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A |
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Abstract (of title) |
A
written summary of the title history of a
particular piece of real estate. |
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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. |
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Adjustable Rate Mortgage (ARM) |
A
mortgage in which the interest rate is adjusted
periodically, based on the movement of a financial
index. |
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Amortization |
Repayment of loan by installment payments.
As the payments are made, the debt is reduced so
that at the end of the fixed period or term, no
money will be owed. |
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Annual
Percentage Rate (APR) |
The
annual percentage rate refers to the total cost of
the loan, expressed as a yearly rate. |
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Application Fee |
That
part of the closing costs pre-paid to the lender
at time of application to cover initial expenses. |
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Appraisal |
A
report made by a qualified person as to the value
of a property as of a given date. |
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Assessed Value |
The
value placed on a piece of real estate by the
taxing authority for the purpose of taxation.
Also called an assessment. |
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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 secondary liable. |
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B |
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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. |
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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. |
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Broker |
The
person who, for a commission or a fee, brings
parties together and assists in negotiating
contracts between them. |
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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. |
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C |
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Cap (interest rate) |
The
maximum interest rate increase allowable on an
adjustable rate mortgage. Does not
result in negative amortization. See "Negative
Amortization". |
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Cap
(payment rate) |
The
maximum payment amount increase allowable on an
adjustable rate mortgage. May result in
negative amortization.
See
"Negative
Amortization". |
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D |
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Deed |
A
legal written document by which title to the
property is transferred. |
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Default |
Failure to fulfill the terms as agreed to in the
mortgage of note. |
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Down
Payment |
The
difference between the sale price of a property
and the mortgage amount. |
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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. |
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E |
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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. |
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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. |
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Encumbrance |
Anything that affects or limits the title to a
property, such as outstanding mortgages, easement
rights or unpaid back taxes. |
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Equity |
The
value in which the owner has in real estate over
and above the mortgage against it. When the
mortgage and all other debts against the property
are paid in full, the owner has 100% equity in his
property. |
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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. |
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F |
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First Mortgage |
A
mortgage that has a primary lien against a
property. |
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Fixed-Rates Mortgage |
A
mortgage with an interest rate and monthly
payments that remain constant over the life of the
loan. |
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Fixture |
Property, such as a hot water heater or plumbing
fixture, that has become permanently attached to a
piece of real estate and goes with the property
when it is sold. |
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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. |
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Foreclosure |
A
legal procedure in which property mortgaged as
security for a loan is sold to pay the defaulting
borrower's debt. |
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G |
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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. |
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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. |
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H |
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Hazard Insurance |
Insurance protection against damage to a property
from fire, windstorms, and other common hazards. |
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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. |
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HUD-1
Form |
See
""Real Estate Settlement Statement". |
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I |
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Income Property |
Real
estate that is owned for investment purposes and
not used as the owner's residence. |
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Interest |
A
charge paid for the use of money. |
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Interim Financing |
See "Bridge Loan". |
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L |
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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") |
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Lien |
A
legal claim on a property used as security for a
debt. |
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Loan-To-Value Ratio |
The
relationship between the amount of the mortgage
and property value, usually shown as a percentage. |
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M |
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Market Value |
The
price at which a property will sell, assuming a
knowledgeable buyer and seller, both operating
without undue pressure. |
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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. |
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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. |
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Mortgagee |
The
lender in a mortgage contract. |
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Mortgagor |
The
borrower in a mortgage contract. |
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N |
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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. |
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O |
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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. |
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Origination Fee |
A fee
charged for the work involved in the evaluation
preparation and submission of a proposed mortgage
loan. |
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Owner Financing |
A
purchase in which the seller provides all or part
of the financing. |
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P |
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PITI |
An
acronym for payments to the lender that cover
principal, interest, taxes and insurance on a
property. |
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Plat |
A map
of a piece of land showing boundary lines,
streets, actual measurements and easements. |
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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. |
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Prepayment Penalty |
A
charge paid to the lender by the borrower if a
mortgage loan is repaid before its term is over. |
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Pre-Approval |
A
commitment by a lender to extend credit provided
that specific conditions are met. |
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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. |
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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. |
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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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PMI
(Private Mortgage Insurance) |
Insurance written by a private company to protect
the lender against loss caused by mortgage
default. |
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Q |
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Qualifying Ratios |
Guidelines applied by lenders to determine how
large a loan to grant a home buyer. |
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R |
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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. |
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Realtor |
A real
estate broker or sales associate affiliated with
the National Association of Realtors. |
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Recording Fee |
The
charges made by the register of deeds to record
the legal documents. |
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Refinancing |
Repaying a debt with the proceeds of a new loan,
using the same property as collateral or security. |
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S |
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Second Mortgage |
A loan
on property which already has an existing mortgage
(the first mortgage). The second mortgage is
subordinate to the first. |
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Secondary Mortgage Market |
The
buying and selling of existing mortgages through
agencies (i.e. Fannie Mae, Freddie Mac). |
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Survey |
A map
prepared by an engineer or surveyor charting a
particular piece of real estate. |
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T |
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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. |
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Title
Insurance Policy |
Protection against financial loss arising from
defects in the title occurring before purchase. |
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Title
Search |
A
check of public record to disclose the past and
current facts regarding ownership of a particular
piece of property. |
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Transfer Tax |
In
some areas, city, county or state taxes imposed
when property passes from one person to another. |
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Truth-In-Lending |
A
federal law that requires lenders to fully
disclose, in writing, the terms and
conditions of a mortgage, including the APR and
other charges. |
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U |
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Underwriting |
The
process of evaluating a loan application to
determine the risk involved for the lender. |
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