|
Adjustable
Rate Mortgage (ARM)
|
Based off a pre-selected index the mortgage interest rate will be changed
periodically. (AKA: Canadian rollover mortgage, re negotiable rate mortgage, or
variable rate mortgage.) |
|
Adjustment
Interval
|
Usually 1, 3, or 5 years,
based off the index. This is the time between a change in either the interest
rate or monthly payment. Both of which may change. |
|
Amortization
|
Payment of your mortgage
through periodic payments covering both dept and accumulated interest. |
|
Appraisal
|
A
qualified professional’s estimated value of property. |
|
Assessment
|
A tax for
the local government for such services as sewer or garbage pick
up. |
|
Balloon
Payment Mortgage |
Most
of the time this is a short term fixed rate loan with smaller
payments over a specified time and a single payment for the
remaining principal at the time specified by the contract. |
|
Blanket
Mortgage
|
Commonly
used by land developers and real estate investors, this form of
mortgage covers multiple properties in the same loan. |
Buy-down Mortgage
|
An initial
large payment beginning the loan allows for the loan taker to
receive a lower interest rate for a specified number of years.
|
|
Closing
|
Actual
moment when the property and the funds are legally exchanged |
|
Closing
Costs
|
Sometimes
called settlement costs usually including but not limited to
discount points, appraisal fee, an origination fee, title search
and title insurance, taxes, deed recording fee, and credit
report charge. Closing costs usually range somewhere between
3-6% of the loan. |
|
Conventional Loan
|
A mortgage
not guaranteed by the VA or FHA insured. |
|
Credit
Report
|
A report
of one’s credit standing. |
|
Debt-to-Income Ratio
|
Monthly
debt payments divided by monthly income. |
|
Deed
|
Used to
secure the payment of a mortgage. |
|
Default
|
Failure to
fulfill a contract |
|
Deferred
interest
|
See
negative amortization
|
|
Down
Payment
|
Money paid
up front, before the loan is given. |
|
Due-on-Sale-Clause
|
Forces
payment of mortgage balance at time holder sells the home. |
|
Earnest
Money
|
Money put
forward to bind a transaction. |
|
Equal
Credit Opportunity Act
(ECOA) |
Federal law requiring
lenders to make credit equally available without discrimination based on race,
color, religion, national origin, age, sex, marital status or receipt of income
from public assistance programs. |
|
Equity
|
The
difference between how much a property is worth and how much is
owed on the property. |
|
Escrow
Account
|
Account
provided by the lender to pay tax and insurance on the property. |
|
Fixed Rate
Mortgage
|
The
interest rate of the mortgage will remain constant through out
the term of the loan. |
|
Foreclosure
|
Forced
sale of property (AKA. Repossession) |
|
Graduated
Payment Mortgage
(GPM) |
Negative amortization
mortgage in which payments increase for a certain time and then become constant.
|
|
Hazard
Insurance
|
Covers
losses from events such as fire or wind. |
|
Impound
|
See
escrow
|
|
Index
|
An
interest rate used to measure the difference between ARM
interest rates and other investments. This is used to change
the adjustable interest rate. |
|
Market
Value
|
Actual
value of the property or what it could be sold for |
|
Mortgage
Insurance
|
See
private mortgage insurance
|
|
Negative
Amortization
|
If monthly
payments do not cover interest due on the loan, the additional
amount is added to the unpaid amount of the loan. May increase
the final amount owed on the loan, but if used properly can be
very helpful. |
|
Non-Assumption Clause
|
An
obligation to pay money owed as a mortgage note. |
|
Origination Fee
|
The fee
paid to prepare loan documents, perform credit checks, and
sometimes appraise a property. This is usually a percentage of
the loan. |
|
Points
|
Prepaid interest charge at
closing. One point equals one percent of the loan |
|
Prepaids |
Used to create or adjust
escrow account. May be taxes, insurance or other assessments. |
|
Prepayment
Penalty
|
Amount charged for early
payoff or loan. |
|
Principal
|
The of a loan owed on a
loan not including the interest. |
|
Private
Mortgage Insurance
(PMI) |
If the
down payment on a loan is less than a certain percentage PMI may
be necessary. |
|
Recording
Fees
|
Cost of
recording transaction with the government. |
|
Refinance
|
Receiving
a new loan to pay an existing loan. |
|
Renegotiable Rate Mortgage
|
See
adjustable rate mortgage.
|
|
Real
Estate Settlement Procedures Act (RESPA)
|
A
federal consumer protection law that that enforces loan
information disclosures and also serves as a deterrent to scams. |
|
Second
Mortgage
|
A loan given along with
the first loan. Can be used as a down payment cushion. |
|
Servicing
|
The
process of paying for taxes, insurance, and property
inspections. |
|
Settlement
Costs
|
See
closing costs
|
|
Simple
Interest
|
Interest is only applied
to the principle amount. |
|
Title |
A legal document confirming ownership of a property.
|
|
Title
Search
|
Examination of the legal ownership of a piece of property |
|
Underwriting
|
The choice
to give a loan based on assets, credit employment and other
factors. |
|
Variable
Rate Mortgage
(VRM) |
See
adjustable rate mortgage
|
|
Verification of Employment
(VOE) |
A document verifying job
status and salary. |
