- A
-
- Abstract (of title)
- A written summary of the
title history of a particular piece of real estate.
- Acceleration Clause
- A provision of a mortgage or
note which provides that the entire outstanding balance will become due and
payable in the event of default.
- ARM (Adjustable Rate
Mortgage)
- A mortgage in which the
interest rate is adjusted periodically, based on the movement of a financial
index.
- Amortization
- Repayment of 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.
- APR (Annual Percentage Rate)
- The annual percentage rate
refers to the total cost of the loan, expressed as a yearly rate.
- 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
person as to the value of a property as of a given date.
- Assessed Value
- The value placed on a piece
of real estate by the taxing authority for the purpose of taxation. Also
called an assessment.
- Assumption of Mortgage
- The purchaser takes over
mortgage payments for the balance of the loan, assuming primary liability.
Unless specifically released by the lender, the seller remains secondarily
liable.
B
- Balloon Mortgage
- A mortgage with periodic
payments that do not fully amortize the loan. The outstanding balance of the
mortgage is due in a lump sum at the end of the term.
- Bridge Loan
- A short-term loan secured by
the equity in an as-yet-unsold house, with the funds to be used for a down
payment and/or closing costs on a new house. There is no payment of
principal until the house is sold or the end of the loan term, whichever
comes first. Interest payments may or may not be deferred until the house is
sold.
- Broker
- The person who, for a
commission or a fee, brings parties together and assists in negotiating
contracts between them.
- Buydown
- Money advanced by an
individual (e.g. builder, seller, buyer, lender, developer) to lower monthly
mortgage payments for a few years or the whole term.
C
- Cap (interest rate)
- The maximum interest rate
increase allowable on an adjustable rate mortgage. Does not result in
negative amortization. See Negative amortization.
- Cap (payment rate)
- The maximum payment amount
increase allowable on an adjustable rate mortgage. May result in negative
amortization. See Negative amortization.
- 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 (over and above the
price of the property) incurred by buyers and sellers in transferring
ownership of a property. Also called "settlement costs."
- Closing Statement
- A financial disclosure
giving 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.
- Commission
- An agent's or broker's fee
for bringing the principals together and helping to negotiate a real estate
transaction, often a percentage of the sales price or flat fee.
- Commitment
- An agreement, frequently in
writing, between a lender and a borrower to loan money at a future date,
subject to certain conditions.
- Comparables
- Refers to similar properties
used for comparison purposes in the appraisal process. These properties will
be reasonably the same size and location, with similar amenities and
characteristics, so that the approximate fair market value of the subject
property can be determined.
- Condominium
- Ownership of a single unit
in a multiunit building or complex of buildings. Along with this goes a
share of ownership of the common areas.
- Contingency
- A condition that must be met
for a contract or a commitment to remain binding.
- Conventional Mortgage
- Any mortgage loan that is
not insured by FHA, guaranteed by VA, of funded by a government authorized
bond sale or grant.
- Convey
- To transfer real estate from
one person to another.
- Credit Report
- The report to a prospective
lender on the credit standing of a prospective borrower.
D
- Deed
- A legal written document by
which title to property is transferred.
- Default
- Failure to fulfill the terms
as agreed to in the mortgage of note.
- Down Payment
- The difference between the
sale price of a property and the mortgage amount.
- Due-On-Sale
- A clause in a mortgage which
gives the lender the right to require immediate repayment of a mortgage
balance if the property changes hands.
E
- Earnest Money
- The deposit money given to
seller or his agent by the potential buyer at the time of the purchase
offer. If the offer is accepted, the money will become part of the down
payment.
- Easement
- A right to the limited use
of land owned by another. An electric company, for example, could have an
easement to put up electric power lines over someone's property.
- Encumbrance
- Anything that affects or
limits the title to a property, such as outstanding mortgages, easement
rights or unpaid property taxes.
- Equity
- The value in which the owner
has in real estate over and above the mortgages against it. When the
mortgage and all other debts against the property are paid in full, the
owner has 100% equity in his property.
- Escrow
- Funds and/or deed left in
trust to a third party. Generally, a portion of the monthly mortgage payment
is held in escrow by the lender to pay for taxes, hazard insurance and
yearly mortgage insurance premiums.
F
- 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.
- Fixture
- Property, such as a hot
water heater or plumbing fixture, that has become permanently attached to
piece of real estate and goes with the property when it is sold.
- 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
- A legal procedure in which
property mortgaged as security for a loan is sold to pay the defaulting
borrower's debt.
G
- Graduated Payment Mortgage
- A fixed rate loan with
monthly payments that start low, increasing by a fixed amount for a specific
number of years. After that period, the payments typically remain constant
for the duration of the loan.
- Gross Income
- Normal income, including
overtime, prior to any payroll deductions, that is regular and dependable.
This income may come from more than one source.
H
- Hazard Insurance
- Insurance protection against
damage to a property from fire, windstorms, and other common hazards.
- Homeowner's Insurance
- An insurance policy that
covers the dwelling and its contents in case of fire or wind damage, theft,
liability for property damage and personal liability.
- HUD-1 Form
- See Real Estate Settlement
Statement.
I
- Income Property
- Real estate that is owned
for investment purposes and not used as the owner's residence.
- Interest
- A charge paid for the use of
money.
- Interim Financing
- See Bridge Loan.
L
- Land Contract
- When the buyer agrees to
make payments directly to the seller at pre-negotiated terms. The seller
agrees to deed the property to the buyer upon completion of the agreement.
The buyer becomes the owner of equity in this type of sale. (Also see
Owner Financing.)
- Lien
- A legal claim on a property
used as security for a debt.
- Loan-To-Value Ratio
- The relationship between the
amount of the mortgage and property value, usually shown as a percentage.
M
- Market Value
- The price at which a
property will sell, assuming a knowledgeable buyer and seller, both
operating without undue pressure.
- 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.
- 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.
O
- Offer to Purchase
- A written proposal to buy a
piece of real estate that becomes binding when accepted by the seller. Also
called a sales contract.
- Origination Fee
- A fee charged for the work
involved in the evaluation preparation and submission of a proposed mortgage
loan.
- Owner Financing
- A purchase in which the
seller provides all or part of the financing.
P
- PITI
- An acronym for payments to
lender that cover principal, interest, taxes and insurance on a property.
- Plat
- A map of a piece of land
showing boundary lines, streets, actual measurements and easements.
- 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.
- 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 credit provided that specific conditions are met.
- Pre-Qualification
- A preliminary assessment of
a buyer's ability to secure a loan, based on a specific set of lending
guidelines and buyer representations made. This is not a guarantee or
commitment by a lender to extend credit.
- Prime Rate
- The interest rate charged by
banks to their preferred corporate customers, it tends to be an estimator
for general trends in short term interest rates.
- Principal
- The amount borrowed or
remaining unpaid; also, that part of the monthly payment that reduces the
outstanding balance of a mortgage.
- PMI (Private Mortgage
Insurance)
- Insurance written by a
private mortgage insurance company to protect the lender against losses
caused by mortgage default. This is commonly required on loan transactions
involving less than a 20% down payment or equity position.
Q
- Qualifying Ratios
- Guidelines used by lenders
to determine how much of a loan a home buyer qualifies for. Often referred
to as debt-to-income ratios (or DTI).
R
- Real Estate Settlement
Statement
- Final settlement statement
often referred to as the HUD-1 form, used to itemize buyer, seller, broker,
and lender charges and credits at closing.
- Realtor
- A real estate broker or
sales associate affiliated with the National Association of Realtors.
- Recording Fee
- The charges made by the
register of deeds to record the legal documents.
- Refinancing
- Repaying a debt with the
proceeds of a new loan, using the same property as collateral or security.
S
- Second Mortgage
- A loan issued on property
that is already encumbered by an existing mortgage (ie: the first mortgage).
The second mortgage is subordinate to the first.
- Secondary Mortgage Market
- The market wherein home
loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a
variety of other institutional investors.
- Survey
- A map prepared by an
engineer or surveyor charting a particular piece of real estate.
T
- Title
- 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
- A policy designed to protect
the buyer or lender after closing from financial losses arising from any
defects in the title that may have occurred prior to purchase.
- Title Search
- A check of public record to
disclose the past and current facts regarding ownership of a particular
piece of property.
- Transfer Tax
- In some areas city, county
or state taxes imposed when property passes from one person to another.
- Truth-In-Lending
- Federal law that requires
lenders to disclose the terms and conditions of a mortgage, including the
APR, based on certain charges incurred by the borrower. If the charges were
$0, the APR would be equal to that actual interest rate on the loan.
U
- Underwriting
- The process of evaluating a
loan application to determine the risk involved for the lender.
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