Adjustable Rate
Mortgage (ARM) |
Is a mortgage
in which the interest rate is adjusted periodically
based on a pre-selected index. |
Agreement
For Sale |
A written document
in which the purchaser agrees to buy certain real
estate and the seller agrees to sell under certain
stated terms and conditions. |
Amortize |
To
reduce debt by means of regular periodic payments
which include amounts applicable to both principle
and interest. |
Annual
Percentage Rate (APR) |
The total cost
of credit expressed as a yearly rate. Includes
interest, loan discount fee, and other credit
costs. |
Application
Fee |
Includes appraisal
and credit report fees. |
Appraisal
Fee |
Fee for the
inspection by the appraiser of the house and neighborhood,
review of sale prices of comparable houses to
determine value of property.
|
Appreciation |
An increase
in value of real property. |
Assumable
Loan |
A loan transferable
from seller to buyer. May require a large down
payment, but interest rate could be lower. |
Assumption
Fee |
May be charged
for processing buyer’s assumption of seller’s
loan. |
Assumption
of Mortgage |
Assumption
by the buyer of the primary liability for payment
of an existing mortgage or deed of trust, with
the seller remaining secondarily liable for the
obligation. |
Balloon Mortgage |
Usually a short-term fixed-rate loan which
involves a set interest rate for a certain period
of time (usually 5 or 7 years), and one large
payment for the remaining amount of the principal
at the conclusion of that time frame (may be
able to convert or refinance).
|
Blanket Mortgage |
A mortgage covering
at least two pieces of real estate as security
for the same mortgage. |
Buydown |
Amount seller
pays to lender so buyer gets lower interest rate.
Inflated or nonnegotiable selling price covers
buydown. |
Cash Flow |
The amount of
cash derived over a certain period of time from
an income-producing property. The cash flow should
be large enough to pay the expenses of the income
producing property (mortgage payment, maintenance,
utilities, etc.). |
Certificate of
Eligibility |
The document
given to qualified veterans which entitles them
to VA guaranteed loans for homes, business, and
mobile homes. |
Closing |
The conclusion
or consummation of the real estate transaction.
Closing includes the delivery of deed, financial
adjustment, the signing of notes, and the disbursement
of funds necessary for the loan transactions.
|
Closing/Settlement |
All paperwork,
financial transactions completed, and title passes
from seller to buyer, if applicable.
|
Credit
Reporting Fee |
Covers cost
of buyer’s credit report.
|
Debt-to-Income
Ratio |
The ratio, expressed
as a percentage, which results when a borrower’s
monthly payment obligation on long-term debts
is divided by his or her gross monthly income. |
Deed |
Written instrument
duly executed and delivered by which the title
to land is transferred from one person to another. |
Deed
of Trust |
A conveyance
of land title by a marker or a note (from a debtor)
to a third party, a trustee, as collateral security
for the payment of the note with the condition
that the trustee shall reconvey the title to the
debtor upon payment of the note, and with the
power in the trustee to sell the land and pay
the note in the event of default on the part of
the debtor. |
Discount
Points |
The amount
of money the borrower or seller must pay the lender
to get a mortgage at a stated interest rate. This
amount is equal to the difference between the
principal balance on the note and the lesser amount
which a purchaser of the note would pay the original
lender under market conditions. A point equals
one percent of the loan. |
Document
Preparation Fee |
Cost of preparing
legal papers. |
Down
Payment |
The difference
between the sale price of real estate and the
mortgage amount. |
Earnest Money |
Money given up front by a buyer to
a seller as part of the purchase price, to bind
a transaction or assure payment. |
Equal Credit
Opportunity Act (ECOA) |
Is a federal
law that requires lenders and other creditors
to make credit equally available without discrimination
based, on among other things: race, color, religion,
national origin, age, sex, martial status, or
receipt of income from public assistance programs. |
Equity |
The difference
between fair market value and the current indebtedness,
usually referring to the owner’s interest. |
Escrow Account |
Funds accumulated
and held by the lender in an escrow account to
pay taxes, hazard insurance premiums, and other
assessments imposed by municipalities or subdivisions;
also called pre-paids, impounds, or escrow funds.
|
Escrow
Agent |
Person or company
holding all documents and money until closing/settlement. |
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. |
FHA Loan |
A loan insured
by the Federal Housing Administration open to
all qualified home purchasers. While there are
limits to the size of FHA loans, they are generous
enough to handle moderately priced homes almost
anywhere in the country. |
For Sale Agreement |
A written document
in which the purchaser agrees to buy certain real
estate and the seller agrees to sell under certain
stated terms and conditions. |
General
Warranty Deed |
A deed containing
a covenant whereby the seller agrees to protect
the buyer against being dispossessed because of
any adverse claims against the land. |
Hazard
Insurance |
Real estate
insurance protecting against loss caused by fire
, some natural causes, vandalism, etc. depending
upon the terms of the policy. |
Home
Protection Plan |
From builder
of new home to protect against faulty materials
and workmanship; on a pre-owned home, first-year
protection against unexpected major repair expense.
|
Lease |
A written document
containing the conditions under which the possession
and use of real property are given by the owner
to another for a stated period and for a stated
consideration. |
Lender’s
Inspection Fee |
Charge for
inspection of new construction by lender or an
inspector. |
Leverage |
The use of
borrowed money to increase one’s return on cash
investments. |
Lien |
A claim or
charge on property held by another for payment
of some debt, obligation, or duty. |
Loan
Origination Fee |
A percent of
the loan; covers administrative costs. |
Margin |
Difference
between index and actual interest rate of ARMs. |
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. |
Mortgage |
Instrument
whereby an owner conditionally transfers title
of his property to another as security for payment
or debt. The owner retains possession and use
of the land and, upon debt payment, the mortgage
becomes void. |
Notary
Fee |
Cost of a licensed
person authenticating execution of documents by
both parties. |
Note |
A written promise
to pay a certain amount of money, at a certain
time, in a certain number of installments. It
usually provides for payment of interest and its
payment is at times secured by a mortgage. |
Notary
Fee |
Cost of a licensed
person authenticating execution of documents by
both parties. |
Owner’s
Policy |
A title insurance
policy insuring the owner against loss due to
any defect of title not expected to or excluded
from the policy. |
Private Mortgage
Insurance (PMI) |
In the event
that you do not have a 20 percent down payment,
lenders will allow a smaller down payment. With
the smaller down payment loans, however, borrowers
are usually required to carry private mortgage
insurance. This insurance protects the lender
against financial loss, should a borrower default
on their mortgage. |
Points |
Charged in
both fixed and adjustable rate mortgages to increase
mortgage yield and cover closing costs. A "Point"
is one percent of the mortgage. |
Recording
Fee |
A charge paid
for recording the transfer of a property; this
fee is paid to a government branch. |
Refinancing |
The repayment
of a debt from the proceeds of a new loan using
the same property as security.
|
Secondary
Financing |
Financing real
estate with a loan or loans that a re subordinate
to a first mortgage or first trust deed. |
Title
Insurance |
Often required
to protect lender against loss due to undiscovered
title defects. An owner’s policy costs less if
bought at the same time. A Title Insurance Binder
is a commitment to insure the lender against such
defects. |
Transfer
Taxes |
Taxes levied
on the transfer of property or on real estate
loans by state or local jurisdictions. |
Veterans
Administration |
A federal agency
that insures mortgage loans with liberal down
payment requirements for honorably discharged
veterans and their living spouses. |