| |
| 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. |
| |
| Automated Clearing House (ACH) |
| 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. |
| |
|
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|
| |
| 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. |
| |
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| |
| 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. |
| |
|
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|
| |
| 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. |
| |
|
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| |
| 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. |
| |
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| |
| 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. |
| |
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| |
| 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. |
| |
|
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| |
| 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. |
| |
|
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| |
| 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.
|
| |
|
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|
| |
| 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. |
| |
|
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|
| |
| 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*.
|
*Consult your tax
advisor
|
| 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 or appraised
value. |
| |
| Lock-in Period |
| A specified number of days before
loan closing during which the range of rates available to a borrower
is protected from financial market fluctuations in interest rates.
Locking does not guarantee what specific rate will apply at closing,
as that depends on specific transaction characteristics and the
borrower's credit profile. |
| |
| 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. |
| |
|
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|
| |
| 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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|
| |
| 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. |
| |
| Plans And Specifications |
| 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. |
| |
| 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 |
| 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 |
| 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 |
| 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 |
| 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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| 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 |
| 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 |
| 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 |
| 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 |
| 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 |
| 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 |
| 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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