Abstract - A written history of public records on a property.
Adjustable Rate Mortgage (ARM) - A mortgage loan in which the interest rate may change periodically according to a specified financial index.
Adverse Action- A denial of a loan for the amount and terms requested by the borrower.
Amortization - Repayment of a loan through scheduled installment payments.
Annual Percentage Rate (APR)- The actual cost of credit to the borrower, including interest and certain other charges, expressed as a yearly rate and calculated over the life of the loan. It is used to compare programs
Appraisal - An inspection of a property to assure that its market value exceeds the amount of the loan.
Assumable Mortgage - A mortgage in which the buyer of your property is able to take the seller's mortgage, and then accepts the responsibility for the payments.
Balloon Mortgage - A mortgage which comes due at a future date where an outstanding balance is payable ias the final payment of the loan.
Binder - A preliminary agreement to purchase, often secured by the payment of money in earnest. Also known as a Purchase Offer or Offer to Purchase.
Blanket Mortgage - A single mortgage that covers two or more properties.
Buy-down - Money advanced by an individual (e.g. builder, seller, buyer, developer) to lower mortgage payments for a few years or for the whole term.
Cap (Interest Rate) - The maximum interest rate increase allowable on an adjustable rate mortgage. Caps can be annual or lifetime.
Closing - The actual legal transfer of property from seller to buyer.
Closing Costs or Settlement Costs - Fees paid at the time of closing. Costs vary by lender.
Commitment Letter- A lenders written offer to grant a mortgage loan outlining terms, the amount of the loan, the interest rate of the loan and conditions that must be met to close the loan.
Counter-Offer- An offer made by the lender to grant credit other than the amount or terms requested.
Debt-To-Income Ratio - The relationship (percentage) between an individual's monthly income and debt expense. Often used as a loan qualification assessment by lenders.
Deed - The written transfer of property ownership.
Default - Failure to meet an obligation or payment when due.
Easement - The legal right for limited use of another's land.
Encumbrance - A claim, lien, or liability that has been attached to the title of a property.
Equity - The difference between the fair market value (appraised value) of your home and the outstanding liens on the property.
Equal Credit Opportunity Act (EQOA)- federal and state laws that prohibit discrimination in the granting of credit based on race, color, religion, national origin, sex, marital status, age, or whether a person is receiving public assistance or alimony.
Escrow - Deposits made to a special account until the terms of a contract are fulfilled.
Fannie Mae- Quasi-government agency that pools mortgages and sells participation agreements.
FHA Loan - Federal Housing Authority insures mortgages on residential property with a low down payment.
Fixed Rate Mortgage- A loan in which the interest rate and payments remain the same for the term of the loan.
Foreclosure - The procedure where the lender reacquires property after Default.
Freddie Mac (FHLMC)/Federal Home Loan Mortgage Corporation - Quasi-government agency that pools mortgages and sells participation agreements.
Grantee - Buyer of property
Grantor - Seller of property
Index - The guide for rate changes which lenders use to decide how much the annual percentage rate will change over time.
Interest Rate - The periodic charge, expressed as a percentage, for use of credit.
Lien - A legal claim on property used as security for a debt.
Loan-To-Value Ratio (LTV)- The relationship expressed as a percentag, between a property's mortgage and its value. For example, if your borrowing $150,000 to purcahse a home for $200,000 your Loan-To-Value would equal 75%
Margin - On an adjustable mortgage, the number of percentage points the lender adds to the index rate to determine the adjusted rate.
Mortgage - A legal document where the owner uses the new property as security to guarantee repayment of the loan. The mortgagee is also known as the lender. The mortgagor is known as the borrower.
Mortgage Review Board- A voluntary board consisting of an equal number of lenders and community representatives who review mortgage loans denied by participating lenders that applicants believe were wrongly denied.
Negative Amortization - The loan balance increasing over time (often due to monthly payments being less than the interest owed).
Note- The borrowers legally binding written promise to repay a debt to a lender on a specific date.
PITI - An acronym for payments to a lender that cover principal, interest, taxes and insurance on a property.
PMI (Private Mortgage Insurance) - Protects lender in case borrower Defaults.
Points - Up-front charge for making the loan (1 point = 1% of loan amount)
Prepayment Penalty - A fee paid by the borrower, if loan is paid off early.
Principal - The balance still owed or the amount of money borrowed on a loan.
Promissory Note - Document signed and given to the lender by the borrower. It explains what is owed and how it will be paid.
Rate Cap - A limit on how much the variable-interest rate can increase during the life of the loan.
Rate Lock Agreement- A written agreement by which the lender will hold a interest rate for a specified period of time.
Real Estate Settlement Procedures Act (RESPA)- A federal law that requires a good faith estimate of the closing costs to be given on certain mortgage loans.
Reverse Mortgage - A loan in which the lender makes payments to the borrower with the principal balance increasing with every payment.
Right of Rescission- state and federal law that allows borrowers who refinance or obtain second mortgages to cancel their contract and receive a refund of all fees. In most cases this must take place within 3 days of the closing.
Secondary Market - The buying and selling of mortgages after closing.
Title - A document showing ownership of property.
Title Insurance - Insurance against defects in title.
Title Search - An examination of legal records to check the validity and completeness of the title to the property. The title search should uncover any liens, easements, overdue assessments, or other claims against the property.
Transfer Tax - In some areas, city, county, or state taxes imposed when property passes from one person to another.
Truth-In-Lending- A federal and state law that requires lenders to provide borrowers with full disclosure of the true cost of the loan including the annual percentage rate and the terms of the loan.
VA Mortgage - Veteran's Administration insures loans for those involved in the armed services (servicepersons/veterans).
Variable Rate Mortgage -A mortgage loan in which the interest rate may increase or decrease at specified intervals within certain limits, based upon an economic indicator. (Another name for an Adjustable Rate Mortgage)
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