|
|
 |
|
|
|
|
Residential
Real Estate Terms |
|
|
|
A | B | C
| D | E | F | G
| H | I | J | M
| N | O | P | R
| S | T | U | V
| W
- Acceleration
(also: "acceleration clause"): The right of the
mortgagee (lender) to demand the immediate repayment of the
mortgage loan balance upon the default of the mortgagor
(borrower), or by using the right vested in the Due-on-Sale
Clause.
-
- Adjustable
rate mortgage
(ARM): Is a mortgage in
which the interest rate is adjusted periodically based on a
preselected index. Also sometimes known as the re-negotiable
rate mortgage, the variable rate mortgage or the Canadian
rollover mortgage.
-
- Adjustment
interval: On an adjustable
rate mortgage, the time between changes in the interest rate
and/or monthly payment, typically one, three or five years,
depending on the index.
-
- Alta
Title Policy (buyers):
This is a policy
that insures the lender's lien position, in the event there
are unrecorded mortgages, liens, etc.
-
- Amortization:
Means loan
payment by equal periodic payment calculated to pay off the
debt at the end of a fixed period, including accrued interest
on the outstanding balance.
-
- Annual
percentage rate (A.P.R.):
Is a interest
rate reflecting the cost of a mortgage as a yearly rate. This
rate is likely to be higher than the stated note rate or
advertised rate on the mortgage, because it takes into account
point and other credit cost. the APR allows home buyers to
compare different types of mortgages based on the annual cost
for each loan.
-
- Appraisal:
An estimate of
the value of property, made by a qualified professional called
an "appraiser".
-
- Assessment:
A local tax
levied against a property for a specific purpose, such as a
sewer or street lights.
-
- Assumption:
The agreement
between buyer and seller where the buyer takes over the
payments on an existing mortgage from the seller. Assuming a
loan can usually save the buyer money since this is an
existing mortgage debt, unlike a new mortgage where closing
cost and new, probably higher, market-rate interest charges
will apply.
Back to Top
------------------------------------------------------------------------
- Balloon
(payment) mortgage: Usually a
short-term fixed-rate loan which involves small payments for a
certain period of time and one large payment for the remaining
amount of the principal at a time specified in the contract.
-
- Blanket
Mortgage: A mortgage
covering at least two pieces of real estate as security for
the same mortgage.
-
- Boot:
Most commonly,
the name given to "taxable income" received by a
party, originating from taking constructive receipt of an
asset, while participating in an Internal Revenue Code 1031
Tax Deferred Exchange.
-
- Borrower
(Mortgagor): One who applies
for and receives a loan in the form of a mortgage with the
intention of repaying the loan in full.
-
- Broker:
An individual in
the business of assisting in arranging funding or negotiating
contracts for a client buy who does not loan the money
himself. Brokers usually charge a fee or receive a commission
for their services.
-
- Buy-down:
When the lender
and/or the home builder subsidized the mortgage by lowering
the interest rate during the first few years of the loan.
While the payments are initially low, they will increase when
the subsidy expires.
Back to Top
------------------------------------------------------------------------
- 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.)
-
- Caps
(interest): Consumer
safeguards which limit the amount the interest rate on an
adjustable rate mortgage may change per year and/or the life
of the loan.
-
- Caps
(payment): Consumer
safeguards which limit the amount monthly payments on an
adjustable rate mortgage may change.
-
- Certificate
of Eligibility: The document
given to qualified veterans which entitles them to VA
guaranteed loans for homes, business, and mobile homes.
Certificates of eligibility may be obtained by sending DD-214
(Separation Paper) to the local VA office with VA form 1880
(request for Certificate of Eligibility)
-
- Certificate
of Reasonable Value (CRV):
An appraisal
issued by the Veterans Administration showing the property's
current market value.
-
- Certificate
of Veteran Status: The document
given to veterans or reservists who have served 90
days of continuous active duty (including training
time) It may be obtained by sending DD 214 to
the local VA office with form 26-8261a (request for
certificate of veteran status. This document enables veterans
to obtain lower down payments on certain FHA insured loans).
-
- Closing:
The moment where
the property and funds legally change hands. Also called
settlement.
-
- Closing
Costs: The fees charged
by an escrow company, title company, and lender to close
(complete) the tranfer of property. Common fees charged
usually include a loan origination fee, discount points,
appraisal fee, title search and insurance, survey, taxes, deed
recording fee, credit report charge and other costs assessed
at settlement
-
- Commitment:
A promise by a
lender to make a loan on specific terms or conditions to a
borrower or builder. A promise by an investor to purchase
mortgages from a lender with specific terms or conditions. an
agreement, often in writing, between a lender and a borrower
to loan money at a future date subject to the completion of
paperwork or compliance with stated conditions.
-
- Construction
loan: A short term
interim loan to pay for the construction of buildings or
homes. These are usually designed to provide periodic
disbursements to the builder as he progresses.
-
- Contract
sale or deed: A contract
between purchaser and a seller of real estate to convey title
after certain conditions have been met. It is a form of
installment sale.
-
- Conventional
loan: A mortgage not
insured by FHA or guaranteed by the VA.
-
- Credit
Report: A report
documenting the credit history and current status of a
borrower's credit standing.
Back to Top
------------------------------------------------------------------------
- DD-214 (military):
The
"DD-214" is a document verifying legal separation
from the US Armed Forces in good standing. It also indicates
dates of active duty.
-
- 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. See housing
expenses-to-income ratio.
-
- Deed of
trust: In many states,
this document is used in place of a mortgage to secure the
payment of a note.
-
- Default:
Failure to meet
legal obligations in a contract, specifically, failure to make
the monthly payments on a mortgage.
-
- Deferred
interest: When a mortgage
is written with a monthly payment that is less than required
to satisfy the note rate, the unpaid interest is deferred by
adding it to the loan balance.See negative amortization
-
- Delinquency:
Failure to make
payments on time. This can lead to foreclosure.
-
- Department
of Veterans Affairs (VA):
An independent
agency of the federal government which guarantees long-term,
low-or no-down payment mortgages to eligible veterans.
-
- Discount
Point: see point
-
- Document
Prep Fee: A fee charged by
lenders for coordinating and ultimately completing a loan
package. In Las Vegas, for an escrow company to charge a
"doc-prep fee" is rare.
-
- Down
Payment: Money paid to
make up the difference between the purchase price and the
mortgage amount.
-
- Due-on-Sale-Clause:
A provision in a
mortgage or deed of trust that allows the lender to demand
immediate payment of the balance of the mortgage if the
mortgage holder sells the home.
Back to Top
------------------------------------------------------------------------
- Earnest
Money: Money given by a
buyer to a seller as part of the purchase price to bind a
transaction or assure payment.
-
- Entitlement:
The VA home loan
benefit is called entitlement. Entitlement for a VA guaranteed
home loan. This is also known as eligibility.
-
- Equal
Credit Opportunity Act
(ECOA): Is a federal law
that requires lenders and other creditors to make credit
equally available without discrimination based on race, color,
religion, national origin, age, sex, marital status or receipt
of income from public assistance programs.
-
- Equity:
The difference
between the fair market value and current indebtedness, also
referred to as the owner's interest. The value an owner has in
real estate over and above the obligation against the
property.
-
- Escrow:
An account held
by the lender into which the home buyer pays money for tax or
insurance payments. Also earnest deposits held pending loan
closing.
Back to Top
------------------------------------------------------------------------
- Fannie
Mae: see Federal
National Mortgage Association.
-
- Farmers
Home Administration
(FmHA): Provides
financing to farmers and other qualified borrowers who are
unable to obtain loans elsewhere.
-
- Federal
Home Loan Bank Board(FHLBB):
The former name
for the regulatory and supervisory agency for federally
chartered savings institutions. Agency is now called the
Office of Thrift Supervision
-
- Federal
Home Loan Mortgage Corporation
(FHLMC): Also called
"Freddie Mac", a
quasi-governmental agency that purchases conventional mortgage
from insured depository institutions and HUD-approved mortgage
bankers.
-
- 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.
-
- Federal
National Mortgage Association (FNMA):
Also know as
"Fannie Mae"
- A tax-paying
corporation created by Congress that purchases and sells
conventional residential mortgages as well as those insured by
FHA or guaranteed by VA. This institution, which provides
funds for one in seven mortgages, makes mortgage money more
available and more affordable.
-
- 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 ($155,250 as of 1/1/96), they are generous enough to
handle moderately-priced homes almost anywhere in the country.
-
- FHA
mortgage insurance: Requires a fee
(up to 2.25 percent of the loan amount) paid at closing to
insure the loan with FHA. In addition, FHA mortgage insurance
requires an annual fee of up to 0.5 percent of the current
loan amount, paid in monthly installments. The lower the down
payment, the more years the fee must be paid.
-
- FHLMC:
The Federal Home
Loan Mortgage Corporation provides a secondary market for
savings and loans by purchasing their conventional loans. Also
known as "Freddie Mac."
-
- Firm
Commitment: A promise by FHA
to insure a mortgage loam for a specified property and
borrower. A promise from a lender to make a mortgage loan.
-
- Fixed
Rate Mortgage: The mortgage
interest rate will remain the same on these mortgages
throughout the term of the mortgage for the original borrower.
-
- Flood
Certification: This is a fee
paid to a third party to search and verify all records
(usually for a lender), pertainting to the location of flood
zones in proximity to a property.
-
- FNMA:
The Federal
National Mortgage Association is a secondary mortgage
institution which is the largest single holder of home
mortgages in the United States. FNMA buys VA, FHA, and
conventional mortgages from primary lenders. Also known as
"Fannie Mae."
-
- Foreclosure:
A legal process
by which the lender or the seller forces a sale of a mortgaged
property because the borrower has not met the terms of the
mortgage. Also known as a repossession of property.
-
- Freddie
Mac: see Federal
Home Loan Mortgage Corporation
Back to Top
------------------------------------------------------------------------
- Ginnie
Mae: see Government
National Mortgage Association.
-
- Government
National Mortgage Association (GNMA):
Also known as Ginnie Mae.
-
- Graduated
Payment Mortgage
(GPM): A type of
flexible-payment mortgage where the payments increase for a
specified period of time and then level off. This type of
mortgage has negative amortization built into it.
-
- Guaranty:
A promise by one
party to pay a debt or perform an obligation contracted by
another if the original party fails to pay or perform
according to a contract.
Back to Top
------------------------------------------------------------------------
- Hazard
Insurance: A form of
insurance in which the insurance company protects the insured
from specified losses, such as fire, windstorm and the like.
-
- Housing
Expenses-to-Income Ratio: The ratio,
expressed as a percentage, which results when a borrower's
housing expenses are divided by his/her gross monthly income.
See debt-to-income ratio.
Back to Top
------------------------------------------------------------------------
- Impound
(also see "Property Tax Impound Account): That portion of
a borrower's monthly payments held by the lender or servicer
to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as
reserves.
-
- Index:
A published
interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate
mortgage and that earned by other investments (such as one-
three-, and five-year U.S. Treasury security yields, the
monthly average interest rate on loans closed by savings and
loan institutions, and the monthly average costs-of-funds
incurred by savings and loans), which is then used to adjust
the interest rate on an adjustable mortgage up or down.
-
- Interim
Financing: A construction
loam made during completion of a building or a project. A
permanent loan usually replaces this loan after completion.
-
- Investor:
A money source
for a lender.
Back to Top
------------------------------------------------------------------------
- Jumbo
Loan: A loan which is
larger (more than $214,600 as of 1/1/97) than the limits set
by the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation. Because jumbo loans
cannot be funded by these two agencies, they usually carry a
higher interest rate.
Back to Top
------------------------------------------------------------------------
- Lien:
A claim upon a
piece of property for the payment or satisfaction of a debt or
obligation.
-
- Loan-to-Value
Ratio: The relationship
between the amount of the mortgage loan and the appraised
value of the property expressed as a percentage.
Back to Top
------------------------------------------------------------------------
- Margin:
The amount a
lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
-
- Market
Value: The highest
price that a buyer would pay and the lowest price a seller
would accept on a property. Market value may be different from
the price a property could actually be sold for at a given
time.
-
- MIP (Mortgage
Insurance Premium): It is insurance
from FHA to the lender against incurring a loss on account of
the borrower's default.
-
- Mortgage
Insurance: Money paid to
insure the mortgage when the down payment is less than 20
percent. See private mortgage insurance, FHA mortgage
insurance.
-
- Mortgagee:
The lender.
-
- Mortgagor:
The borrower or
homeowner.
Back to Top
------------------------------------------------------------------------
- Negative
Amortization: Occurs when your
monthly payments are not large enough to pay all the interest
due on the loan. This unpaid interest is added to the unpaid
balance of the loan. the danger of negative amortization is
that the home buyer ends up owing more than the original
amount of the loan.
-
- Net
Effective Income: The borrower's
gross income minus federal income tax.
-
- Non
Assumption Clause: A statement in a
mortgage contract forbidding the assumption of the mortgage
without the prior approval of the lender. Note: The signed
obligation to pay a debt, as a mortgage note.
-
- Notary
Fee: The fee charged
by a state-licensed person to authenticate the identity and
signature of an individual(s), before any signing of
documents. A "seal" is imprinted on all notorized
documents, along with the notary's license number, the date if
the witnessed signature, and the signature of the notary.
Back to Top
------------------------------------------------------------------------
- Office
of Thrift Supervision (OTS): The regulatory
and supervisory agency for federally chartered savings
institutions. Formally known as Federal Home Loan Bank
Board.
-
- Origination
Fee: The fee charged
by a lender to prepare loan documents, make credit checks,
inspect and sometimes appraise a property; usually computed as
a percentage of the face value of the loan.
Back to Top
------------------------------------------------------------------------
- Permanent
Loan: A long term
mortgage, usually ten years or more. Also called an "end
loan."
-
- PITI:
Principal,
Interest, Taxes and Insurance. Also called monthly housing
expense.
-
- Pledged
account Mortgage
(PAM): Money is placed
in a pledged savings account and this fund plus earned
interest is gradually used to reduce mortgage payments.
-
- Points
(loan discount points): Prepaid interest
assessed at closing by the lender. Each point is equal to 1
percent of the loan amount (e.g., two points on a $100,000
mortgage would cost $2,000).
-
- Power of
Attorney: A legal document
authorizing one person to act on behalf of another.
-
- Prepaid
Expenses: Necessary to
create an escrow account or to adjust the seller's existing
escrow account. Can include taxes, hazard insurance, private
mortgage insurance and special assessments.
-
- Prepaid
Interest: An amount paid
up front by a borrower to cover accrued interest on a mortgage
which closes on any day other than the first day of the month.
-
- Prepayment:
A privilege in a
mortgage permitting the borrower to make payments in advance
of their due date.
-
- Prepayment
Penalty: Money charged
for an early repayment of debt. Prepayment penalties are
allowed in some form (but not necessarily imposed) in many
states.
-
- Primary
Mortgage Market: Lenders making
mortgage loans directly to borrower's such as savings and loan
associations, commercial banks, and mortgage companies. These
lenders sometimes sell their mortgages into the secondary
mortgage markets such as to FNMA or GNMA,
etc.
-
- Principal:
The amount of
debt, not counting interest, left on a loan.
-
- Private
Mortgage Insurance
(PMI): In the event
that you do not have a 20 percent down payment, lenders will
allow a smaller down payment - as low as 5 percent in some
cases. With the smaller down payment loans, however, borrowers
are usually required to carry private mortgage insurance.
Private mortgage insurance will usually require an initial
premium payment and may require an additional monthly fee
depending on you loan's structure.
-
- Property
Tax Impound (also "Impound Account):
That portion of
a borrower's monthly payments held by the lender or servicer
to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as
reserves.
Back to Top
------------------------------------------------------------------------
- REALTOR®:
A real estate
broker or an associate holding active membership in a local
real estate board affiliated with the National Association of
REALTORS®.
-
- Recission:
The cancellation
of a contract. With respect to mortgage refinancing, the law
that gives the homeowner three days to cancel a contract in
some cases once it is signed if the transaction uses equity in
the home as security.
-
- Recording
Fees: Money paid to
the lender for recording a home sale with the local
authorities, thereby making it part of the public records.
-
- Refinance:
Obtaining a new
mortgage loan on a property already owned. Often to replace
existing loans on the property.
-
- Renegotiable
Rate Mortgage: A loan in which
the interest rate is adjusted periodically. See adjustable
rate mortgage.
-
- RESPA:
Short for the
Real Estate Settlement Procedures Act. RESPA is a federal law
that allows consumers to review information on known or
estimated settlement cost once after application and once
prior to or at a settlement. The law requires lenders to
furnish the information after application only.
-
- Reverse
Annuity Mortgage (RAM):
A form of
mortgage in which the lender makes periodic payments to the
borrower using the borrower's equity in the home as
Satisfaction of Mortgage: The document issued by the mortgagee
when the mortgage loam is paid in full. Also called a
"release of mortgage."
Back to Top
------------------------------------------------------------------------
- Second
Mortgage: A mortgage made
subsequent to another mortgage and subordinate to the first
one.
-
- Secondary
Mortgage Market: The place where
primary mortgage lenders sell the mortgages they make to
obtain more funds to originate more new loans. It provides
liquidity for the lenders. security.
-
- Servicing:
All the steps
and operations a lender performs to keep a loan in good
standing, such as collection of payments, payment of taxes,
insurance, property inspections and the like.
-
- Settlement/Settlement
Costs: see closing/closing
costs
-
- Shared
Appreciation Mortgage (SAM):
A mortgage in
which a borrower receives a below-market interest rate in
return for which the lender (or another investor such as a
family member or other partner) receives a portion of the
future appreciation in the value of the property. May also
apply to mortgage where the borrowers shares the monthly
principal and interest payments with another party in exchange
for part of the appreciation.
-
- Simple
Interest: Interest which
is computed only on the principle balance.
-
- Survey:
A measurement of
land, prepared by a registered land surveyor, showing the
location of the land with reference to know points, its
dimensions, and the location and dimensions of any buildings.
-
- Sweat
Equity: Equity created
by a purchaser performing work on a property being purchased.
Back to Top
------------------------------------------------------------------------
- Tax
Service Fee: A fee paid at
the closing to a third party, that will notify the lender when
property taxes are due, how much they are, and whether or not
they are current.
-
- Termite
Report: Self-expanitory,
except that after 10/01/99, a termite inspection is now
required by the FHA. The VA has required one since the 80's.
Also, inspectors must be certified by the FHA and VA to do
inspections. The report must be filled out, signed, and
approved before there is any release-of-funds.
-
- Title:
A document that
gives evidence of an individual's ownership of property.
-
- Title
Insurance: A policy,
usually issued by a title insurance company, which insures a
home buyer against errors in the title search. The cost of the
policy is usually a function of the value of the property, and
is often borne by the purchaser and/or seller. Policies are
also available to protect the lender's interests.
-
- Title
Search: An examination
of municipal records to determine the legal ownership of
property. Usually is performed by a title company.
-
- Truth-In-Lending:
A federal law
requiring disclosure of the Annual Percentage Rate to home
buyers shortly after they apply for the loan. Also known as
Regulation Z.
-
- Two-Step
Mortgage: A mortgage in
which the borrower receives a below-market interest rate for a
specified number of years (most often seven or 10), and then
receives a new interest rate adjusted (within certain limits)
to market conditions at that time. the lender sometimes has
the option to call the loan due with 30 days notice at the end
of seven or 10 years. also called "Super Seven" or
"Premier" mortgage.
Back to Top
------------------------------------------------------------------------
- Underwriting:
The decision
whether to make a loan to a potential home buyer based on
credit, employment, assets, and other factors and the matching
of this risk to an appropriate rate and term or loan amount.
-
- Usury:
Interest charged
in excess of the legal rate established by law.
Back to Top
------------------------------------------------------------------------
- VA Loan:
A long-term,
low-or no-down payment loan guaranteed by the Department of
Veterans Affairs. Restricted to individuals qualified by
military service or other entitlements.
-
- VA
Funding Fee: A premium of up
to 1-7/8 percent (depending on the size of the down payment)
paid on a VA-backed loan. On a $75,000 fixed-rate mortgage
with no down payment, this would amount to $1,406 either paid
at closing or added to the amount financed.
-
- Variable
Rate Mortgage
(VRM): see adjustable
rate mortgage
-
- Verification
of Deposit
(VOD): A document
signed by the borrower's financial institution verifying the
status and balance of his/her financial accounts.
-
- Verification
of Employment
(VOE): A document
signed by the borrower's employer verifying his/her position
and salary.
Back to Top
------------------------------------------------------------------------
Warehouse
Fee: Many mortgage
firms must borrow funds on a short term basis in order to
originate loans which are to be sold later in the secondary
mortgage market (or to investors). When the prime rate of
interest is higher on short term loans than on mortgage loans,
the mortgage firm has an economic loss which is offset by
charging a warehouse fee.
-
- Wraparound
mortgage: Results when an
existing assumable loan is combined with a new loan, resulting
in an interest rate somewhere between the old rate and the
current market rate. The payments are made to a second lender
or the previous homeowner, who then forwards the payments to
the first lender after taking the additional amount off the
top.
|
|
|
