| |
| Abstract of Title
|
| A written history of ownership
to a specific area of land. An abstract of title covers
the period from the original source of title to the present
time and summarizes all subsequent documents that have
been recorded against that area. |
| |
| ACH (Automatic Clearing
House) |
| Electronic Drafting system
that debits an authorized bank account and electronically
transfers funds scheduled for remittance. |
| |
| Acquisition Costs
|
| Costs of acquiring property
other than purchase price, for example, attorney fees,
title insurance, lender's fees. |
| |
| Addendum |
| An agreement or list that
is added to a contract, agreement, or other document such
as a letter of intent. FHA and VA require that an addendum
be added to or incorporated in a sales contract, if it
is written prior to the appraisal. |
| |
| Additional Principal
Payment |
| A payment by a borrower
of more than the scheduled principal amount due in order
to reduce the remaining balance on the loan. |
| |
| Adjustable Rate Mortgage
(ARM) |
| A mortgage in which the
interest rate is adjusted periodically according to a
pre-selected index. |
| |
| Adjusted Gross Income
|
| A person's total income,
as reported on his or her IRS 1040 tax return form, after
allowable contributions, deductions and expenses (alimony).
|
| |
| Adjustment Period
|
| The period that elapses
between the adjustment dates for an adjustable rate mortgage
(ARM). |
| |
| Agricultural Property
|
| Unimproved property available
for farming activities. |
| |
| Alimony |
| Periodic payments made
under a divorce decree or a written separation agreement
toward the support of a former spouse. |
| |
| American Land Title
Association (ALTA) |
| A national association
of title insurance companies, abstractors, and attorneys
specializing in real property law. The association speaks
for the title insurance and abstracting industry and establishes
standard procedures and title policy forms. |
| |
| Amortization |
| Payment of a debt in regular,
periodic installments of principal and interest as opposed
to interest only payments. |
| |
| Amortization Schedule
|
| A timetable for payment
of a mortgage showing the amount of each payment applied
to interest and principal and the remaining balance. |
| |
| Annual Percentage
Rate (APR) |
| A term used in the Truth-in-Lending
Act to represent the percentage relationship of the total
finance charge to the amount of the loan. The APR reflects
the cost of your mortgage loan as a yearly rate. It will
be higher than the interest rate stated on the note because
it includes, in addition to the interest rate, loan discount
points, fees and mortgage insurance. |
| |
| Applicant |
| A prospective borrower
who has completed an application. An application is series
of steps, usually including the completion of documents,
a lender requires of those seeking a loan. |
| |
| Application |
| A printed form used by
a mortgage lender to record necessary information concerning
a prospective mortgage. |
| |
| Application Fee |
| A sum of money paid towards
estimated initial mortgage processing expenses such as
appraisal and credit report. |
| |
| Appraisal |
| A report made by a qualified
person setting forth an opinion or estimate of property
value. The term also refers to the process by which this
estimate is obtained. |
| |
| Appraised Value |
| An opinion of value reached
by an appraiser based upon knowledge, experience, and
a study of pertinent data. |
| |
| Appraiser |
| A person qualified by education,
training and experience to estimate the value of real
and personal property. |
| |
| Appreciation |
| An increase in the value
of property due to either a positive improvement of the
area or the elimination of negative factors. Commonly,
and incorrectly, used to describe an increase in value
through inflation. |
| |
| Arm's-Length Transaction
|
| Legal slang meaning that
there existed no special relationship between the parties
involved in any matter which would taint the result. |
| |
| As Separate Property
|
| Ownership in real property
which is to be specifically excluded from community property.
|
| |
| Assessed Valuation
|
| The value that a taxing
authority places on real or personal property for the
purpose of taxation. |
| |
| Assessment |
| A charge against a property
for purpose of taxation. This may take the form of a levy
for a special purpose or a tax in which the property owner
pays a share of the cost of community improvements according
to the valuation of his or her property. |
| |
| Assumable Mortgage
|
| A mortgage that can be
taken over (assumed) by the buyer when a home is sold.
|
| |
| Return
to Top
|
| |
| Balloon Mortgage |
| A mortgage that has level
monthly payments that will fully amortize it over a stated
term, but which provides for a lump-sum payment to be
due at the end of an earlier specified term. |
| |
| Bankruptcy |
| A proceeding in a federal
court in which a debtor, who owes more than his or her
assets, can discharge personal liability for his or her
debts. This affects the borrower's personal liability
for a mortgage debt but not the lien of the mortgage.
|
| |
| Biweekly Mortgage
|
| A mortgage with payments
due every two weeks, totaling 26 payments a year. |
| |
| Borrower |
| A person (also known as
mortgagor) who receives funds in the form of a loan with
an obligation to repay principal with interest. |
| |
| Break-Even Point |
| The point at which total
income is equal to total expenses. |
| |
| Bridge Financing |
| A loan spanning the gap
between the termination of one loan (generally short-term)
and the start of another (generally permanent long-term)
loan. Also referred to as gap financing. |
| |
| Bridge Loan |
| A form of second deed of
trust or mortgage 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. |
| |
| Buydown |
| Money advanced by an individual
(builder, seller, etc.) to reduce the monthly payments
for a home mortgage either during the entire term or for
an initial period of years. |
| |
| Return
to Top |
| |
| Cash |
| Currency, checks and other
negotiable instruments acceptable for direct deposit by
a bank. |
| |
| Cash to Close |
| Liquid assets that are
readily available to be used to pay the closing costs
involved in a closing of a mortgage transaction. |
| |
| Cash Reserve |
| A requirement by some lenders
that buyers have sufficient cash remaining after closing
to make the first mortgage payment. |
| |
| Cash Out Refinancing
|
| When the principal amount
of a new mortgage involved in refinancing is greater than
the principal amount outstanding of the existing mortgage
being refinanced, and all or a portion of the equity is
converted to cash. |
| |
| Closing |
| The consummation of a real
estate transaction. The closing includes the delivery
of a deed, financial adjustments, the signing of notes,
and the disbursement of funds necessary to complete the
sale and loan transaction. |
| |
| Closing Costs |
| Money paid by the borrower
in connection with the closing of a mortgage loan. This
generally involves an origination fee, discount points,
appraisal, credit report, title insurance, attorney's
fees, survey, and pre-paid items such as tax and insurance
escrow payments. |
| |
| Closing Statement
|
| A form used at closing
that gives an account of the funds received and paid at
the closing, including the escrow deposits for taxes,
hazard insurance, and mortgage insurance. |
| |
| Co-Borrower |
| Additional borrower(s)
whose income contributes to qualifying for a loan and
whose name(s) appears on documents with equal legal obligations.
|
| |
| Collateral |
| Property pledged as security
for a debt, such as the real estate pledged as security
for a mortgage. |
| |
| Collection |
| The servicing procedure
followed to bring a delinquent mortgage current and to
file the required notices to bring foreclosure when necessary.
|
| |
| Commitment (Loan)
|
| A binding pledge made by
the lender to the borrower to make a loan, usually at
a stated interest rate within a given period of time for
a given purpose, subject to the compliance of the borrower
to stated conditions. |
| |
| Commitment Fee (Loan)
|
| Any fee paid by a potential
borrower to a lender for the lender's promise to lend
money at a specified rate and within a given time period.
|
| |
| Commitment Letter
|
| A formal offer by a lender
stating the terms under which it agrees to loan money
to a homebuyer. |
| |
| Compensating Factors
|
| Positive characteristics
of a borrower's credit, employment or savings history
which may be used to offset high debt-to-income ratios
in the underwriting process. |
| |
| Co-mortgager |
| A second borrower who signs
a mortgage loan with a mortgagor. The co-mortgagor's income,
assets and debts are combined with the mortgagor's for
underwriting and ratio analysis purposes. The co-mortgagor's
name must appear on the FHA Certificate of Commitment
and the mortgage or deed of trust. For full guarantee
under the VA's program, the co-mortgagor must be either
a spouse or another eligible veteran. |
| |
| Comparable Properties
|
| Properties used for comparative
purposes in the appraisal process that have been recently
sold and have characteristics similar to property being
appraised, thereby indicating the approximate fair market
value of the subject property. |
| |
| Concession |
| A discount or other inducement
given by a landlord or seller to a prospective tenant
or buyer to induce them to sign a lease or purchase property.
|
| |
| Conforming Loan |
| Conventional home mortgages
eligible for sale and delivery to either the Federal National
Mortgage Association (FNMA) or the Federal Home Loan Mortgage
Corporation (FHLMC). These agencies generally purchase
first mortgages up to loan amounts mandated by Congressional
directive. |
| |
| Contingency |
| A condition that must be
met before a contract is legally binding. |
| |
| Conventional Mortgage
|
| A mortgage not obtained
under a government insured program (such as FHA or VA).
|
| |
| Convertible ARM |
| An adjustable-rate mortgage
that can be converted to a fixed-rate mortgage under specified
conditions. |
| |
| Cooperative |
| A building of two or more
dwelling units that is owned by a cooperative corporation
made up of people in the building. The right to occupy
a unit is obtained by buying shares of stock in the corporation
and signing an occupancy agreement known as a proprietary
lease. |
| |
| Covenant |
| A clause in a contract
that obligates or restricts the parties and which, if
violated, can result in legal action. |
| |
| Credit Report |
| A report detailing an individual's
credit history. |
| |
| Return
to Top |
| |
| Deed |
| The legal document conveying
title to a real property. |
| |
| Deed of Trust |
| An instrument used in many
states in place of a mortgage. Property is transferred
to a trustee by the borrower (trustor), in favor of the
lender (beneficiary) and reconveyed upon payment in full.
|
| |
| Default |
| The failure to perform
an obligation as agreed in a contract. |
| |
| Delinquency |
| A loan payment that is
overdue but within the period allowed before actual default
is declared. |
| |
| DeMinimus PUD |
| A Planned Unit Development
(PUD) in which the common property has less than a 2%
influence upon the value of the premises. The 2% rule
of thumb is calculated by dividing the dollar amount of
amenities by the total number of units. |
| |
| Department of Housing
and Urban Development (HUD) |
| A governmental entity responsible
for the implementation and administration of housing and
urban development programs. HUD was established by the
Housing and Urban Development Act of 1965 to supersede
the Housing and Home Finance Agency. |
| |
| Department of Veterans
Affairs (VA) |
| A cabinet-level agency
of the federal government. The Servicemen's Readjustment
Act of 1944 authorized the agency to administer a variety
of benefit programs designed to facilitate the adjustment
of returning veterans to civilian life. Among the benefit
programs is the VA Home Loan Guaranty program, which encourages
mortgage lenders to offer long-term, no down payment financing
to eligible veterans by partially guaranteeing the lender
against loss upon foreclosure. |
| |
| Deposit |
| A sum of money given to
bind a sale of real estate. Also known as earnest money.
|
| |
| Depreciation |
| A loss of value in real
property brought about by age, physical deterioration,
functional or economic obsolescence. |
| |
| Disclosure |
| Information relevant to
specific transactions that is required by law. |
| |
| Discount Point |
| A point paid to the lender
to permanently buy down or lower an interest rate. It
is usually a percentage of the loan amount. |
| |
| Discounted Loan |
| When the note rate on a
loan is less than the market rate, it is a discounted
loan. However, the lender requires additional points to
raise the yield on the loan to the market rate. |
| |
| Down Payment |
| Money paid to make up the
difference between the purchase price and the mortgage
amount. |
| |
| Return
to Top |
| |
| Earnest Money |
| A portion of the down payment
delivered with a purchase offer by the purchaser of real
estate. Delivered to the seller, or an escrow agency,
by the purchaser with the purchase offer as evidence of
good faith. Also known as a deposit. |
| |
| Easement |
| A right of way giving persons
other than the property owner access to or over a property.
|
| |
| Effective Interest
Rate |
| The actual rate of return
or yield to an investor. The actual rate of interest paid
by a borrower. |
| |
| Encroachment |
| An improvement that illegally
violates another's property or right to use that property.
|
| |
| Encumbrance |
| Anything that affects or
limits the fee simple title to property, such as mortgages,
liens, leases, easements, or restrictions. |
| |
| Equal Credit Opportunity
Act (ECOA) |
| A Federal law requiring
lenders and other creditors to make credit equally available
without discrimination based on race, color, religion,
national origin, sex, age, marital status, receipt of
income from public assistance programs or past exercising
of rights under the Consumer Credit Protection Act. |
| |
| Equity |
| The ownership interest;
i.e. portion of a property's value over and above the
liens against it. |
| |
| Equity Loan |
| A loan based on the borrower's
equity in his or her home. |
| |
| Escrow |
| An item of value, money
or documents, deposited with a third party, to be delivered
upon the fulfillment of a condition. For example, the
deposit by a borrower with the lender of funds to pay
taxes and insurance premiums when they become due, or
the deposit of funds or documents with an attorney or
escrow agent to be disbursed upon the closing of a sale
of real estate. In some parts of the country, escrows
of taxes and insurance premiums are called impounds or
reserves. |
| |
| Escrow Account |
| The segregated trust account
in which escrow funds are held. |
| |
| Escrow Agent |
| The person or organization
having a fiduciary responsibility to both the buyer and
seller (or lender and borrower) to see that the terms
of the purchase/sale (or loan) are carried out. Also called
escrow company or escrow depository. |
| |
| Escrow Payment |
| That portion of a mortgagor's
monthly payments held by a lender or servicer to pay taxes,
hazard insurance, mortgage insurance, lease payments,
and other items as they become due. Also called impounds
or reserves in some states. |
| |
| Return
to Top |
| |
| Fair Credit Reporting
Act (FCRA) |
| This law requires consumer
reporting agencies to exercise fairness, confidentiality
and accuracy in preparing and disclosing credit information.
|
| |
| Federal Home Loan
Mortgage Corporation - FHLMC (FREDDIE MAC) |
| A quasi-governmental agency
that purchases conventional mortgages in the secondary
mortgage market from insured depository institutions and
HUD-approved mortgage bankers. It sells participation
sales certificates secured by pools of conventional mortgage
loans, their principal, and interest guaranteed by the
federal government through the FHLMC. It also sells Government
National Mortgage Association bonds to raise funds to
finance the purchase of mortgages. Popularly know as Freddie
Mac. |
| |
| Federal National Mortgage
Association - FNMA (FANNIE MAE) |
| A taxpaying corporation
created by Congress to support the secondary mortgage
market. It purchases and sells residential mortgages insured
by the Federal Housing Administration (FHA) or guaranteed
by the Veterans Administration (VA) as well as conventional
home mortgages. |
| |
| Fee Simple |
| The greatest possible interest
a person can have in real estate, including the right
to dispose of the property or pass it on to one's heirs.
|
| |
| First Mortgage |
| A real estate loan that
has priority over any subsequently recorded mortgages.
|
| |
| Fixed Interest Rate
|
| An interest rate which
does not change during the loan term. |
| |
| Fixed-rate Mortgage
(FRM) |
| A mortgage in which the
interest rate and payments remain the same for the life
of the loan. |
| |
| Foreclosure |
| A legal procedure in which
property mortgaged as security for a loan is sold to pay
the defaulting borrower's debt. |
| |
| Return
to Top |
| |
| Gift Letter |
| A written explanation signed
by the individual giving the gift stating, "This
is a bona fide gift and there is no obligation expressed
or implied to repay this sum at any time." |
| |
| Ginnie Mae |
| Created in 1968 by an amendment
to Title III of the National Housing Act (12 USC 1716
et seq.), this federal government corporation is a constituent
part of the Department of Housing and Urban Development.
Among other governmental functions, it guarantees securities
backed by mortgages that are insured or guaranteed by
other government agencies. Also called Government National
Mortgage Association (GNME). |
| |
| Good Faith Estimate
(GFE) |
| A document which tells
borrowers the approximate costs they will pay at or before
settlement, based on common practice in the locality.
Under requirements of the Real Estate Settlement Procedures
Act (RESPA), the mortgage banker or mortgage broker, if
any, must deliver or mail the GFE to the applicant. |
| |
| Gross Income |
| Total income produced by
a property before any expenses are deducted. |
| |
| Gross Monthly Income
|
| Total monthly income earned
before tax and other deductions. |
| |
| Return
to Top |
| |
| Hazard Insurance |
| A contract whereby an insurer,
for a premium, undertakes to compensate the insured for
loss on a specific property due to certain hazards (i.e.
fire). |
| |
| High-Ratio Loan |
| Mortgage loans in excess
of 80 percent of the loan amount divided by the lower
of the sales price or appraised value. |
| |
| Home Equity Line of
Credit |
| A form of revolving credit
in which your home serves as collateral. |
| |
| Home Equity Loan |
| A revolving line of credit
or loan based on the equity in the mortgagor's house.
The property is the security for the loan, which is usable
for any purpose. |
| |
| Homeowners' Association
Dues |
| The fees imposed by a condominium
or homeowners' association for maintenance of common areas.
|
| |
| Home Mortgage Disclosure
Act (HMDA) |
| Federal legislation which
requires certain types of lenders to compile and disclose
data on where their mortgage and home improvement loans
are being made. |
| |
| Homeowner's Insurance
|
| An insurance policy that
combines liability coverage and hazard insurance. |
| |
| Homeowner's Policy
|
| A multiple peril insurance
policy available to owners of private dwellings which
covers the dwelling and its contents, as well as personal
liability. |
| |
| Housing Expense Ratio
|
| The relationship of a borrower's
monthly payment obligation on housing (PITI and other
applicable housing expenses) divided by gross monthly
income, expressed as a percentage. Also called the top
ratio. |
| |
| Return
to Top |
| |
| Income/Expense Ratio
|
| A qualifying ratio used
in underwriting a residential mortgage loan which computes
the percentage of monthly income required. |
| |
| Index |
| A published interest rate,
such as the prime rate, LIBOR, T-Bill rate, or the 11th
District COFI. Lenders use indexes to establish interest
rates charged on mortgages or to compare investment returns.
On ARMs, a predetermined margin is added to the index
to compute the interest rate adjustment. |
| |
| In File Credit Report
|
| Unverified credit report
which may contain unchecked, duplicated, or overlapping
data. It is often used for a quick look at a prospective
borrower's credit history. |
| |
| Installment |
| The periodic payment that
a borrower agrees to pay a mortgage lender. |
| |
| Insured Loans |
| A loan insured by HUD-FHA
or a private mortgage insurance company. |
| |
| Interest |
| Consideration in the form
of money paid for the use of money. Also a right, share
or title in property. |
| |
| Interest Rate |
| The percentage of an amount
of money which is paid for its use for a specified time.
|
| |
| Interest Rate Cap
|
| A provision of an ARM limiting
how much interest rates may increase per adjustment period.
See also Lifetime cap. |
| |
| Interest Rate Floor
|
| On a floating rate instrument,
the lowest the interest rate may go. |
| |
| Investment Property
|
| Real estate owned with
the intent of supplementing income and not intended for
owner occupancy. |
| |
| Return
to Top |
| |
| Joint Tenancy |
| An undivided interest in
property, taken by two or more joint tenants. Upon the
death of a joint tenant, the interest passes to the surviving
joint tenants, rather than to the heirs of the deceased.
|
| |
| Judgment |
| Final determination by
a court of the rights and claims of the parties to an
action. |
| |
| Return
to Top |
| |
| Land Acquisition Loan
|
| A loan made for the purpose
of purchasing land only, not improvements on or to the
land. Also called an acquisition loan. |
| |
| Late Charge |
| The penalty a borrower
must pay when a payment is made after the due date. |
| |
| Lender Paid Mortgage
Insurance (LPMI) |
| Insurance in which the
cost of the mortgage insurance is included in the interest
rate. Although the interest rate is slightly higher with
LPMI, this option usually results in a lower monthly payment
and a larger tax deduction. |
| |
| Lien |
| A legal claim or attachment
against property as security for payment of an obligation.
|
| |
| Lifetime Cap |
| A provision of an ARM that
limits the total increase in interest rates over the life
of the loan. |
| |
| Limited Partnership
|
| A form of business ownership
that consists of one or more general partners who are
fully liable, and one or more limited partners who are
liable only for the amount of their investment. |
| |
| Line of Credit |
| An agreement by a commercial
bank or other financial institution to extend an open-ended
line of credit up to a certain amount for a certain time
to a specific borrower. (See also home equity line of
credit.) |
| |
| Liquidity |
| The ability to readily
convert assets or investments to cash. |
| |
| Loan-To-Value Ratio
|
| The ratio between the amount
of a given mortgage loan and the lower of sales price
of appraised value. |
| |
| Lock-in Period |
| The number of days during
which a lender guarantees a borrower a specific interest
rate and terms on a mortgage. |
| |
| London Interbank Offered
Rate (LIBOR) |
| The rate at which banks
in the foreign market lend dollars to one another. LIBOR
varies by deposit maturity. A common interest rate index;
one of the most valid barometers of the international
cost of money. |
| |
| Loss Payable Clause
|
| An insurance policy provision
for payment of a claim to someone other than the insured,
who holds an insurable interest in the insured property.
|
| |
| Return
to Top |
| |
| Manufactured Home
|
| Factory-built or prefabricated
housing, including mobile homes. |
| |
| Margin |
| The set percentage the
lender adds to the index rate to determine the interest
rate of an ARM. |
| |
| Market Value |
| The most probable price
which a ready, willing and able buyer would pay and a
willing seller will accept, both being fully informed
under no pressure to act. The market value may be different
from the price a property can actually be sold for at
a given time (market price). |
| |
| Maturity |
| The termination or due
date, on which final payment on a loan must be paid in
full. |
| |
| Mobile Home |
| A factory-assembled residence
consisting of one or more modules, in which a chassis
and wheels are an integral part of the structure, and
can be readied for occupancy without removing the chassis
and/or wheels. |
| |
| Modular House |
| A factory-assembled residence
built in units or sections, transported to a permanent
site and erected on a foundation. Excludes mobile homes.
|
| |
| Monthly Payment |
| Usually, the amount of
PITI (principal, interest, taxes, and insurance) paid
each month on a mortgage loan. |
| |
| Mortgage |
| The conveyance of an interest
in real property given as security for the payment of
a loan. |
| |
| Mortgage Broker |
| A company that for a fee
matches borrowers with lenders. |
| |
| Mortgage Commitment
|
| An agreement between lender
and borrower detailing the terms of a mortgage loan such
as interest rate, loan type, term and amount. |
| |
| Mortgagee |
| The lender on a mortgage
transaction. |
| |
| Mortgage Insurance
|
| See private mortgage insurance.
|
| |
| Mortgage Insurance
Premium (MIP) |
| The consideration paid
by a mortgagor (borrower) for mortgage insurance -either
to the FHA or to a private mortgage insurer. |
| |
| Mortgage Note |
| A written promise to pay
a sum of money at a stated interest rate during a specified
term. The note contains a complete description of the
conditions under which the loan is to be repaid and when
it is due. |
| |
| Mortgagor |
| The borrower in a mortgage
transaction who pledges property as security for a debt.
|
| |
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| |
| Negative Amortization
|
| A loan payment schedule
in which the outstanding principal balance goes up, rather
than down, because the payments do not cover the full
amount of interest due. The unpaid interest is added to
the principal. |
| |
| Non-Conforming Loan
|
| Conventional home mortgages
not eligible for sale and delivery to either FNMA or FHLMC
because of various reasons, including loan amount, loan
characteristics or underwriting guidelines. |
| |
| Note |
| A general term for any
kind of paper or document signed by a borrower that is
an acknowledgment of the debt, and is, by inference, a
promise to pay. When the note is secured by a mortgage,
it is called a mortgage note and the mortgagee is named
as the payee. |
| |
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| |
| Occupancy |
| The use of a property as
a full-time residence, either by the title holder (owner-occupancy)
or by another party through a formal agreement (rental).
|
| |
| Origination |
| Securing a completed mortgage
application from a commercial or residential borrower.
|
| |
| Origination Fee |
| The amount charged for
services performed by the company handling the initial
application and processing of the loan. |
| |
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to Top |
| |
| Payoff Figures |
| The unpaid principal balance
and escrow amounts to be used for payment in full of the
mortgage or for closing sale of the property. |
| |
| Percentage Point |
| One percent of the loan
or a measure of the interest rate. |
| |
| PITI (Principal, Interest,
Taxes, and Insurance) |
| The most common components
of a monthly mortgage payment. |
| |
| Planned Unit Developoment
(PUD) |
A comprehensive development
plan for a large land area. A PUD usually includes residences,
roads, schools, recreational facilities, commercial, office
and industrial areas. Also, a subdivision having lots
of areas owned in common and reserved for the use of some
or all of the owners of the separately owned lots.
See also DeMinimus PUD. |
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| Plans And Specifications
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| Architectural and engineering
drawings and specifications for construction of a building
or project. They include a description of materials to
be used and the manner in which they are to be applied.
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| Points |
| A one-time charge by the
lender to increase the yield of the loan; a point is 1%
of the amount of the mortgage. |
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| Power of Attorney
|
| A legal document authorizing
one person to act on behalf of another. |
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| Preliminary Title
Report |
| The results of a title
search by a title company prior to issuing a title binder
or commitment to insure clear title. |
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| Prepaids |
| Closing costs related to
the mortgage loan which are collected at loan closing
- including per diem pre-paid interest and initial deposits
of monthly escrows of taxes and insurance. |
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| Prepayment Penalty
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| A fee charged to a borrower
who pays off a loan before it is due. |
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| Prequalification |
| The process of determining
how much money a prospective home buyer will be eligible
to borrow before a loan is applied for. |
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| Primary Residence
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| A residence which the borrower
intends to occupy as the principal residence. |
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| Principal |
| The amount borrowed or
remaining unpaid; also, that part of the monthly payment
that reduces the outstanding balance of a mortgage. |
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| Principal Balance
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| The remaining balance due
on a debt, exclusive of accrued interest. |
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| Private Mortgage Insurance
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| Insurance written by a
private company protecting the mortgage lender against
loss resulting from a mortgage default. |
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| Processing |
| The preparation of a mortgage
loan application and supporting documentation for consideration
by a lender or insurer. |
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| Purchase Contract
(Agreement/Offer) |
| An agreement between a
buyer and seller of real property, setting forth the price
and terms of the sale. Also known as a sales contract.
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| Qualifying Ratios
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| Guidelines applied by lenders
to determine how large a loan to grant a home buyer. |
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| Quitclaim Deed |
| A deed relinquishing all
interest, title, or claim an owner has in a property.
A quitclaim deed implies no warranty. |
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| Rate Lock Option |
| An agreement guaranteeing
an individual a specified interest rate on a loan provided
the loan is closed within a set period of time. |
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| Real Assets |
| Real estate or real property
owned by an individual or business. |
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| Real Estate Settlement
Procedures Act (RESPA) |
| A federal law requiring
lenders to provide home mortgage borrowers with information
on known or estimated settlement costs. It also establishes
guidelines for escrow account balances. |
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| Real Property |
| Land and that which is
affixed to it. |
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| Refinancing |
| The repayment of a debt
from the proceeds of a new loan using the same property
as security. |
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| Satisfaction of Mortgage
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| The recordable instrument
issued by the lender verifying full payment of a mortgage
debt. |
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| Second Home (Vacation
Home, Weekend Home) |
| A residence other than
the borrower's primary residence which the borrower intends
to occupy for a portion of each year. Must be suitable
for year-round occupancy. |
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| Secondary Mortgage
Market |
| A market where existing
mortgages are bought and sold. It contrasts with the primary
mortgage market where mortgages are originated. |
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| Second Mortgage |
| A mortgage that has rights
that are subordinate to the rights of the first mortgage
holder. |
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| Security |
| In lending, the collateral
given, deposited, or pledged to secure the payment of
a debt. |
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| Security Instrument
|
| Mortgage or deed of trust
evidencing the pledge of real estate as collateral for
the loan. |
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| Security Interest
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| The interest of a creditor
in the security collateralizing an investment. |
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| Section 203(k) Loan
Program |
| HUD's primary program for
the rehabilitation and repair of single-family properties.
A 203 (k) loan is a first mortgage that covers the costs
of rehabilitation and purchase or refinance of an eligible
property. The goals of the Section 203(k) loan program
are community and neighborhood revitalization and expanded
opportunities for homeownership for low-and moderate-income
families. |
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| Seller Contributions
|
| Payment by the seller or
any other interested party of some or all of the purchaser's
usual closing costs. Investors and insurers sometimes
limit the amount of seller contribution and require lenders
to adjust the property's value if contributions exceed
limitations. Undisclosed seller contributions (such as
decorating allowances, appliances, or payment of moving
expenses) are made to borrowers outside of closing and
are also subject to investor and insurer restrictions.
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| Servicing Released
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| A stipulation in the agreement
for the sale of mortgages in which the seller is not responsible
for loan administration. |
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| Settlement |
| See Closing. |
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| Settlement Costs |
| Money paid by borrowers
and sellers to effect the closing of a mortgage loan,
including payments for title insurance, survey, attorney
fees, and such prepaid items as taxes and insurance escrow.
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| Settlement Sheet |
| The computation of costs
payable at closing which determines the seller's net proceeds
and the buyer's net payment. |
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| Settlement Services
|
| Services provided by the
lender at the closing of a loan. |
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| Site Value |
| The value of land without
improvements, as if vacant. |
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| Subdivision |
| Improved or unimproved
land divided into a number of parcels for sale, lease,
financing, or development. |
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| Subordinate |
| To make subject or junior
to. For example, a loan on vacant land is made subject
to a subsequent construction loan. |
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| Survey |
| The measurement and description
of land by a registered surveyor. |
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| Tax Lien |
| A claim against property
for unpaid taxes. |
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| Tenancy |
| The use of real estate
under any kind of right of title. |
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| Term |
| The time limit within which
a loan must be repaid. |
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| Title |
| The legal evidence of ownership
rights to real property. |
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| Title (Insurance)
Company |
| A company that confirms
the legal owner of a property, as well as insures a home
owner and lender against a loss that could result from
a title dispute. |
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| Title Insurance |
| An insurance policy that
protects a lender and/or homebuyer (only if homebuyer
purchases a separate policy, called owner's coverage)
against any loss resulting from a title error or dispute.
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| Title Insurance Policy
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| A contract in which an
insurer, usually a title insurance company, agrees to
pay the insured party a specific amount for any loss caused
by defects of title on real estate in which the insured
has an interest as purchaser, mortgagee, or otherwise.
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| Title Search |
| An examination of public
records to disclose the past and current facts regarding
the ownership of a given piece of real estate. |
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| Torrens Certificate
|
| A certificate issued by
a public authority called a registrar of titles, establishing
title of an indicated owner. Used when title to property
is registered under the Torrens system of land registration.
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| Transfer Tax |
| State or local tax payable
when the title passes from one owner to another. |
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| Trust Deed |
| The instrument given by
a borrower (trustor) to a trustee vesting title to a property
in the trustee to ensure the borrower's fulfillment of
an obligation. A mortgage. |
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| Truth-in-Lending Act
|
| A Federal law requiring
full disclosure of credit terms using a standard format.
This is intended to facilitate comparisons between the
lending terms and financial institutions. |
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| Underwriting |
| Analysis of risk and setting
of an appropriate rate and terms for a mortgage on a given
property for given borrowers. |
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| URLA |
| Uniform residential loan
application. |
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| Wholesale Origination
|
| A loan origination strategy
by which loans are purchased from mortgage brokers, mortgage
bankers, or other loan originators (banks, thrifts etc.)
The loans may be purchased prior to closing, at closing
or after the loans are closed depending on the arrangement
between the originator and the wholesale lender. Wholesale
origination enables a lender to acquire mortgage servicing
rights without incurring the fixed costs associated with
a retail origination strategy. |
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| Yield to Maturity
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| The lender's percentage
of annual return on actual funds loaned, assuming that
the loan will be paid in full at maturity. |
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| Zero Point Option
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| An option which allows
the borrower to opt to pay a slightly higher loan interest
rate in lieu of paying the loan origination points generally
charged for the particular loan product. |
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