portion of the future appreciation of the property value.
Simple Interest—Interest that is computed only on the principal
balance.
Subsidized Second Mortgage—Alternative financing option for
low- and moderate-income households that also includes a down payment
and a first mortgage, with funds for the second mortgage provided
by city, county, or state housing agencies, foundations, or nonprofit
corporations. Payment on the second mortgage is often deferred and
carries low interest rates (if any). Part of the debt may be forgiven
for each year the family remains in the home.
Survey—A measurement of land, prepared by a licensed surveyor,
showing a property’s boundaries, elevations, improvements,
and relationship to surrounding tracts.
Sweat Equity—Value added to a property by improvements made
by the owner.
Swing Loan—See Bridge loan.
>>back
to top<<
T
Tax Impound—Money paid to and held by a lender for annual
tax payments. See Impound Account.
Tax Lien—Claim against a property for unpaid taxes.
Tax Sale—Public sale of property by a government authority
as a result of nonpayment of taxes.
Term—The number of years it will take to pay off a loan.
Title—Document that gives evidence of ownership of a property.
Also the rights of ownership and possession of that property.
Title Company—A company that 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—Examination of municipal records to ensure that
the seller is the legal owner of a property and that there are no
liens other claims against the property.
Transfer Tax—Tax paid when title passes from one owner to
another.
Trust Account—Account maintained by a broker or escrow company
to handle all money collected for clients.
Trustee—Someone given legal responsibility to hold property
in the best interest of another.
Truth-in-Lending Act—Federal law requiring written disclosure
of the terms of a mortgage (including the APR and other charges)
by a lender to a borrower after application.
Two-Step Mortgage—Mortgage with a low fixed interest rate
for 5, 7, or 10 years, which is then adjusted to a new rate for
the rest of the loan.
>>back
to top<<
U
Underwriting—The process of verifying data and evaluating
a loan for approval. The underwriter gives the final loan approval.
Usury—Interest charged in excess of the legal rate established
by law.
>>back
to top<<
V
VA Loan—Home loan available to veterans with little or no
down payment and guaranteed by the U.S. Veteran’s Administration.
Variable Rate Mortgage—See Adjustable-Rate Mortgage.
Variable Rate—Interest rate that changes periodically in relation
to an index.
Verification of Deposit (VOD)—Document signed by the borrower’s
bank or other financial institution verifying the borrower’s
account balance and history.
Verification of Employment (VOE)—Document signed by the borrower’s
employer verifying the borrower’s position and salary.
VOD—See Verification of Deposit.
VOE—See Verification of Empolyment.
>>back
to top<<
W-Z
Waiver—Voluntary relinquishment or surrender of some right
or privilege.
Walk-Through—A final inspection of a home to check for problems
that may need to be corrected before closing.
Warehouse Fee—Mortgage firms often borrow funds on a short-term
basis in order to originate loans that will later be sold to investors
in the secondary mortgage market. When the prime rate of interest
is higher on short-term loans than on mortgage loans, the mortgage
firm has an economic loss that is offset by charging a warehouse
fee.
Wraparound Mortgage—Loan arrangement in which an existing
loan is combined with a new loan, resulting in an interest rate
somewhere between the old rate and the current market rate.
Zoning Ordinances—Local law establishing building codes and
usage regulations for properties in a specified area. This creation
of districts specifies different types of property uses such as
commercial or residential, and so on.
>>back
to top<<
|
