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Licensed in GA, AL, & TN |
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Real Estate Glossary |
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A |
acceleration clause
A provision in a mortgage that
gives the lender the right to
demand payment of the entire
principal balance if a monthly
payment is missed.
acceptance
An offeree’s consent to enter
into a contract and be bound by
the terms of the offer.
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 that permits the
lender to adjust the mortgage's
interest rate periodically on
the basis of changes in a
specified index. Interest rates
may move up or down, as market
conditions change.
adjusted basis
The original cost of a property
plus the value of any capital
expenditures for improvements to
the property minus any
depreciation taken.
adjustment date
The date on which the
interest rate changes for an
adjustable-rate mortgage (ARM).
adjustment period
The period that elapses between
the adjustment dates for an
adjustable-rate mortgage (ARM).
administrator
A person appointed by a probate
court to administer the estate
of a person who died intestate.
affordability analysis
A detailed analysis of your
ability to afford the purchase
of a home. An affordability
analysis takes into
consideration your income,
liabilities, and available
funds, along with the type of
mortgage you plan to use, the
area where you want to purchase
a home, and the closing costs
that you might expect to pay.
amenity
A feature of real property that
enhances its attractiveness and
increases the occupant’s or
user’s satisfaction although the
feature is not essential to the
property’s use. Natural
amenities include a pleasant or
desirable location near water,
scenic views of the surrounding
area, etc. Human-made amenities
include swimming pools, tennis
courts, community buildings, and
other recreational facilities.
amortization
The gradual repayment of a
mortgage loan by installments.
amortization schedule
A timetable for payment of a
mortgage loan. An amortization
schedule shows the amount of
each payment applied to interest
and principal and shows the
remaining balance after each
payment is made.
amortization term
The amount of time required to
amortize the mortgage loan. The
amortization term is expressed
as a number of months. For
example, for a 30-year
fixed-rate mortgage, the
amortization term is 360 months.
amortize
To repay a mortgage with regular
payments that cover both
principal and interest.
annual mortgagor statement
A report sent to the mortgagor
(the borrower) each year. The
report shows how much was paid
in taxes and interest during the
year, as well as the remaining
mortgage loan balance at the end
of the year.
annual percentage rate (APR)
The cost of a mortgage stated as
a yearly rate; includes such
items as interest, mortgage
insurance, and loan origination
fee (points).
annuity
An amount paid yearly or at
other regular intervals, often
on a guaranteed dollar basis.
application
A form used to apply for a
mortgage loan and to record
pertinent information concerning
a prospective mortgagor and the
proposed security. Lenders use
the information on the loan
application to evaluate whether
or not they can give the loan,
and if so, the amount of money
they can lend.
appraisal
A written analysis of the
estimated value of a property
prepared by a qualified
appraiser. Contrast with home
inspection.
appraised value
An opinion of a property's fair
market value, based on an
appraiser's knowledge,
experience, and analysis of the
property.
appraiser
A person qualified by education,
training, and experience to
estimate the value of real
property and personal property.
appreciation
An increase in the value of a
property due to changes in
market conditions or other
causes. The opposite of
depreciation.
assessed value
The valuation placed on property
by a public tax assessor for
purposes of taxation.
assessment
The process of placing a value
on property for the strict
purpose of taxation. May also
refer to a levy against property
for a special purpose, such as a
sewer assessment.
assessment rolls
The public record of taxable
property.
assessor
A public official who
establishes the value of a
property for taxation purposes.
asset
Anything of monetary value that
is owned by a person. Assets
include real property, personal
property, and enforceable claims
against others (including bank
accounts, stocks, mutual funds,
and so on). More
assignment
The transfer of a mortgage from
one person to another.
assumable mortgage
A mortgage that can be taken
over ("assumed") by the buyer
when a home is sold.
assumption
The transfer of the seller’s
existing mortgage to the buyer.
See assumable mortgage.
assumption clause
A provision in an assumable
mortgage that allows a buyer to
assume responsibility for the
mortgage from the seller. The
loan does not need to be paid in
full by the original borrower
upon sale or transfer of the
property.
assumption fee
The fee paid to a lender
(usually by the purchaser of
real property) resulting from
the assumption of an existing
mortgage.
attorney-in-fact
One who holds a power of
attorney from another to execute
documents on behalf of the
grantor of the power.
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B |
balance sheet
A financial statement that shows
assets, liabilities, and net
worth as of a specific date.
balloon mortgage
A mortgage that has level
monthly payments that will
amortize it over a stated term
but that provides for a lump sum
payment to be due at the end of
an earlier specified term. The
principal and interest on the
loan are amortized over a longer
period than the actual term of
the mortgage.
balloon payment
The final lump sum payment that
is made at the maturity date of
a balloon mortgage.
bankrupt
A person, firm, or corporation
that, through a court
proceeding, is relieved from the
payment of all debts after the
surrender of all assets to a
court-appointed trustee.
bankruptcy
A proceeding in a federal court
in which a debtor who owes more
than his or her assets can
relieve the debts by
transferring his or her assets
to a trustee.
before-tax income
Income before taxes are
deducted.
beneficiary
The person designated to receive
the income from a trust, estate,
or a deed of trust.
bequeath
To transfer personal property
through a will.
betterment
An improvement that increases
property value as distinguished
from repairs or replacements
that simply maintain value.
bill of sale
A written document that
transfers title to personal
property.
binder
A preliminary agreement, secured
by the payment of an earnest
money deposit, under which a
buyer offers to purchase real
estate.
biweekly payment mortgage
A mortgage that requires
payments to reduce the debt
every two weeks (instead of the
standard monthly payment
schedule). The 26 (or possibly
27) biweekly payments are each
equal to one-half of the monthly
payment that would be required
if the loan were a standard
30-year fixed-rate mortgage, and
they are usually drafted from
the borrower’s bank account. The
result for the borrower is a
substantial savings in interest.
blanket insurance policy
A single policy that covers more
than one piece of property (or
more than one person).
blanket mortgage
The mortgage that is secured by
a cooperative project, as
opposed to the share loans on
individual units within the
project.
bona fide
In good faith, without fraud.
bond
An interest-bearing certificate
of debt with a maturity date. An
obligation of a government or
business corporation. A real
estate bond is a written
obligation usually secured by a
mortgage or a deed of trust.
breach
A violation of any legal
obligation.
bridge loan
A form of second trust 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.
Also known as "swing loan."
broker
A person who, for a commission
or a fee, brings parties
together and assists in
negotiating contracts between
them.
budget
A detailed plan of income and
expenses expected over a certain
period of time. A budget can
provide guidelines for managing
future investments and expenses.
budget category
A category of income or expense
data that you can use in a
budget. You can also define your
own budget categories and add
them to some or all of the
budgets you create. "Rent" is an
example of an expense category.
"Salary" is a typical income
category.
building code
Local regulations that
control design, construction,
and materials used in
construction. Building codes are
based on safety and health
standards.
buydown account
An account in which funds are
held so that they can be applied
as part of the monthly mortgage
payment as each payment comes
due during the period that an
interest rate buydown plan is in
effect.
buydown mortgage
A temporary buydown is a
mortgage on which an initial
lump sum payment is made by any
party to reduce a borrower’s
monthly payments during the
first few years of a mortgage. A
permanent buydown reduces the
interest rate over the entire
life of a mortgage. |
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C |
call option
A provision in the mortgage that
gives the mortgagee (the lender)
the right to call the mortgage
due and payable at the end of a
specified period for whatever
reason.
cap
A provision of an
adjustable-rate mortgage (ARM)
that limits how much the
interest rate or mortgage
payments may increase or
decrease. See lifetime payment
cap, lifetime rate cap, periodic
payment cap, and periodic rate
cap.
capital
(1) Money used to create income,
either as an investment in a
business or an income property.
(2) The money or property
comprising the wealth owned or
used by a person or business
enterprise. (3) The accumulated
wealth of a person or business.
(4) The net worth of a business
represented by the amount by
which its assets exceed
liabilities.
capital expenditure
The cost of an improvement made
to extend the useful life of a
property or to add to its value.
capital improvement
Any structure or component
erected as a permanent
improvement to real property
that adds to its value and
useful life.
cash-out refinance
A refinance transaction in which
the amount of money received
from the new loan exceeds the
total of the money needed to
repay the existing first
mortgage, closing costs, points,
and the amount required to
satisfy any outstanding
subordinate mortgage liens. In
other words, a refinance
transaction in which the
borrower receives additional
cash that can be used for any
purpose.
certificate of deposit
A document written by a bank or
other financial institution that
is evidence of a deposit, with
the issuer's promise to return
the deposit plus earnings at a
specified interest rate within a
specified time period. See
adjustable rate mortgage (ARM).
certificate of deposit index
An index that is used to
determine interest rate changes
for certain adjustable-rate
mortgage (ARM) plans. It
represents the weekly average of
secondary market interest rates
on six-month negotiable
certificates of deposit. See
adjustable-rate mortgage.
Certificate of Eligibility
A document issued by the federal
government certifying a
veteran's eligibility for a
Department of Veterans Affairs
(VA) mortgage.
Certificate of Reasonable
Value (CRV)
A document issued by the
Department of Veterans Affairs
(VA) that establishes the
maximum value and loan amount
for a VA mortgage.
certificate of title
A statement provided by an
abstract company, title company,
or attorney stating that the
title to real estate is legally
held by the current owner.
chain of title
The history of all of the
documents that transfer title to
a parcel of real property,
starting with the earliest
existing document and ending
with the most recent.
change frequency
The frequency (in months) of
payment and/or interest rate
changes in an adjustable-rate
mortgage (ARM).
chattel
Another name for personal
property.
clear title
A title that is free of liens or
legal questions as to ownership
of the property.
closing
A meeting at which a sale of a
property is finalized by the
buyer signing the mortgage
documents and paying closing
costs. Also called "settlement."
At this meeting, ownership of
the property is transferred from
the seller to the buyer.
closing cost item
A fee or amount that a home
buyer must pay at closing for a
single service, tax, or product.
Closing costs are made up of
individual closing cost items
such as origination fees and
attorney's fees. Many closing
cost items are included as
numbered items on the HUD-1
statement.
closing costs
Expenses (over and above the
price of the property) incurred
by buyers and sellers in
transferring ownership of a
property. Closing costs normally
include an origination fee, an
attorney's fee, taxes, an amount
placed in escrow, and charges
for obtaining title insurance
and a survey. Closing costs
percentage will vary according
to the area of the country;
lenders or Realtors® often
provide estimates of closing
costs to prospective homebuyers.
closing statement
See HUD-1 statement.
cloud on title
Any conditions revealed by a
title search that adversely
affect the title to real estate.
Usually clouds on title cannot
be removed except by a quitclaim
deed, release, or court action.
coinsurance
A sharing of insurance risk
between the insurer and the
insured. Coinsurance depends on
the relationship between the
amount of the policy and a
specified percentage of the
actual value of the property
insured at the time of the loss.
coinsurance clause
A provision in a hazard
insurance policy that states the
amount of coverage that must be
maintained -- as a percentage of
the total value of the property
-- for the insured to collect
the full amount of a loss.
collateral
An asset (such as a car or a
home) that guarantees the
repayment of a loan. The
borrower risks losing the asset
if the loan is not repaid
according to the terms of the
loan contract.
collection
The efforts used to bring a
delinquent mortgage current and
to file the necessary notices to
proceed with foreclosure when
necessary.
co-maker
A person who signs a promissory
note along with the borrower. A
co-maker's signature guarantees
that the loan will be repaid,
because the borrower and the
co-maker are equally responsible
for the repayment. See endorser.
commission
The fee charged by a broker or
agent for negotiating a real
estate or loan transaction. A
commission is generally a
percentage of the price of the
property or loan.
commitment letter
A formal offer by a lender
stating the terms under which it
agrees to lend money to a home
buyer. Also known as a "loan
commitment."
common area assessments
Levies against individual unit
owners in a condominium or
planned unit development (PUD)
project for additional capital
to defray homeowners'
association costs and expenses
and to repair, replace,
maintain, improve, or operate
the common areas of the project.
common areas
Those portions of a building,
land, and amenities owned (or
managed) by a planned unit
development (PUD) or condominium
project's homeowners'
association (or a cooperative
project's cooperative
corporation) that are used by
all of the unit owners, who
share in the common expenses of
their operation and maintenance.
Common areas include swimming
pools, tennis courts, and other
recreational facilities, as well
as common corridors of
buildings, parking areas, means
of ingress and egress, etc.
common law
An unwritten body of law based
on general custom in England and
used to an extent in the United
States.
Community Land Trust Mortgage
Option
An alternative financing option
that enables low- and
moderate-income home buyers to
purchase housing that has been
improved by a nonprofit
Community Land Trust and to
lease the land on which the
property stands.
community property
In some western and southwestern
states, a form of ownership
under which property acquired
during a marriage is presumed to
be owned jointly unless acquired
as separate property of either
spouse.
Community Seconds®
An alternative financing option
for low- and moderate-income
households under which an
investor purchases a first
mortgage that has a subsidized
second mortgage behind it. The
second mortgage may be issued by
a state, county, or local
housing agency, foundation, or
nonprofit organization. Payment
on the second mortgage is often
deferred and carries a very low
interest rate (or no interest
rate at all). Part of the debt
may be forgiven incrementally
for each year the buyer remains
in the home.
comparables
An abbreviation for "comparable
properties"; used for
comparative purposes in the
appraisal process. Comparables
are properties like the property
under consideration; they have
reasonably the same size,
location, and amenities and have
recently been sold. Comparables
help the appraiser determine the
approximate fair market value of
the subject property.
compound interest
Interest paid on the original
principal balance and on the
accrued and unpaid interest.
condemnation
The determination that a
building is not fit for use or
is dangerous and must be
destroyed; the taking of private
property for a public purpose
through an exercise of the right
of eminent domain.
condominium
A real estate project in which
each unit owner has title to a
unit in a building, an undivided
interest in the common areas of
the project, and sometimes the
exclusive use of certain limited
common areas.
condominium conversion
Changing the ownership of an
existing building (usually a
rental project) to the
condominium form of ownership.
condominium hotel
A condominium project that has
rental or registration desks,
short-term occupancy, food and
telephone services, and daily
cleaning services and that is
operated as a commercial hotel
even though the units are
individually owned.
construction loan
A short-term, interim loan for
financing the cost of
construction. The lender makes
payments to the builder at
periodic intervals as the work
progresses.
contingency
A condition that must be met
before a contract is legally
binding. For example, home
purchasers often include a
contingency that specifies that
the contract is not binding
until the purchaser obtains a
satisfactory home inspection
report from a qualified home
inspector.
contract
An oral or written agreement to
do or not to do a certain thing.
conventional mortgage
A mortgage that is not insured
or guaranteed by the federal
government. Contrast with
government mortgage.
convertibility clause
A provision in some
adjustable-rate mortgages (ARMs)
that allows the borrower to
change the ARM to a fixed-rate
mortgage at specified timeframes
after loan origination.
convertible ARM
An adjustable-rate mortgage
(ARM) that can be converted to a
fixed-rate mortgage under
specified conditions.
cooperative (co-op)
A type of multiple ownership in
which the residents of a
multiunit housing complex own
shares in the cooperative
corporation that owns the
property, giving each resident
the right to occupy a specific
apartment or unit.
cooperative corporation
A business trust entity that
holds title to a cooperative
project and grants occupancy
rights to particular apartments
or units to shareholders through
proprietary leases or similar
arrangements.
cooperative mortgages
Mortgages related to a
cooperative project. This
usually refers to the
multifamily mortgage covering
the entire project but
occasionally describes the share
loans on the individual units.
cooperative project
A residential or mixed-use
building wherein a corporation
or trust holds title to the
property and sells shares of
stock representing the value of
a single apartment unit to
individuals who, in turn,
receive a proprietary lease as
evidence of title.
corporate relocation
Arrangements under which an
employer moves an employee to
another area as part of the
employer's normal course of
business or under which it
transfers a substantial part or
all of its operations and
employees to another area
because it is relocating its
headquarters or expanding its
office capacity.
cost of funds index (COFI)
An index that is used to
determine interest rate changes
for certain adjustable-rate
mortgage (ARM) plans. It
represents the weighted-average
cost of savings, borrowings, and
advances of the 11th District
members of theFederal Home Loan
Bank of San Francisco. See
adjustable-rate mortgage (ARM).
covenant
A clause in a mortgage that
obligates or restricts the
borrower and that, if violated,
can result in foreclosure.
credit
An agreement in which a borrower
receives something of value in
exchange for a promise to repay
the lender at a later date.
credit history
A record of an individual's open
and fully repaid debts. A credit
history helps a lender to
determine whether a potential
borrower has a history of
repaying debts in a timely
manner.
credit life insurance
A type of insurance often bought
by mortgagors because it will
pay off the mortgage debt if the
mortgagor dies while the policy
is in force.
creditor
A person to whom money is owed.
credit report
A report of an individual's
credit history prepared by a
credit bureau and used by a
lender in determining a loan
applicant's creditworthiness.
credit reporting agency (or
bureau)
An organization that prepares
reports that are used by lenders
to determine a potential
borrower's credit history. The
agency obtains data for these
reports from a credit repository
as well as from other sources.
credit repository
An organization that gathers,
records, updates, and stores
financial and public records
information about the payment
records of individuals who are
being considered for credit. |
|
D |
debt
An amount owed to another. See
installment loan and revolving
liability.
deed
The legal document conveying
title to a property.
deed-in-lieu
A deed given by a mortgagor to
the mortgagee to satisfy a debt
and avoid foreclosure. Also
called a "voluntary conveyance."
deed of trust
The document used in some states
instead of a mortgage; title is
conveyed to a trustee.
default
Failure to make mortgage
payments on a timely basis or to
comply with other requirements
of a mortgage.
delinquency
Failure to make mortgage
payments when mortgage payments
are due.
deposit
A sum of money given to bind the
sale of real estate, or a sum of
money given to ensure payment or
an advance of funds in the
processing of a loan. See
earnest money deposit.
depreciation
A decline in the value of
property; the opposite of
appreciation.
discount points
See point.
dower
The rights of a widow in the
property of her husband at his
death.
down payment
The part of the purchase price
of a property that the buyer
pays in cash and does not
finance with a mortgage.
due-on-sale provision
A provision in a mortgage that
allows the lender to demand
repayment in full if the
borrower sells the property that
serves as security for the
mortgage.
due-on-transfer provision
This terminology is usually used
for second mortgages. See
due-on-sale provision. |
|
E |
earnest money deposit
A deposit made by the potential
home buyer to show that he or
she is serious about buying the
house.
easement
A right of way giving persons
other than the owner access to
or over a property.
effective age
An appraiser’s estimate of the
physical condition of a
building. The actual age of a
building may be shorter or
longer than its effective age.
effective gross income
Normal annual income including
overtime that is regular or
guaranteed. The income may be
from more than one source.
Salary is generally the
principal source, but other
income may qualify if it is
significant and stable.
eminent domain
The right of a government to
take private property for public
use upon payment of its fair
market value. Eminent domain is
the basis for condemnation
proceedings.
Employer-assisted housing
A special housing initiative
that offers several different
ways for employers to work with
local lenders to develop plans
to assist their employees in
purchasing homes.
encroachment
An improvement that intrudes
illegally on another’s property.
encumbrance
Anything that affects or limits
the fee simple title to a
property, such as mortgages,
leases, easements, or
restrictions.
endorser
A person who signs ownership
interest over to another party.
Contrast with co-maker.
Equal Credit Opportunity Act
(ECOA)
A federal law that requires
lenders and other creditors to
make credit equally available
without discrimination based on
race, color, religion, national
origin, age, sex, marital
status, or receipt of income
from public assistance programs.
equity
A homeowner's financial interest
in a property. Equity is the
difference between the fair
market value of the property and
the amount still owed on its
mortgage.
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.
escrow account
The account in which a mortgage
servicer holds the borrower’s
escrow payments prior to paying
property expenses.
escrow analysis
The periodic examination of
escrow accounts to determine if
current monthly deposits will
provide sufficient funds to pay
taxes, insurance, and other
bills when due.
escrow collections
Funds collected by the servicer
and set aside in an escrow
account to pay the borrower’s
property taxes, mortgage
insurance, and hazard insurance.
escrow disbursements
The use of escrow funds to pay
real estate taxes, hazard
insurance, mortgage insurance,
and other property expenses as
they become due.
escrow payment
The portion of a mortgagor’s
monthly payment that is held by
the servicer to pay for taxes,
hazard insurance, mortgage
insurance, lease payments, and
other items as they become due.
Known as "impounds" or
"reserves" in some states.
estate
The ownership interest of an
individual in real property. The
sum total of all the real
property and personal property
owned by an individual at time
of death.
eviction
The lawful expulsion of an
occupant from real property.
examination of title
The report on the title of a
property from the public records
or an abstract of the title.
exclusive listing
A written contract that gives a
licensed real estate agent the
exclusive right to sell a
property for a specified time,
but reserving the owner’s right
to sell the property alone
without the payment of a
commission.
executor
A person named in a will to
administer an estate. The court
will appoint an administrator if
no executor is named.
"Executrix" is the feminine
form. |
|
F |
Fair Credit Reporting Act
A consumer protection law that
regulates the disclosure of
consumer credit reports by
consumer/credit reporting
agencies and establishes
procedures for correcting
mistakes on one's credit record.
fair market value
The highest price that a buyer,
willing but not compelled to
buy, would pay, and the lowest a
seller, willing but not
compelled to sell, would accept.
Fannie Mae
A New York Stock Exchange
company and the largest non-bank
financial services company in
the world. It operates pursuant
to a federal charter and is the
nation's largest source of
financing for home mortgages.
Fannie Mae Properties
Fannie Mae owns, manages, and
has available for sale,
single-family detached homes,
two- to four-unit properties,
condominiums, and townhouses in
a variety of neighborhoods. The
number, type, and sales price
may vary substantially. The
homes vary in age and may
require repairs. Fannie Mae
homes are sold through local
real estate brokers whose
contact information is provided
in the Fannie Mae Properties for
Sale search results on
homepath.com.
Fannie Mae's Community Home
Buyer's ProgramSM
An income-based community
lending model, under which
mortgage insurers and Fannie Mae
offer flexible underwriting
guidelines to increase a low- or
moderate-income family's buying
power and to decrease the total
amount of cash needed to
purchase a home. Borrowers who
participate in this model are
required to attend pre-purchase
home-buyer education sessions.
Fannie 97®
A financing option for a
fixed-rate mortgage that offers
home buyers a 3 percent down
payment loan with a term between
15 and 30 years. The mortgage
features a loan-to-value (LTV)
percentage of 97 percent, and is
designed to expand homeownership
opportunities for people with
modest incomes. Borrowers must
take a pre-purchase home-buyer
education session to qualify for
a Fannie 97 mortgage.
Federal Housing
Administration (FHA)
An agency of the U.S. Department
of Housing and Urban Development
(HUD). Its main activity is the
insuring of residential mortgage
loans made by private lenders.
The FHA sets standards for
construction and underwriting
but does not lend money or plan
or construct housing.
fee simple
The greatest possible interest a
person can have in real estate.
fee simple estate
An unconditional, unlimited
estate of inheritance that
represents the greatest estate
and most extensive interest in
land that can be enjoyed. It is
of perpetual duration. When the
real estate is in a condominium
project, the unit owner is the
exclusive owner only of the air
space within his or her portion
of the building (the unit) and
is an owner in common with
respect to the land and other
common portions of the property.
FHA coinsured mortgage
A mortgage (under FHA Section
244) for which the Federal
Housing Administration (FHA) and
the originating lender share the
risk of loss in the event of the
mortgagor's default.
FHA mortgage
A mortgage that is insured by
the Federal Housing
Administration (FHA). Also known
as a government mortgage.
finder's fee
A fee or commission paid to a
mortgage broker for finding a
mortgage loan for a prospective
borrower.
firm commitment
A lender’s agreement to make a
loan to a specific borrower on a
specific property.
first mortgage
A mortgage that is the primary
lien against a property.
fixed installment
The monthly payment due on a
mortgage loan. The fixed
installment includes payment of
both principal and interest.
fixed-rate mortgage (FRM)
A mortgage in which the interest
rate does not change during the
entire term of the loan.
fixture
Personal property that becomes
real property when attached in a
permanent manner to real estate.
flood insurance
Insurance that compensates for
physical property damage
resulting from flooding. It is
required for properties located
in federally designated flood
areas.
foreclosure
The legal process by which a
borrower in default under a
mortgage is deprived of his or
her interest in the mortgaged
property. This usually involves
a forced sale of the property at
public auction with the proceeds
of the sale being applied to the
mortgage debt.
forfeiture
The loss of money, property,
rights, or privileges due to a
breach of legal obligation.
401(k)/403(b)
An employer-sponsored investment
plan that allows individuals to
set aside tax-deferred income
for retirement or emergency
purposes. 401(k) plans are
provided by employers that are
private corporations. 403(b)
plans are provided by employers
that are not for profit
organizations.
401(k)/403(b) loan
Some administrators of
401(k)/403(b) plans allow for
loans against the monies you
have accumulated in these plans
-- monies must be repaid to
avoid serious penalty charges.
fully amortized ARM
An adjustable-rate mortgage
(ARM) with a monthly payment
that is sufficient to amortize
the remaining balance, at the
interest accrual rate, over the
amortization term |
|
G |
government mortgage
A mortgage that is insured by
the Federal Housing
Administration (FHA) or
guaranteed by the Department of
Veterans Affairs (VA) or the
Rural Housing Service (RHS).
Contrast with conventional
mortage.
Government National Mortgage
Association
A government-owned corporation
within the U.S. Department of
Housing and Urban Development
(HUD). Created by Congress on
September 1, 1968, GNMA assumed
responsibility for the special
assistance loan program formerly
administered by Fannie Mae.
Popularly known as Ginnie Mae.
grantee
The person to whom an interest
in real property is conveyed.
grantor
The person conveying an interest
in real property.
ground rent
The amount of money that is paid
for the use of land when title
to a property is held as a
leasehold estate rather than as
a fee simple estate.
group home
A single-family residential
structure designed or adapted
for occupancy by unrelated
developmentally disabled
persons. The structure provides
long-term housing and support
services that are residential in
nature.
growing-equity mortgage (GEM)
A fixed-rate mortgage that
provides scheduled payment
increases over an established
period of time, with the
increased amount of the monthly
payment applied directly toward
reducing the remaining balance
of the mortgage.
guarantee mortgage
A mortgage that is guaranteed by
a third party.
guaranteed loan
Also known as a government
mortgage. |
|
H |
hazard insurance
Insurance coverage that
compensates for physical damage
to a property from fire, wind,
vandalism, or other hazards.
Home Equity Conversion
Mortgage (HECM)
A special type of mortgage that
enables older home owners to
convert the equity they have in
their homes into cash, using a
variety of payment options to
address their specific financial
needs. Unlike traditional home
equity loans, a borrower does
not qualify on the basis of
income but on the value of his
or her home. In addition, the
loan does not have to be repaid
until the borrower no longer
occupies the property. Sometimes
called a reverse mortgage.
home equity line of credit
A mortgage loan, which is
usually in a subordinate
position, that allows the
borrower to obtain multiple
advances of the loan proceeds at
his or her own discretion, up to
an amount that represents a
specified percentage of the
borrower's equity in a property.
home inspection
A thorough inspection that
evaluates the structural and
mechanical condition of a
property. A satisfactory home
inspection is often included as
a contingency by the purchaser.
Contrast with appraisal.
HomeKeeperSM
Fannie Mae's adjustable-rate
conventional reverse mortgage,
which allows older homeowners to
borrow against the value of
their homes and receive the
proceeds according to the
payment option they select. The
amount available is based on the
number of borrowers and their
ages and the adjusted property
value. Anyone 62 years or older
who either owns his or her own
home free and clear or has very
low mortgage debt is eligible.
homeowners' association
A nonprofit association that
manages the common areas of a
planned unit development (PUD)
or condominium project. In a
condominium project, it has no
ownership interest in the common
elements. In a PUD project, it
holds title to the common
elements.
homeowner's insurance
An insurance policy that
combines personal liability
insurance and hazard insurance
coverage for a dwelling and its
contents.
homeowner's warranty (HOW)
A type of insurance that covers
repairs to specified parts of a
house for a specific period of
time. It is provided by the
builder or property seller as a
condition of the sale.
HomeStyle® Mortgage Loan
A mortgage that enables eligible
borrowers to obtain financing to
remodel, repair, and upgrade
their existing homes or homes
that they are purchasing. See
also HomeStyle Standard
Mortgage, HomeStyle Remodeler,
HomeStyle Community Mortgage and
HomeStyle Consumer Energy Loan.
housing expense ratio
The percentage of gross monthly
income that goes toward paying
housing expenses.
HUD median income
Median family income for a
particular county or
metropolitan statistical area (MSA),
as estimated by the Department
of Housing and Urban Development
(HUD).
HUD-1 statement
A document that provides an
itemized listing of the funds
that are payable at closing.
Items that appear on the
statement include real estate
commissions, loan fees, points,
and initial escrow amounts. Each
item on the statement is
represented by a separate number
within a standardized numbering
system. The totals at the bottom
of the HUD-1 statement define
the seller's net proceeds and
the buyer's net payment at
closing. The blank form for the
statement is published by the
Department of Housing and Urban
Development (HUD). The HUD-1
statement is also known as the
"closing statement" or
"settlement sheet."
|
|
I |
income property
Real estate developed or
improved to produce income.
index
A number used to compute the
interest rate for an
adjustable-rate mortgage (ARM).
The index is generally a
published number or percentage,
such as the average interest
rate or yield on Treasury bills.
A margin is added to the index
to determine the interest rate
that will be charged on the ARM.
This interest rate is subject to
any caps that are associated
with the mortgage.
in-file credit report
An objective account, normally
computer-generated, of credit
and legal information obtained
from a credit repository.
inflation
An increase in the amount of
money or credit available in
relation to the amount of goods
or services available, which
causes an increase in the
general price level of goods and
services. Over time, inflation
reduces the purchasing power of
a dollar, making it worth less.
initial interest rate
The original interest rate of
the mortgage at the time of
closing. This rate changes for
an adjustable-rate mortgage
(ARM). Sometimes known as "start
rate" or "teaser."
installment
The regular periodic payment
that a borrower agrees to make
to a lender.
installment loan
Borrowed money that is repaid in
equal payments, known as
installments. A furniture loan
is often paid for as an
installment loan.
insurable title
A property title that a title
insurance company agrees to
insure against defects and
disputes.
insurance
A contract that provides
compensation for specific losses
in exchange for a periodic
payment. An individual contract
is known as an insurance policy,
and the periodic payment is
known as an insurance premium.
insurance binder
A document that states that
insurance is temporarily in
effect. Because the coverage
will expire by a specified date,
a permanent policy must be
obtained before the expiration
date.
insured mortgage
A mortgage that is protected by
the Federal Housing
Administration (FHA) or by
private mortgage insurance (MI).
If the borrower defaults on the
loan, the insurer must pay the
lender the lesser of the loss
incurred or the insured amount.
interest
The fee charged for borrowing
money.
interest accrual rate
The percentage rate at which
interest accrues on the
mortgage. In most cases, it is
also the rate used to calculate
the monthly payments, although
it is not used for an
adjustable-rate mortgage (ARM)
with payment change limitations.
interest rate
The rate of interest in effect
for the monthly payment due.
interest rate buy down plan
An arrangement wherein the
property seller (or any other
party) deposits money to an
account so that it can be
released each month to reduce
the mortgagor's monthly payments
during the early years of a
mortgage. During the specified
period, the mortgagor's
effective interest rate is
"bought down" below the actual
interest rate.
interest rate ceiling
For an adjustable-rate mortgage
(ARM), the maximum interest
rate, as specified in the
mortgage note.
interest rate floor
For an adjustable-rate mortgage
(ARM), the minimum interest
rate, as specified in the
mortgage note.
investment property
A property that is not occupied
by the owner.
IRA (Individual Retirement
Account)
A retirement account that allows
individuals to make tax-deferred
contributions to a personal
retirement fund. Individuals can
place IRA funds in bank accounts
or in other forms of investment
such as stocks, bonds, or mutual
funds.
|
|
J |
joint tenancy
A form of co-ownership that
gives each tenant equal interest
and equal rights in the
property, including the right of
survivorship.
judgment
A decision made by a court of
law. In judgments that require
the repayment of a debt, the
court may place a lien against
the debtor's real property as
collateral for the judgment's
creditor.
judgment lien
A lien on the property of a
debtor resulting from the decree
of a court.
judicial foreclosure
A type of foreclosure proceeding
used in some states that is
handled as a civil lawsuit and
conducted entirely under the
auspices of a court.
jumbo loan
A loan that exceeds Fannie Mae’s
mortgage amount limits. Also
called a nonconforming loan. |
|
L |
late charge
The penalty a borrower must pay
when a payment is made a stated
number of days (usually 15)
after the due date.
lease
A written agreement between the
property owner and a tenant that
stipulates the conditions under
which the tenant may possess the
real estate for a specified
period of time and rent.
leasehold estate
A way of holding title to a
property wherein the mortgagor
does not actually own the
property but rather has a
recorded long-term lease on it.
lease-purchase mortgage loan
An alternative financing option
that allows low- and
moderate-income home buyers to
lease a home from a nonprofit
organization with an option to
buy. Each month's rent payment
consists of principal, interest,
taxes and insurance (PITI)
payments on the first mortgage
plus an extra amount that is
earmarked for deposit to a
savings account in which money
for a downpayment will
accumulate.
legal description
A property description,
recognized by law, that is
sufficient to locate and
identify the property without
oral testimony.
liabilities
A person's financial
obligations. Liabilities include
long-term and short-term debt,
as well as any other amounts
that are owed to others.
liability insurance
Insurance coverage that offers
protection against claims
alleging that a property owner's
negligence or inappropriate
action resulted in bodily injury
or property damage to another
party.
lien
A legal claim against a property
that must be paid off when the
property is sold.
lifetime payment cap
For an adjustable-rate mortgage
(ARM), a limit on the amount
that payments can increase or
decrease over the life of the
mortgage. See cap.
lifetime rate cap
For an adjustable-rate mortgage
(ARM), a limit on the amount
that the interest rate can
increase or decrease over the
life of the loan. See cap,
interest rate ceiling and
interest rate floor.
line of credit
An agreement by a commercial
bank or other financial
institution to extend credit up
to a certain amount for a
certain time to a specified
borrower. See home equity line
of credit.
liquid asset
A cash asset or an asset that is
easily converted into cash.
loan
A sum of borrowed money
(principal) that is generally
repaid with interest.
loan commitment
See commitment letter.
loan origination
The process by which a mortgage
lender brings into existence a
mortgage secured by real
property.
loan-to-value (LTV)
percentage
The relationship between the
principal balance of the
mortgage and the appraised value
(or sales price if it is lower)
of the property. For example, a
$100,000 home with an $80,000
mortgage has a LTV percentage of
80 percent.
lock-in
A written agreement in which the
lender guarantees a specified
interest rate if a mortgage goes
to closing within a set period
of time. The lock-in also
usually specifies the number of
points to be paid at closing.
lock-in period
The time period during which the
lender has guaranteed an
interest rate to a borrower. See
lock-in. |
|
M |
margin
For an adjustable-rate mortgage
(ARM), the amount that is added
to the index to establish the
interest rate on each adjustment
date, subject to any limitations
on the interest rate change.
master association
A homeowners' association in a
large condominium or planned
unit development (PUD) project
that is made up of
representatives from
associations covering specific
areas within the project. In
effect, it is a "second-level"
association that handles matters
affecting the entire
development, while the
"first-level" associations
handle matters affecting their
particular portions of the
project.
maturity
The date on which the principal
balance of a loan, bond, or
other financial instrument
becomes due and payable.
maximum financing
A mortgage amount that is within
5 percent of the highest
loan-to-value (LTV) percentage
allowed for a specific product.
Thus, maximum financing on a
fixed-rate mortgage would be 90
percent or higher, because 95
percent is the maximum allowable
LTV percentage for that product.
merged credit report
A credit report that contains
information from three credit
repositories. When the report is
created, the information is
compared for duplicate entries.
Any duplicates are combined to
provide a summary of a your
credit.
modification
The act of changing any of the
terms of the mortgage.
money market account
A savings account that provides
bank depositors with many of the
advantages of a money market
fund. Certain regulatory
restrictions apply to the
withdrawal of funds from a money
market account.
money market fund
A mutual fund that allows
individuals to participate in
managed investments in
short-term debt securities, such
as certificates of deposit and
Treasury bills.
monthly fixed installment
That portion of the total
monthly payment that is applied
toward principal and interest.
When a mortgage negatively
amortizes, the monthly fixed
installment does not include any
amount for principal reduction.
monthly payment mortgage
A mortgage that requires
payments to reduce the debt once
a month.
mortgage
A legal document that pledges a
property to the lender as
security for payment of a debt.
mortgage banker
A company that originates
mortgages exclusively for resale
in the secondary mortgage
market.
mortgage broker
An individual or company that
brings borrowers and lenders
together for the purpose of loan
origination. Mortgage brokers
typically require a fee or a
commission for their services.
mortgagee
The lender in a mortgage
agreement.
mortgage insurance
A contract that insures the
lender against loss caused by a
mortgagor's default on a
government mortgage or
conventional mortgage. Mortgage
insurance can be issued by a
private company or by a
government agency such as the
Federal Housing Administration
(FHA). Depending on the type of
mortgage insurance, the
insurance may cover a percentage
of or virtually all of the
mortgage loan. See private
mortgage insurance.
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 insurance
A type of term life insurance
often bought by mortgagors. The
amount of coverage decreases as
the principal balance declines.
In the event that the borrower
dies while the policy is in
force, the debt is automatically
satisfied by insurance proceeds.
mortgagor
The borrower in a mortgage
agreement.
multi-dwelling units
Properties that provide separate
housing units for more than one
family, although they secure
only a single mortgage.
multifamily mortgage
A residential mortgage on a
dwelling that is designed to
house more than four families,
such as a high-rise apartment
complex.
multifamily properties
Fannie Mae provides financing
for multifamily (buildings with
five or more units) rental
properties through a nationwide
network of mortgage lenders. |
|
N |
negative amortization
A gradual increase in mortgage
debt that occurs when the
monthly payment is not large
enough to cover the entire
principal and interest due. The
amount of the shortfall is added
to the remaining balance to
create "negative" amortization.
net cash flow
The income that remains for an
investment property after the
monthly operating income is
reduced by the monthly housing
expense, which includes
principal, interest, taxes, and
insurance (PITI) for the
mortgage, homeowners'
association dues, leasehold
payments, and subordinate
financing payments.
net worth
The value of all of a person's
assets, including cash, minus
all liabilities.
no cash-out refinance
A refinance transaction in which
the new mortgage amount is
limited to the sum of the
remaining balance of the
existing first mortgage, closing
costs (including prepaid items),
points, the amount required to
satisfy any mortgage liens that
are more than one year old (if
the borrower chooses to satisfy
them), and other funds for the
borrower's use (as long as the
amount does not exceed 1 percent
of the principal amount of the
new mortgage).
nonliquid asset
An asset that cannot easily be
converted into cash.
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
A fee paid to a lender for
processing a loan application.
The origination fee is stated in
the form of points. One point is
1 percent of the mortgage
amount.
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.
payment change date
The date when a new monthly
payment amount takes effect on
an adjustable-rate mortgage
(ARM) or a graduated-payment
adjustable-rate mortgage (GPARM).
Generally, the payment change
date occurs in the month
immediately after the adjustment
date.
periodic payment cap
For an adjustable-rate mortgage
(ARM), a limit on the amount
that payments can increase or
decrease during any one
adjustment period.
periodic rate cap
For an adjustable-rate mortgage
(ARM), 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
See principal, interest, taxes
and insurance (PITI) below.
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
See PUD below.
point
A one-time charge by the lender
for originating a loan. 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.
prearranged refinancing
agreement
A formal or informal arrangement
between a lender and a borrower
wherein the lender agrees to
offer special terms (such as a
reduction in the costs) for a
future refinancing of a mortgage
being originated as an
inducement for the borrower to
enter into the original mortgage
transaction.
preforeclosure sale
A procedure in which the
investor allows a mortgagor to
avoid foreclosure by selling the
property for less than the
amount that is owed to the
investor.
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
The process of determining how
much money a prospective home
buyer will be eligible to borrow
before he or she applies for a
loan.
prime rate
The interest rate that banks
charge to their preferred
customers. Changes in the prime
rate influence changes in other
rates, including mortgage
interest rates.
principal
The amount borrowed or remaining
unpaid. The part of the monthly
payment that reduces the
remaining balance of a mortgage.
More
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. 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.
PUD (Planned Unit
Development)
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 and sale 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. They
consist of two separate
calculations: a housing expense
as a percent of income ratio and
total debt obligations as a
percent of income ratio.
quitclaim deed
A deed that transfers without
warranty whatever interest or
title a grantor may have at the
time the conveyance is made.
|
|
R |
radon
A radioactive gas found in some
homes that in sufficient
concentrations can cause health
problems.
rate-improvement mortgage
A fixed-rate mortgage that
includes a provision that gives
the borrower a one-time option
to reduce the interest rate
(without refinancing) during the
early years of the mortgage
term.
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. See
lock-in.
real estate agent
A person licensed to negotiate
and transact the sale of real
estate on behalf of the property
owner.
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 broker or an
associate who holds active
membership in a local real
estate board that is affiliated
with the National Association of
Realtors.
recission
The cancellation or annulment of
a transaction or contract by the
operation of a law or by mutual
consent. Borrowers usually have
the option to cancel a refinance
transaction within three
business days after it has
closed.
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.
rehabilitation mortgage
A mortgage created to cover the
costs of repairing, improving,
and sometimes acquiring an
existing property.
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.
rent with option to buy
See lease-purchase mortgage
loan.
repayment plan
An arrangement made to repay
delinquent installments or
advances. Lenders' formal
repayment plans are called
"relief provisions."
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 liability
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.
Rural Housing Service (RHS)
An agency within the Department
of Agriculture, which operates
principally under the
Consolidated Farm and Rural
Development Act of 1921 and
Title V of the Housing Act of
1949. This agency provides
financing to farmers and other
qualified borrowers buying
property in rural areas who are
unable to obtain loans
elsewhere. Funds are borrowed
from the U.S. Treasury.
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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 mortgage market
The buying and selling of
existing mortgages.
secured loan
A loan that is backed by
collateral.
security
The property that will be
pledged as collateral for a
loan.
seller take-back
An agreement in which the owner
of a property provides
financing, often in combination
with an assumable mortgage. See
owner financing.
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
See closing.
settlement sheet
See HUD-1 statement.
single-family properties
One- to four-unit properties
including detached homes,
townhomes, condominiums, and
cooperatives.
special deposit account
An account that is established
for rehabilitation mortgages to
hold the funds needed for the
rehabilitation work so they can
be disbursed from time to time
as particular portions of the
work are completed.
standard payment calculation
The method used to determine the
monthly payment required to
repay the remaining balance of a
mortgage in substantially equal
installments over the remaining
term of the mortgage at the
current interest rate.
step-rate mortgage
A mortgage that allows for the
interest rate to increase
according to a specified
schedule (i.e., seven years),
resulting in increased payments
as well. At the end of the
specified period, the rate and
payments will remain constant
for the remainder of the loan.
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.
subsidized second mortgage
An alternative financing option
known as the Community Seconds®
mortgage for low- and
moderate-income households. An
investor purchases a first
mortgage that has a subsidized
second mortgage behind it. The
second mortgage may be issued by
a state, county, or local
housing agency, foundation, or
nonprofit corporation. Payment
on the second mortgage is often
deferred and carries a very low
interest rate (or no interest
rate). Part of the debt may be
forgiven incrementally for each
year the buyer remains in the
home.
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. |
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T |
tenancy by the entirety
A type of joint tenancy of
property that provides right of
survivorship and is available
only to a husband and wife.
Contrast with tenancy in common.
tenancy in common
A type of joint tenancy in a
property without right of
survivorship. Contrast with
tenancy by the entirety and with
joint tenancy.
tenant-stockholder
The obligee for a cooperative
share loan, who is both a
stockholder in a cooperative
corporation and a tenant of the
unit under a proprietary lease
or occupancy agreement.
third-party origination
A rocess 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. See mortgage
broker.
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.
total expense ratio
Total obligations as a
percentage of gross monthly
income. The total expense ratio
includes monthly housing
expenses plus other monthly
debts.
trade equity
Equity that results from a
property purchaser giving his or
her existing property (or an
asset other than real estate) as
trade as all or part of the down
payment for the property that is
being purchased.
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. In cases in which an
inter vivos revocable trust is
the borrower, lenders also
consider any transfer of a
beneficial interest in the trust
to be a transfer of ownership.
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. See
adjustable-rate mortgage (ARM).
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.
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U |
underwriting
The process of evaluating a loan
application to determine the
risk involved for the lender.
Underwriting involves an
analysis of the borrower's
creditworthiness and the quality
of the property itself.
unsecured loan
A loan that is not backed by
collateral. |
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V |
VA mortgage
A mortgage that is guaranteed by
the Department of Veterans
Affairs (VA). Also known as a
government mortgage.
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.
Department of Veterans
Affairs (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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W |
what-if analysis
An affordability analysis that
is based on a what-if scenario.
A what-if analysis is useful if
you do not have complete data or
if you want to explore the
effect of various changes to
your income, liabilities, or
available funds or to the
qualifying ratios or down
payment expenses that are used
in the analysis.
what-if scenario
A change in the amounts that is
used as the basis of an
affordability analysis. A
what-if scenario can include
changes to monthly income,
debts, or down payment funds or
to the qualifying ratios or down
payment expenses that are used
in the analysis. You can use a
what-if scenario to explore
different ways to improve your
ability to afford a house.
wraparound mortgage
A mortgage that includes the
remaining balance on an existing
first mortgage plus an
additional amount requested by
the mortgagor. Full payments on
both mortgages are made to the
wraparound mortgagee, who then
forwards the payments on the
first mortgage to the first
mortgagee.
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