Hello, I’m Shataa Whittle, “Your Local Realty Partner”and thank you for visiting my real estate blog. I am a Licensed Professional Listing, Buyer and Sales Agent in the District of Columbia -DC & Maryland- MD. I am a Licensed Real Estate Agent / Realtor and a Native Washingtonian. Finding the perfect house, condo or housing complex does not have to be difficult. As a Licensed Real Estate Professional, I can assist you with locating your Dream Home. Luxury Condo, Apartments in DC / MD, New Development Projects, Newly Constructed Developments, and Luxury Apartment Homes are also accessible to me thru the MLS. If you are in the market and looking to find that perfect Loft, Single Family Homes, Multi Family Properties, Commercial Rental and For Sale Property, Co-op Developments, Investment properties I can assist you with locating any one of these properties also. Foreclosures, REO Bank Owned Properties, Luxurious Town homes, Water Front Properties, and / or finding land to build your new dream house, then I am your agent. As a Licensed Realtor, It does not matter if you are looking for city life / urban communities, suburban / country areas, or Historic Locations, I can help you find it. Our office have been called by many of our clients, “A One Stop Real Estate Shop”, and I am dedicated to taking a stand for the best interests of my clients.
You have truly found a professional Real Estate Agent that is going to consider you a client and work in your best interest, rather than just another commission check. With all the different local brokerage companies to choose from ( i.e.GRM , Remax, Long & Foster, Exit, Keller Williams, Century 21, Fairfax Realty, Coldwell Banker, Prudential etc…) and all the different factors to choose you are truly in good professional care when you allow me to represent you as my client. You can rest assure that as your Licensed Real Estate Professional, I will work in your best interest, in which it is very important during any real estate transaction. My mission is to provide sound and educated advice that will lead to a successful purchase and or sale of your home. I am looking forward to meeting with you and discussing the sale and or purchase of your new home or investment property. Click on the link below, and allow me to put to work my real estate experience for you!
Schedule a Real Estate Consultation
Please fee free to review the most commonly used terminology within the real estate industry that every new home buyer should be familiar with. This is just another step that I have taken to provide information to clients and provide helpful resources. If you have any additional questions or would like to take advantage of my Free Property Analysis and CMA, Listing Services, or if you need Buyer Representation, Please feel free to Contact Me , and I will be happy to render my professional real estate services to you. If you are a new home buyer, you may want to consider attending my New Home Buyer Seminar .
Glossary Terms
A
ADDITIONAL SECURITY: Security offered to a lender that would be different from the primary security property.
This might include an additional piece of real property or a savings account, in addition to the down payment,
in order to convince a lender to grant a mortgage loan.
ADJUSTABLE RATE MORTGAGE (ARM): A mortgage loan in which the interest rate periodically changes according to terms and conditions specified in a mortgage note. The changing interest rate is based upon the upward and downward movement of an index, such as the current U.S. Treasury Securities, and a fixed margin above that index. An adjustable rate mortgage is also called an adjustable mortgage loan (AML).
A.L.T.A. POLICY: An acronym for American Land Title Association. It is a title insurance policy insuring the lender against losses sustained due to lien priority. This policy protects the lender from claims which might have been recorded but may not have been identified by title search and examination. It also protects the lender from defects which might not have been recorded at the time the search was completed. The borrower
may pay all, a part or none of this cost, depending on the terms of the sales contract or local custom.
AMORTIZATION: The reduction of a mortgage debt, according to a set schedule spelled out in the mortgage note, to a zero balance over a certain number of years.
APPLICATION FEE: A fee charged by a lender for initiating a loan application.
APPRAISAL: The valuation of real property, based upon current market conditions, by a certified, independent appraiser to determine if the value of the property is sufficient to secure the loan. The appraiser inspects the house and the neighborhood, and considers the selling prices of comparable houses and other factors in determining the value. The appraisal will provide the factual data upon which the appraiser bases the appraised value.
APPRECIATION: An increase in property value beyond the original purchase price.
ASSESSED VALUATION: The dollar value assigned to real property by a local government for the purpose of assessing taxes.
B
BORROWER: A person who obtains a loan in order to take ownership of real property. The borrower is responsible for the repayment of that loan according to the terms and conditions of the mortgage note.
BUY DOWN: A provision granted by a lender that allows the borrower to pay additional points to lower a given interest rate.
BUY UP: A provision granted by a lender that allows the borrower to pay fewer points, which results in a higher interest rate.
C
CAPS: Limits, set by the lender, on the upward (ceiling) or downward (floor) rate changes permitted on an adjustable rate mortgage at each adjustment period.
Capital Gain Exclusion: Ex. As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit--subject to limitation--free from taxation.
CITY INSPECTION: An inspection of the property required by some cities. The seller is required to meet specific property standards established by the city. Properties that meet these standards may be issued a certificate of occupancy.
CLOSING COSTS: Costs paid by a buyer or seller or both in order to purchase, sell or transfer real property.
COLLATERAL: Real property and/or other security pledged to a lender as an inducement for granting a loan. If the borrower defaults, the lender has the legal right to seize and sell the collateral in order to collect repayment of the debt.
COMMITMENT FEE: A fee charged by a lender for extending the period of time to which the lender will commit to approval of a specific interest rate and/or loan amount.
CONVENTIONAL MORTGAGE: A residential mortgage loan that is not insured or guaranteed by an agency of the government, payable in monthly installments over a specified period of time.
CONVERSION CLAUSE: An arrangement within an adjustable rate mortgage note that permits the borrower to change an adjustable rate loan to a fixed rate loan within a certain period of time and under certain specified conditions.
CONVEYANCE: A transfer of ownership in real property from one party to another party.
CONVEYANCE FEE: This is the fee paid to a county recorder to log the transfer of title from the seller to the buyer. This fee is set by the local government and is based on the selling price of the property.
CO-SIGNER: One who signs for another, thereby accepting full responsibility for repayment of a debt in the event of default.
CREDIT REPORT: A detailed summary of an individual’s credit history prepared by a credit-reporting agency.
D
DEBT-TO-INCOME RATIO: A way of evaluating a borrower’s ability to repay a loan based upon current debt and income levels.
DEED: An instrument used to transfer ownership of real property. There are three types of deeds: A general warranty deed is a guarantee from the seller that good title is being conveyed. A joint tenancy or joint survivorship deed allows two or more persons to hold real estate jointly for life, with the survivor(s) taking the interest of the one who dies.
A tenancy in common deed allows ownership of real property to be granted to two or more persons, each holding separate title in the same estate. There is no right of survivorship with tenancy in common, so if one tenant dies, his or her undivided interest in the estate passes to his or her heirs rather than the remaining tenants in common.
DOWER: The interest in the real property of a homeowner allowed to the non-title holding spouse.
DOWN PAYMENT: The cash that a buyer pays toward the purchase of a house. The down payment/equity represents the difference between the mortgage amount and the purchase price, and includes the earnest money (escrow deposit) and secondary financing.
E
EARNEST MONEY (ESCROW DEPOSIT): Money given by a buyer, to a seller or a seller’s agent, in order to secure the purchase of real property and to show that the buyer’s offer is being made in good faith.
EQUITY: The difference between the current value of the real property and the outstanding balances on any mortgages attached to the property.
ESCROW: The holding of funds and documents of buyers and sellers by a disinterested third party until contractual conditions, specified by a purchase agreement, are satisfied.
ESCROW ACCOUNT: Funds included in the monthly real estate loan payment to accumulate the amounts necessary for the future payment of county taxes and any of the following, when applicable: PMI, homeowner’s insurance, flood insurance, mortgage life insurance and disability insurance. Using the funds in the escrow account, the lender makes these payments as they become due.
ESCROW AGENT: An impartial third party responsible for overseeing the transfer of real property according to conditions set forth in the purchase agreement and any attached addenda.
ESCROW DELETION LETTER: A letter, signed by both buyer and seller, which deletes the escrow agent listed in the purchase agreement and names a new escrow agent.
ESCROW FEE: A fee paid to the escrow agent for overseeing the transfer of real property.
F
FINANCE CHARGE: The cost of interest and other charges involved in borrowing money to build or purchase real estate.
FLOOD INSURANCE: A federal insurance plan required for any property purchased in a certain flood hazard area identified by FEMA (Federal Emergency Management Agency). If your property is within such an area, you may be required by federal law to carry flood insurance on your home. Such insurance may be purchased in participating communities under the National Flood Insurance Act.
G
GOOD-FAITH ESTIMATE: A calculation offered by a lender, usually at the time of application, that provides a breakdown of estimated closing costs.
GROSS INCOME: Total income from all sources for all borrowers on a loan. This is the income before any deductions, including taxes, 401k contributions, insurance premiums or charitable deductions.
H
HOMEOWNER’S (HAZARD) INSURANCE: Insurance protecting a house against certain hazards including loss from fire, certain natural causes and vandalism, and guaranteeing payment to the insured in cases of such loss.
I
INDEX: A base indicator for the interest rate of an adjustable rate mortgage. A typical index is the 1-year Treasury Bill averaged to a constant maturity, plus the margin. Another typical index would be the prime interest rate.
INTEREST: The cost of borrowing money from a lender.
INTEREST RATE: The rate used to perform interest calculations and establish the monthly mortgage payment.
J
JUDGMENT: The decree of a court which produces a lien against the real property of a debtor as a result of the court’s award of money to a creditor.
L
LIEN: A security claim on property until a debt is satisfied. A mortgage lien is evidenced by an executed mortgage which the lender files with the county recorder. A tax lien is a lien filed by a tax agency for non-payment of taxes. A mechanic’s lien is a lien filed by a contractor, laborer or material supplier for non-payment for work that has been performed or for materials supplied.
LOAN COMMITMENT: A guarantee by a lending institution to a borrower to lock in an interest rate for a certain
number of days.
LOAN-TO-VALUE (LTV): A percentage representing the mortgage amount divided by the appraised property value or selling price of the property (whichever is less). For example, if the market value of a house is $100,000, and the amount of the loan is $80,000, the LTV is 80%.
LONG-TERM COMMITMENT: A rate and/or loan amount guarantee by a lending institution which is longer than its basic commitment period.
M
MARGIN: The percentage that a lender adds to a base index to create adjustments on adjustable rate products.
MARKET VALUE: The most likely price at which a property will sell in a competitive and open market.
MORTGAGE: A debt instrument by which a borrower (mortgagor) gives a lender (mortgagee) security interest in real property in return for a loan. When the debt is paid in full, the mortgage is cancelled and the lien on the secured property is released.
MORTGAGE DISABILITY INSURANCE: Optional insurance which, under circumstances spelled out in the
insurance policy, makes payments on a mortgage loan when the borrower is injured, ill or disabled.
MORTGAGE LIFE INSURANCE: Optional insurance which pays off a mortgage loan or a significant part of a mortgage loan in the event of the death of the insured. The coverage decreases as the mortgage balance declines.
MORTGAGEE: A lender that accepts a debt instrument as a security interest in real property in return for granting a loan.
MORTGAGOR: The person (borrower) providing a debt instrument to the lender.
N
NET WORTH: The value of all assets minus the amount of all liabilities. It is often used as a measure of financial strength.
O
ORIGINATION FEE: A fee charged by a lender or loan originator to offset the costs involved in processing a loan request.
OWNER’S FEE POLICY: A title insurance policy guaranteeing that the buyer of a property enjoys free and clear title at the time the deed is filed for record. This policy goes beyond the title guarantee by protecting the buyer against defects which might not have been of record at the time the title search was performed. In some areas, it is customary for the seller to provide the buyer with an owner’s policy and for the seller to
pay for this policy. In other areas, if the buyer desires an owner’s policy, he or she must pay for it. It shows the location of the land, its dimensions and any improvements on the land. It also checks for easements of record, encroachments and building line violations.
P
PITI: An acronym for the components of a monthly mortgage payment. It stands for principal, interest, taxes and insurance.
POINT FORM: A form signed by whoever is paying the purchaser’s points and/or costs.
POINTS: A one-time charge used to “buy down” the interest rate on a loan. Each point is equal to 1% of the mortgage amount. For example, if a lender charges one point on an $80,000 loan, this amounts to a charge of $800.
PRE-APPROVAL: An approval for a certain loan amount granted to an applicant who has not signed a purchase agreement at time of application.
PREPAID INTEREST: Interest due on the full amount of the principal for the period from the date of settlement to the beginning of the period covered by the first monthly payment.
PREPAYMENT: The payment of a mortgage loan before it is due.
PREPAYMENT PENALTY: A penalty charged by a lender to a borrower for paying off a mortgage loan before maturity.
PRIME RATE: The interest rate charged by commercial banks to their best, most secure corporate customers. It is regarded as a yardstick for general trends in interest rates.
PRINCIPAL: The amount of money borrowed from the lender.
PRINCIPAL PAYMENT: The portion of a loan payment which goes to reduce the outstanding balance of the loan.
PRIVATE MORTGAGE INSURANCE (PMI): A generic name for mortgage insurance granted to a lender. The insurance is written by a private company, and it protects the lender against loss if the borrower defaults on the mortgage.
PURCHASE AGREEMENT (CONTRACT): A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions.
R
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): A federal law requiring lenders to send an estimate of settlement costs to the borrower within three business days after accepting a completed loan application. This act also places limits on the amount lenders may hold in an escrow account and further requires a disclosure
of settlement costs to buyers and sellers within a reasonable period of time after settlement.
RECORDING FEES: The charges for recording documents with public agencies.
S
SECONDARY FINANCING: Financing provided by a second lender that will accept a second lien position. This includes seller financing or financing provided by communities or organizations to further community housing goals.
SETTLEMENT: The final closing in which real property is transferred and proceeds are disbursed.
SETTLEMENT STATEMENT: The financial disclosure, often called the HUD-I Settlement Statement, which includes an itemized list of the services provided to you and the fees charged to you. This form (developed by the U.S. Department of Housing and Urban Development) is filled out by the settlement agent who will conduct the settlement. In parts of the country where the settlement agent does not require a meeting, the statement will be mailed or delivered as soon as practical after settlement. No advance inspection is required.
SURVEY (LOCATION SERVICE): A lot drawing performed by a surveyor which locates the house and other buildings on the lot described in the legal description of the property. It shows the location of the land, its dimensions and any improvements on the land. It also checks for easements of record, encroachments and building line violations.
T
TAX PRORATION: The distribution of seller’s proceeds to the buyer to cover county taxes which are owed but not payable at the time of the title transfer.
TAX RESERVES: Funds, collected as part of the monthly mortgage payment, which are held by the lender on behalf of the borrower. These funds are used by the lender to pay the borrower’s semi-annual real estate taxes.
TERM: The amount of time between the start date and the termination date of a note, mortgage or other legal document.
TITLE: The right of ownership, control and possession of property.
TITLE GUARANTEE: The guarantee to a purchaser by an independent title company performing a title search that there are no liens of record which would cloud the title to a newly acquired real property.
TITLE INSURANCE: A policy that protects the purchaser, mortgagee or other party against losses due to defects in title.
TITLE SEARCH: A search by an independent title company for liens or encumbrances which could affect passing clear title from the seller to the buyer.
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Friday, December 26, 2008
Thursday, December 25, 2008
REAL PROPERTY GLOSSARY(PART2)
Hello its me again , Shataa Whittle, “Your Local Realty Partner”. Thanks for visiting my real estate blog again. I am a Licensed Professional Listing, Buyer and Sales Agent in the District of Columbia -DC & Maryland- MD. I am a Licensed Real Estate Agent / Realtor and a Native Washingtonian. Finding the perfect house, condo or housing complex does not have to be difficult. As a Licensed Real Estate Professional, I can assist you with locating your Dream Home. Luxury Condo, Apartments in DC / MD, New Development Projects, Newly Constructed Developments, and Luxury Apartment Homes are also accessible to me thru the MLS. If you are in the market and looking to find that perfect Loft, Single Family Homes, Multi Family Properties, Commercial Rental and For Sale Property, Co-op Developments, Investment properties I can assist you with locating any one of these properties also. Foreclosures, REO Bank Owned Properties, Luxurious Town homes, Water Front Properties, and / or finding land to build your new dream house, then I am your agent. As a Licensed Realtor, It does not matter if you are looking for city life / urban communities, suburban / country areas, or Historic Locations, I can help you find it. Our office have been called by many of our clients, “A One Stop Real Estate Shop”, and I am dedicated to taking a stand for the best interests of my clients.
You have truly found a professional Real Estate Agent that is going to consider you a client and work in your best interest, rather than just another commission check. With all the different local brokerage companies to choose from ( i.e.GRM , Remax, Long & Foster, Exit, Keller Williams, Century 21, Fairfax Realty, Coldwell Banker, Prudential etc…) and all the different factors to choose you are truly in good professional care when you allow me to represent you as my client. You can rest assure that as your Licensed Real Estate Professional, I will work in your best interest, in which it is very important during any real estate transaction. My mission is to provide sound and educated advice that will lead to a successful purchase and or sale of your home. I am looking forward to meeting with you and discussing the sale and or purchase of your new home or investment property. Click on the link below, and allow me to put to work my real estate experience for you!
Schedule a Real Estate Consultation
Please fee free to review the most commonly used terminology within the real estate industry. This is just another step that I have taken to provide information to clients and provide helpful resources. If you have any additional questions or would like to take advantage of my Free Property Analysis and CMA, Listing Services, or if you need Buyer Representation, Please feel free to Contact Me , and I will be happy to render my professional real estate services to you. If you are a new home buyer, you may want to consider attending my New Home Buyer Seminar .
M
margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
merged credit report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.
mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
mortgage banker
For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
mortgagee
The lender in a mortgage agreement.
mortgage insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
mortgage life and disability insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
mortgagor
The borrower in a mortgage agreement.
multidwelling units
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
N
negative amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
no cash-out refinance
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."
no-cost loan
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
note rate
The interest rate stated on a mortgage note.
notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
O
original principal balance
The total amount of principal owed on a mortgage before any payments are made.
origination fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
owner financing
A property purchase transaction in which the property seller provides all or part of the financing.
P
partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
periodic payment cap
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
periodic rate cap
For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
personal property
Any property that is not real property.
PITI
This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
PITI reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
planned unit development (PUD)
A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
point
A point is 1 percent of the amount of the mortgage.
power of attorney
A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification
prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
pre-qualification
This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
prime rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
principal, interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
private mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
promissory note
A written promise to repay a specified amount over a specified period of time.
public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.
purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
purchase money transaction
The acquisition of property through the payment of money or its equivalent.
Q
qualifying ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower's monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner's association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.
quitclaim deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
R
rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
real estate agent
A person licensed to negotiate and transact the sale of real estate.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
real property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
recording
The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
refinance transaction
The process of paying off one loan with the proceeds from a new loan using the same property as security.
remaining balance
The amount of principal that has not yet been repaid. See principal balance.
remaining term
The original amortization term minus the number of payments that have been applied.
rent loss insurance
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
repayment plan
An arrangement made to repay delinquent installments or advances.
replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
revolving debt
A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
right of ingress or egress
The right to enter or leave designated premises.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
S
sale-leaseback
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
secondary market
The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.
secured loan
A loan that is backed by collateral.
security
The property that will be pledged as collateral for a loan.
seller carry-back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
servicer
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
settlement statement
See HUD1 Settlement Statement
subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
subordinate financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
sweat equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
T - Z
tenancy in common
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
title
A legal document evidencing a person's right to or ownership of a property.
title company
A company that specializes in examining and insuring titles to real estate.
title insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
transfer of ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
transfer tax
State or local tax payable when title passes from one owner to another.
Treasury index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
two-step mortgage
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
two- to four-family property
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
trustee
A fiduciary who holds or controls property for the benefit of another.
V
VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
vested
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Veterans Administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
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M
margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
merged credit report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.
mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
mortgage banker
For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents.
mortgage broker
A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
mortgagee
The lender in a mortgage agreement.
mortgage insurance (MI)
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
mortgage life and disability insurance
A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
mortgagor
The borrower in a mortgage agreement.
multidwelling units
Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
N
negative amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
no cash-out refinance
A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a "rate and term refinance."
no-cost loan
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
note rate
The interest rate stated on a mortgage note.
notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
O
original principal balance
The total amount of principal owed on a mortgage before any payments are made.
origination fee
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
owner financing
A property purchase transaction in which the property seller provides all or part of the financing.
P
partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
periodic payment cap
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
periodic rate cap
For an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
personal property
Any property that is not real property.
PITI
This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
PITI reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
planned unit development (PUD)
A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
point
A point is 1 percent of the amount of the mortgage.
power of attorney
A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
pre-approval
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification
prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
pre-qualification
This usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
prime rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.
principal, interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment on impounded loans. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
private mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
promissory note
A written promise to repay a specified amount over a specified period of time.
public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.
purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
purchase money transaction
The acquisition of property through the payment of money or its equivalent.
Q
qualifying ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower's monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner's association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.
quitclaim deed
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
R
rate lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
real estate agent
A person licensed to negotiate and transact the sale of real estate.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
real property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
recording
The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
refinance transaction
The process of paying off one loan with the proceeds from a new loan using the same property as security.
remaining balance
The amount of principal that has not yet been repaid. See principal balance.
remaining term
The original amortization term minus the number of payments that have been applied.
rent loss insurance
Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
repayment plan
An arrangement made to repay delinquent installments or advances.
replacement reserve fund
A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
revolving debt
A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
right of ingress or egress
The right to enter or leave designated premises.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
S
sale-leaseback
A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
secondary market
The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.
secured loan
A loan that is backed by collateral.
security
The property that will be pledged as collateral for a loan.
seller carry-back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.
servicer
An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
settlement statement
See HUD1 Settlement Statement
subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
subordinate financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
sweat equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
T - Z
tenancy in common
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
third-party origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
title
A legal document evidencing a person's right to or ownership of a property.
title company
A company that specializes in examining and insuring titles to real estate.
title insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
transfer of ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
transfer tax
State or local tax payable when title passes from one owner to another.
Treasury index
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
two-step mortgage
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
two- to four-family property
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
trustee
A fiduciary who holds or controls property for the benefit of another.
V
VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
vested
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Veterans Administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
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