| Real Estate Definitions |
| Adjustable
Rate Mortgage |
A mortgage for which the interest
rate and the payments change during the life of the loan. |
| Alternative
Financing |
Mortgage instruments for both new
and existing homes which allow the buyer to qualify at lower than
market rate. Among these instruments are adjustable rate mortgages, graduated
payment mortgages and buy-down mortgages. |
| Amortization |
A gradual repayment of a mortgage
by periodic installments. |
| Annual
Percentage Rate |
The total cost of credit expressed
as a yearly rate. It reflects all of your mortgage loan financing
costs, including interest paid up front as points and interest paid over
the life of the loan. |
| Appraisal |
An analysis done by a qualified
appraiser that puts a dollar value on a property based on a number of considerations,
including the condition, location and size of the property. |
| Assumable
Loan |
A loan that can be picked up by
a subsequent buyer for an assumption fee. It saves thousands of dollars
in closing costs and loan origination fees. Conventional loans that are
assume able usually require a new application. |
| Closing
or Settlement |
The conclusion of a transaction,
including the delivery of the deed, financial adjustments, signing of the
note and the disbursement of funds, which allows for transfer of ownership. |
| Closing
Costs |
Costs in addition to the price
of a house, usually including mortgage origination fee, title search and
insurance, recording fees and pre-payable payments collected in advance
and held in an escrow account. Be sure your sales contract clearly states
who will pay these costs - the buyer or the seller. |
| Commitment |
A written promise of a lender to
a borrower to make a mortgage loan, on a specific property, under stated
terms and conditions. The terms of the commitment most important to borrowers
are the interest rate on the loan and expiration date of the commitment. |
| Conventional
Loan |
Fixed-rate or adjustable-rate mortgage
that is not guaranteed by a government agency. If you are applying for
a conventional loan and your down payment is less than 20 percent of the
purchase price, mortgage insurance is required. The lender will obtain
mortgage insurance for you. Mortgage insurance protects lenders against
default by borrowers. |
| Credit
Report |
Lists the credit history of a borrower
on current and previous credit obligations. |
| Deed |
A written document transferring
ownership of property from seller to buyer. |
| Down Payment |
A specified percentage of a home's
value paid at closing. Usually a down payment is 5 to 25 percent
of the house price. Private mortgage insurance is required at amounts less
than 20 percent. |
| Earnest
Money |
Deposit money given to the seller
by the potential buyer to show that he is serious about buying the house.
If the deal does not go through, it may be forfeited. |
| Encumbrance |
A legal interest in a property
that affects or limits the sale or transfer of property. Examples of encumbrances
are mortgages, leases, easements, judgments, and equity liens. |
| FHA |
Mortgage Loans made by private
lenders, which are insured by the Federal Housing Administration. |
| Graduated
Pmt Mortgages |
A type of flexible-payment mortgage
where by the payments increase for a specified time and then level off.
Used by home buyers who expect their incomes to increase over the years. |
| Hazard
Insurance |
Protects homeowners against damage
caused to a property by fire, wind or other common hazards. It is required
by the lender up to the amount of the mortgage to protect the lender's
security interest in the property. Additional coverage on the property
can be purchased by the borrower. |
| Lien |
A legal claim on property as security
for a debt. |
| Loan-to-Value
Ratio |
The relationship between the amount
of your mortgage to the appraised value of your property, the security.
If you have a $60,000 mortgage on property valued at $80,000, your
LTV is 75 percent ($60,000 divided by $80,000 = 75 percent). |
| Lock-In |
When the borrower informs the lender
that he or she wishes to lock-in a guaranteed interest rate and points
for a specified time period. To keep the lock-in price, the loan must close
or settle by the end of the lock-in period. Be sure you fully understand
the terms and conditions under which you lock-in your guaranteed interest
rate and points. |
| Mortgage
Insurance |
An insurance, paid for by the mortgagor,
which protects a lender against default. If the loan-to-value- ratio is
greater then 80 percent (or in some cases less than 80 percent) on conventional
loans, lenders will require mortgage insurance
issued by an independent mortgage insurer. Mortgage insurance protects
the lender's security interest on a property if the borrower defaults on
the loan. Mortgage insurance for FHA mortgages is known as the Mortgage
Insurance Premium, or MIP. MIP is required on all FHA mortgages regardless
of the loan-to-value ratio. Mortgage insurance should not be confused
with mortgage life insurance, which pays off a mortgage loan in the event
of the Mortgage Note borrowers death. |
| Negative
Amortization |
Defines the terms of repayment
of the debt secured by the mortgage. The principal balance of the loan
actually grows, due to payments which are not enough to cover all of the
interest due. Often negative amortization accrues during the years of a
variable rate or graduated payment mortgage when the payments are less
then market rate |
| Points |
Usually paid by the seller, a point
is one percent of the loan balance and is charged by the lender to issue
a loan. Points can be a negotiable item between Principal buyer and seller
or buyer and lender, and usually range from 1 up to 7 or 8. |
| Principal
and Interest Pmt |
A periodic (usually monthly) payment
that includes the interest charges for the Principal and Interest. |
| (PITI) |
The periodic (typically monthly)
payment that includes a principal and interest payment plus a contribution
to the escrow account set up by the lender to pay Taxes and Hazard Insurance. |
| (PMI) |
The insurance coverage offered
by a private company that protects a lender against loss on a defaulted
mortgage loan. Its use is usually limited to loans with high loan-to-value
ratio. The borrower pays the premiums. |
| Survey |
A drawing of a piece of property
that shows the boundaries of the property and other facts, such as the
location of buildings, easement or encroachments. |
| Title
Insurance |
The owner's evidence of his property
rights. |
| Title
Search |
A history that shows all who have
held the title to the property you are about to purchase. An abstract of
title also states any facts that may impair title and lists all proceedings
that may have affected title. |
| Truth-ln-Lending
Act |
A federal law aimed at promoting
the informed use of consumer credit by requiring the lender to provide
the borrower with disclosures about terms and costs. The initial Truth-in-Lending
Disclosure usually must be issued within three days of application. Information
found in the initial disclosure includes the annual
percentage rate finance charge, amount financed, total payments, payment
schedule and additional information regarding assumability of your loan
and the amount of late charge. Figures on the initial disclosure are estimates
only. A final Truth-in-Lending Disclosure is given prior to or at closing,
listing the final terms and costs. |
