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N O P Q R S T U V W X Y Z
- 7/23 and 5/25 Mortgages
- Mortgages with a one time rate adjustment after seven
years and five years respectively.
TOP - 3/1, 5/1, 7/1 and 10/1 ARMs
- Adjustable-rate mortgages in which rate is fixed for
three-year, five-year, seven-year and 10-year periods, respectively, but may
adjust annually after that.
TOP - Acceleration
- The right of the mortgagee (lender) to demand the
immediate repayment of the mortgage loan balance upon the default of the
mortgagor (borrower), or by using the right vested in the Due-on-Sale
Clause.
TOP - Adjustable rate mortgage (ARM)
- Is a mortgage in which the interest rate is adjusted
periodically based on a pre-selected index. Also sometimes known as the
renegotiable rate mortgage, the variable rate mortgage or the Canadian
rollover mortgage.
TOP - Adjusted Basis
- The cost of a property plus the value of any capital
expenditures for improvements to the property minus any depreciation
taken.
TOP - Adjustment Date
- The date that the interest rate changes on an
adjustable-rate mortgage (ARM).
TOP - Adjustment interval
- On an adjustable rate mortgage, the time between
changes in the interest rate and/or monthly payment, typically one, three or
five years depending on the index.
TOP - Adjustment Period
- The period elapsing between adjustment dates for an
adjustable-rate mortgage (ARM).
TOP - Affordability Analysis
- An analysis of a buyers ability to afford the
purchase of a home. Reviews income, liabilities, and available funds, and
considers the type of mortgage you plan to use, the area where you want to
purchase a home, and the closing costs that are likely.
TOP - Amortization
- Means loan payment by equal periodic payment
calculated to pay off the debt at the end of a fixed period, including accrued
interest on the outstanding balance.
TOP - Amortization Term
- The length of time required to amortize the mortgage
loan expressed as a number of months. For example, 360 months is the
amortization term for a 30-year fixed-rate mortgage.
TOP - Annual percentage rate (A.P.R.)
- APR is a measurement of the full cost of a loan
including interest and loan fees expressed as a yearly percentage rate.
Because all lenders apply the same rules in calculating the annual percentage
rate, it provides consumers with a good basis for comparing the cost of
loans.
TOP - Appraisal
- An estimate of the value of property, made by a
qualified professional called an "appraiser".
TOP - Appraised Value
- An opinion of a property's fair market value, based
on an appraiser's knowledge, experience, and analysis of the property.
TOP - Assessment
- A local tax levied against a property for a specific
purpose, such as a sewer or street lights.
TOP - Assignment
- The transfer of a mortgage from one person to
another.
TOP - Assumability
- An assumable mortgage can be transferred from the
seller to the new buyer. Generally requires a credit review of the new
borrower and lenders may charge a fee for the assumption. If a mortgage
contains a due-on-sale clause, it may not be assumed by a new buyer.
TOP - Assumption
- The agreement between buyer and seller where the
buyer takes over the payments on an existing mortgage from the seller.
Assuming a loan can usually save the buyer money since this is an existing
mortgage debt, unlike a new mortgage where closing cost and new, probably
higher, market-rate interest charges will apply.
TOP - Assumption Fee
- The fee paid to a lender (usually by the purchaser of
real property) when an assumption takes place.
TOP - Balloon Mortgage
- A loan which is amortized for a longer period than
the term of the loan. Usually this refers to a thirty-year amortization and a
five year term. At the end of the term of the loan, the remaining outstanding
principal on the loan is due. This final payment is known as a balloon
payment.
TOP - Balloon Payment
- The final lump sum paid at the maturity date of a
balloon mortgage.
TOP - Biweekly Payment Mortgage
- A plan 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 required if the
loan were a standard 30-year fixed-rate mortgage. The result for the borrower
is a substantial savings in interest.
TOP - Blanket Mortgage
- A mortgage covering at least two pieces of real
estate as security for the same mortgage.
TOP - Borrower (Mortgagor)
- One who applies for and receives a loan in the form
of a mortgage with the intention of repaying the loan in full.
TOP - Bridge Loan
- A second trust that is collateralized by the
borrower's present home allowing the proceeds to be used to close on a new
house before the present home is sold. Also known as "swing loan."
TOP - Broker
- An individual in the business of assisting in
arranging funding or negotiating contracts for a client but who does not loan
the money himself. Brokers usually charge a fee or receive a commission for
their services.
TOP - Buy-down
- When the lender and/or the home builder subsidized
the mortgage by lowering the interest rate during the first few years of the
loan. While the payments are initially low, they will increase when the
subsidy expires.
TOP - Cash Flow
- The amount of cash derived over a certain period of
time from an income-producing property. The cash flow should be large enough
to pay the expenses of the income producing property (mortgage payment,
maintenance, utilities, etc.).
TOP - Caps (interest)
- Consumer safeguards which limit the amount the
interest rate on an adjustable rate mortgage which may change per year and/or
the life of the loan.
TOP - Caps (payment)
- Consumer safeguards which limit the amount monthly
payments on an adjustable rate mortgage may change.
TOP - Certificate of Eligibility
- The document given to qualified veterans which
entitles them to VA guaranteed loans for homes, business and mobile homes.
Certificates of eligibility may be obtained by sending form DD-214 (Separation
Paper) to the local VA office with VA form 1880 (request for Certificate of
Eligibility)
TOP - Certificate of Reasonable Value (CRV)
- An appraisal issued by the Veterans Administration
showing the property's current market value
TOP - Certificate of veteran status
- The document given to veterans or reservists who have
served 90 days of continuous active duty (including training time) It may be
obtained by sending DD 214 to the local VA office with form 26-8261a (request
for certificate of veteran status. This document enables veterans to obtain
lower down payments on certain FHA insured loans).
TOP - Change Frequency
- The frequency (in months) of payment and/or interest
rate changes in an adjustable-rate mortgage (ARM).
TOP - Closing
- The meeting between the buyer, seller and lender or
their agents where the property and funds legally change hands, also called
settlement. Closing costs usually include an origination fee, discount points,
appraisal fee, title search and insurance, survey, taxes, deed recording fee,
credit report charge and other costs assessed at settlement. The cost of
closing usually are about 3 percent to 6 percent of the mortgage amount.
TOP - Closing Costs
- These are expenses - over and above the price of the
property- that are incurred by buyers and sellers when transferring ownership
of a property. Closing costs normally include an origination fee, property
taxes, charges for title insurance and escrow costs, appraisal fees, etc.
Closing costs will vary according to the area country and the lenders
used.
TOP - COFI
- Adjustable-rate mortgage with rate that adjusts based
on a cost-of-funds index, often the 11th District Cost of Funds.
TOP - Construction loan
- A short term interim loan to pay for the construction
of buildings or homes. These are usually designed to provide periodic
disbursements to the builder as he or she progresses.
TOP - Consumer Reporting Agency (or Bureau)
- An organization that handles the preparation of
reports used by lenders to determine a potential borrower's credit history.
The agency gets data for these reports from a credit repository and from other
sources.
TOP - Contract sale or deed:
- A contract between purchaser and a seller of real
estate to convey title after certain conditions have been met. It is a form of
installment sale.
TOP - Conventional loan
- A mortgage not insured by FHA or guaranteed by the
VA.
TOP - Conversion Clause
- A provision in an ARM allowing the loan to be
converted to a fixed-rate at some point during the term. Usually conversion is
allowed at the end of the first adjustment period. The conversion feature may
cost extra.
TOP - Credit Report
- A report documenting the credit history and current
status of a borrower's credit standing.
TOP - Credit Risk Score
- A credit risk score is a statistical summary of the
information contained in a consumer's credit report. The most well known type
of credit risk score is the Fair Isaac or FICO score. This form of credit
scoring is a mathematical summary calculation that assigns numerical values to
various pieces of information in the credit report. The overall credit risk
score is highly relative in the credit underwriting process for a mortgage
loan.
TOP - Debt-to-Income Ratio
- The ratio, expressed as a percentage, which results
when a borrower's monthly payment obligation on long-term debts is divided by
his or her gross monthly income. See housing expenses-to-income ratio.
TOP - Deed of trust
- In many states, this document is used in place of a
mortgage to secure the payment of a note.
TOP - Default
- Failure to meet legal obligations in a contract,
specifically, failure to make the monthly payments on a mortgage.
TOP - Deferred interest
- When a mortgage is written with a monthly payment
that is less than required to satisfy the note rate, the unpaid interest is
deferred by adding it to the loan balance. See negative
amortization.
TOP - Delinquency
- Failure to make payments on time. This can lead to
foreclosure.
TOP - Department of Veterans Affairs (VA)
- An independent agency of the federal government which
guarantees long-term, low-or no-down payment mortgages to eligible
veterans.
TOP - Discount Point
- see point
TOP - Down Payment
- Money paid to make up the difference between the
purchase price and the mortgage amount.
TOP - Due-on-Sale-Clause
- A provision in a mortgage or deed of trust that
allows the lender to demand immediate payment of the balance of the mortgage
if the mortgage holder sells the home.
TOP - Earnest Money
- Money given by a buyer to a seller as part of the
purchase price to bind a transaction or assure payment.
TOP - Entitlement
- The VA home loan benefit is called an entitlement
(i.e. entitlement for a VA guaranteed home loan). This is also known as
eligibility.
TOP - Equal Credit Opportunity Act (ECOA)
- Is 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.
TOP - Equity
- The difference between the fair market value and
current indebtedness, also referred to as the owner's interest. The value an
owner has in real estate over and above the obligation against the property.
TOP - Escrow
- An account held by the lender into which the home
buyer pays money for tax or insurance payments. Also earnest deposits held
pending loan closing.
TOP - Escrow Disbursements
- The use of escrow funds to pay real estate taxes,
hazard insurance, mortgage insurance, and other property expenses as they
become due.
TOP - Escrow Payment
- The part 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.
- Fannie Mae
- see Federal National Mortgage
Association.
TOP - Farmers Home Administration (FmHA)
- Provides financing to farmers and other qualified
borrowers who are unable to obtain loans elsewhere.
TOP - Federal Home Loan Bank Board (FHLBB)
- The former name for the regulatory and supervisory
agency for federally chartered savings institutions. Agency is now called
the Office of Thrift Supervision
TOP - Federal Home Loan Mortgage Corporation(FHLMC) also called "Freddie Mac"
- Is a quasi-governmental agency that purchases
conventional mortgage from insured depository institutions and HUD-approved
mortgage bankers.
TOP - Federal Housing Administration (FHA)
- A division of the Department of Housing and Urban
Development. Its main activity is the insuring of residential mortgage loans
made by private lenders. FHA also sets standards for underwriting
mortgages.
TOP - Federal National Mortgage Association (FNMA) also know as "Fannie Mae"
- A tax-paying corporation created by Congress that
purchases and sells conventional residential mortgages as well as those
insured by FHA or guaranteed by VA. This institution, which provides funds for
one in seven mortgages, makes mortgage money more available and more
affordable.
TOP - FHA loan
- A loan insured by the Federal Housing Administration
open to all qualified home purchasers. While there are limits to the size of
FHA loans ($155,250 as of 1/1/96), they are generous enough to handle
moderately-priced homes almost anywhere in the country.
TOP - FHA mortgage insurance
- Requires a fee (up to 2.25 percent of the loan
amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage
insurance requires an annual fee of up to 0.5 percent of the current loan
amount, paid in monthly installments. The lower the down payment, the more
years the fee must be paid.
TOP - FHLMC
- The Federal Home Loan Mortgage Corporation provides a
secondary market for savings and loans by purchasing their conventional loans.
Also known as "Freddie Mac."
TOP - Firm Commitment
- A promise by FHA to insure a mortgage loan for a
specified property and borrower. A promise from a lender to make a mortgage
loan.
TOP - First Mortgage
- The primary lien against a property.">
TOP - Fixed Installment
- The monthly payment due on a mortgage loan including
payment of both principal and interest.
TOP - Fixed Rate Mortgage
- The mortgage interest rate will remain the same on
these mortgages throughout the term of the mortgage for the original
borrower.
TOP - 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.
TOP - FNMA
- The Federal National Mortgage Association is a
secondary mortgage institution which is the largest single holder of home
mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages
from primary lenders. Also known as "Fannie Mae."
TOP - Foreclosure
- A legal process by which the lender or the seller
forces a sale of a mortgaged property because the borrower has not met the
terms of the mortgage. Also known as a repossession of property.
TOP - Freddie Mac
- see Federal Home Loan Mortgage Corporation
TOP - Ginnie Mae
- see Government National Mortgage
Association.
TOP - Government National Mortgage Association (GNMA)
- Also known as "Ginnie Mae," provides sources of funds
for residential mortgages, insured or guaranteed by FHA or VA.
TOP - Graduated Payment Mortgage (GPM)
- A type of flexible-payment mortgage where the
payments increase for a specified period of time and then level off. This type
of mortgage has negative amortization built into it.
TOP - Growing-Equity Mortgage (GEM)
- A fixed-rate mortgage that provides scheduled payment
increases over an established period of time. The increased amount of the
monthly payment is applied directly toward reducing the remaining balance of
the mortgage.
TOP - Guaranty
- A promise by one party to pay a debt or perform an
obligation contracted by another if the original party fails to pay or perform
according to a contract.
TOP - Guarantee Mortgage
- A mortgage that is guaranteed by a third party.
TOP - Hazard Insurance
- A form of insurance in which the insurance company
protects the insured from specified losses, such as fire, windstorm and the
like.
TOP - Housing Expenses-to-Income Ratio
- The ratio, expressed as a percentage, which results
when a borrower's housing expenses are divided by his/her gross monthly
income. See debt-to-income ratio.
TOP - 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.
TOP - Impound
- That portion of a borrower's monthly payments held by
the lender or servicer to pay for taxes, hazard insurance, mortgage insurance,
lease payments, and other items as they become due. Also known as
reserves.
TOP - Index
- A published interest rate against which lenders
measure the difference between the current interest rate on an adjustable rate
mortgage and that earned by other investments (such as one- three-, and
five-year U.S. Treasury security yields, the monthly average interest rate on
loans closed by savings and loan institutions, and the monthly average
costs-of-funds incurred by savings and loans), which is then used to adjust
the interest rate on an adjustable mortgage up or down.
TOP - Indexed rate
- The sum of the published index plus the margin. For
example if the index were 9% and the margin 2.75%, the indexed rate would be
11.75%. Often, lenders charge less than the indexed rate the first year of an
adjustable-rate mortgage.
TOP - Initial Interest Rate
- This refers to the original interest rate of the
mortgage at the time of closing. This rate changes for an adjustable-rate
mortgage (ARM). It's also known as "start rate" or "teaser."
TOP - Installment
- The regular periodic payment that a borrower agrees
to make to a lender.
TOP - Insured Mortgage
- A mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance (MI).
TOP - Interest
- The fee charged for borrowing money.
TOP - 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.
TOP - Interest Rate Buydown Plan
- An arrangement that allows the property seller to
deposit money to an account. That money is then released each month to reduce
the mortgagor's monthly payments during the early years of a mortgage.
TOP - Interest Rate Ceiling
- For an adjustable-rate mortgage (ARM), the maximum
interest rate, as specified in the mortgage note.
TOP - Interest Rate Floor
- For an adjustable-rate mortgage (ARM), the minimum
interest rate, as specified in the mortgage note.
TOP - Interim Financing
- A construction loan made during completion of a
building or a project. A permanent loan usually replaces this loan after
completion.
TOP - Investor
- A money source for a lender.
TOP - Jumbo Loan
- A loan which is larger (more than $359,650 as of
1/1/05) than the limits set by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation.
Because jumbo loans cannot be funded by these two agencies, they usually
carry a higher interest rate.
TOP - Late Charge
- The penalty a borrower must pay when a payment is
made a stated number of days (usually 15) after the due date.
TOP - Lease-Purchase Mortgage Loan
- An alternative financing option that allows low- and
moderate-income home buyers to lease a home 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 accumulates in
a savings account for a down payment.
TOP - Liabilities
- A person's financial obligations. Liabilities include
long-term and short-term debt.
TOP - Lien
- A claim upon a piece of property for the payment or
satisfaction of a debt or obligation.
TOP - 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.
TOP - 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.
TOP - Loan
- A sum of borrowed money (principal) that is generally
repaid with interest.
TOP - Loan-to-Value Ratio
- The relationship between the amount of the mortgage
loan and the appraised value of the property expressed as a percentage.
TOP - Lock
- Lender's guarantee that the mortgage rate quoted will
be good for a specific number of days from day of application.
TOP - Margin
- The amount a lender adds to the index on an
adjustable rate mortgage to establish the adjusted interest rate.
TOP - Market Value
- The highest price that a buyer would pay and the
lowest price a seller would accept on a property. Market value may be
different from the price a property could actually be sold for at a given
time.
TOP - Maturity
- The date on which the principal balance of a loan
becomes due and payable.
TOP - MIP (Mortgage Insurance Premium)
- It is insurance from FHA to the lender against
incurring a loss on account of the borrower's default.
TOP - 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 and doesn't cover all of the interest. The loan balance therefore
increases instead of decreasing.
TOP - Mortgage
- A legal document that pledges a property to the
lender as security for payment of a debt.
TOP - Mortgage Banker
- A company that originates mortgages exclusively for
resale in the secondary mortgage market.
TOP - Mortgage Broker
- An individual or company that charges a service fee
to bring borrowers and lenders together for the purpose of loan
origination.
TOP - Mortgagee
- The lender.
TOP - Mortgage Insurance
- Money paid to insure the mortgage when the down
payment is less than 20 percent. See private mortgage insurance, FHA
mortgage insurance.
TOP - Mortgage Life Insurance
- A type of term life insurance In the event that the
borrower dies while the policy is in force, the debt is automatically paid by
insurance proceeds.
TOP - Mortgagor
- The borrower or homeowner.
TOP - Negative Amortization
- Occurs when your monthly payments are not large
enough to pay all the interest due on the loan. This unpaid interest is added
to the unpaid balance of the loan. The danger of negative amortization is that
the home buyer ends up owing more than the original amount of the loan.
TOP - Net Effective Income
- The borrower's gross income minus federal income
tax.
TOP - Non Assumption Clause
- A statement in a mortgage contract forbidding the
assumption of the mortgage without the prior approval of the lender. Note: The
signed obligation to pay a debt, as a mortgage note.
TOP - Note
- A legal document that obligates a borrower to repay a
mortgage loan at a stated interest rate during a specified period of
time.
TOP - Office of Thrift Supervision (OTS)
- The regulatory and supervisory agency for federally
chartered savings institutions. Formally known as Federal Home Loan Bank
Board
TOP - One-year adjustable
- Mortgage whose annual rate changes yearly. The rate
is usually based on movements of a published index plus a specified margin,
chosen by the lender.
TOP - Origination Fee
- The fee charged by a lender to prepare loan
documents, make credit checks, inspect and sometimes appraise a property;
usually computed as a percentage of the face value of the loan.
TOP - Owner Financing
- A property purchase transaction in which the party
selling the property provides all or part of the financing.
TOP - 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 adjustment date.
TOP - Periodic Payment Cap
- A limit on the amount that payments can increase or
decrease during any one adjustment period.
TOP - Periodic Rate Cap
- 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.
TOP - Permanent Loan
- A long term mortgage, usually ten years or more. Also
called an "end loan."
TOP - PITI
- Principal, Interest, Taxes and Insurance. Also called
monthly housing expense.
TOP - Pledged account Mortgage (PAM):
- Money is placed in a pledged savings account and this
fund plus earned interest is gradually used to reduce mortgage payments.
TOP - Points (loan discount points)
- Prepaid interest assessed at closing by the lender.
Each point is equal to 1 percent of the loan amount (e.g., two points on a
$100,000 mortgage would cost $2,000).
TOP - Power of Attorney
- A legal document authorizing one person to act on
behalf of another.
TOP - Pre-Approval
- The process of determining how much money you will be
eligible to borrow before you apply for a loan.
TOP - Prepaid Expenses
- Necessary to create an escrow account or to adjust
the seller's existing escrow account. Can include taxes, hazard insurance,
private mortgage insurance and special assessments.
TOP - Prepayment
- A privilege in a mortgage permitting the borrower to
make payments in advance of their due date.
TOP - Prepayment Penalty
- Money charged for an early repayment of debt.
Prepayment penalties are allowed in some form (but not necessarily imposed) in
many states.
TOP - Primary Mortgage Market
- Lenders, such as savings and loan associations,
commercial banks, and mortgage companies, who make mortgage loans directly to
borrowers. These lenders sometimes sell their mortgages to the secondary
mortgage markets such as to FNMA or GNMA, etc.
TOP - Principal
- The amount borrowed or remaining unpaid. The part of
the monthly payment that reduces the remaining balance of a mortgage.
TOP - Principal Balance
- The outstanding balance of principal on a mortgage
not including interest or any other charges.
TOP - 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 monthly cost of property taxes and homeowners
insurance, whether these amounts that are paid into an escrow account each
month or not.
TOP - Private Mortgage Insurance (PMI)
- In the event that you do not have a 20 percent down
payment, lenders will allow a smaller down payment - as low as 3 percent in
some cases. With the smaller down payment loans, however, borrowers are
usually required to carry private mortgage insurance. Private mortgage
insurance will usually require an initial premium payment and may require an
additional monthly fee depending on your loan's structure.
TOP - Qualifying Ratios
- Calculations used to determine if 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.
TOP - Rate Lock
- A commitment issued by a lender to a borrower or
other mortgage originator guaranteeing a specified interest rate and lender
costs for a specified period of time.
TOP - Realtor?
- A real estate broker or an associate holding active
membership in a local real estate board affiliated with the National
Association of Realtors.
TOP - Real Estate Agent
- A person licensed to negotiate and transact the sale
of real estate on behalf of the property owner.
TOP - Real Estate Settlement Procedures Act (RESPA)
- A consumer protection law that requires lenders to
give borrowers advance notice of closing costs.
TOP - Recission
- The cancellation of a contract. With respect to
mortgage refinancing, the law that gives the homeowner three days to cancel a
contract in some cases once it is signed if the transaction uses equity in the
home as security.
TOP - Recording Fees
- Money paid to the lender for recording a home sale
with the local authorities, thereby making it part of the public
records.
TOP - Refinance
- Obtaining a new mortgage loan on a property already
owned. Often to replace existing loans on the property.
TOP - Renegotiable Rate Mortgage
- A loan in which the interest rate is adjusted
periodically. See adjustable rate mortgage.
TOP - RESPA
- Short for the Real Estate Settlement Procedures Act.
RESPA is a federal law that allows consumers to review information on known or
estimated settlement cost once after application and once prior to or at a
settlement. The law requires lenders to furnish the information after
application only.
TOP - Reverse Annuity Mortgage (RAM)
- A form of mortgage in which the lender makes periodic
payments to the borrower using the borrower's equity in the home as collateral
for and repayment of the loan.
TOP - 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.
TOP - Satisfaction of Mortgage
- The document issued by the mortgagee when the
mortgage loan is paid in full. Also called a "release of mortgage."
TOP - Second Mortgage
- A mortgage made subsequent to another mortgage and
subordinate to the first one.
TOP - Secondary Mortgage Market
- The place where primary mortgage lenders sell the
mortgages they make to obtain more funds to originate more new loans. It
provides liquidity for the lenders.
TOP - Security
- The property that will be pledged as collateral for a
loan.
TOP - Seller Carry-back
- An agreement in which the owner of a property
provides financing, often in combination with an assumable mortgage. See owner
financing.
TOP - 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.
TOP - Servicing
- All the steps and operations a lender performs to
keep a loan in good standing, such as collection of payments, payment of
taxes, insurance, property inspections and the like.
TOP - Settlement/Settlement Costs
- see closing/closing costs
TOP - Shared Appreciation Mortgage (SAM)
- A mortgage in which a borrower receives a
below-market interest rate in return for which the lender (or another investor
such as a family member or other partner) receives a portion of the future
appreciation in the value of the property. May also apply to mortgage where
the borrowers shares the monthly principal and interest payments with another
party in exchange for part of the appreciation.
TOP - Simple Interest
- Interest which is computed only on the principle
balance.
TOP - 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.
TOP - 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.
TOP - Survey
- A measurement of land, prepared by a registered land
surveyor, showing the location of the land with reference to known points, its
dimensions, and the location and dimensions of any buildings.
TOP - Sweat Equity
- Equity created by a purchaser performing work on a
property being purchased.
TOP - Third-party Origination
- When 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.
TOP - Title
- A document that gives evidence of an individual's
ownership of property.
TOP - Title Insurance
- A policy, usually issued by a title insurance
company, which insures a home buyer against errors in the title search. The
cost of the policy is usually a function of the value of the property, and is
often borne by the purchaser and/or seller. Policies are also available to
protect the lender's interests.
TOP - Title Search
- An examination of municipal records to determine the
legal ownership of property. Usually is performed by a title company.
TOP - Total Expense Ratio
- Total obligations as a percentage of gross monthly
income including monthly housing expenses plus other monthly debts.
TOP - Truth-In-Lending
- A federal law requiring disclosure of the Annual
Percentage Rate to home buyers shortly after they apply for the loan. Also
known as Regulation Z.
TOP - Two-Step Mortgage
- A mortgage in which the borrower receives a
below-market interest rate for a specified number of years (most often seven
or 10), and then receives a new interest rate adjusted (within certain limits)
to market conditions at that time. the lender sometimes has the option to call
the loan due with 30 days notice at the end of seven or 10 years. also called
"Super Seven" or "Premier" mortgage.
TOP - Underwriting
- The decision whether to make a loan to a potential
home buyer based on credit, employment, assets, and other factors and the
matching of this risk to an appropriate rate and term or loan amount.
TOP - Usury
- Interest charged in excess of the legal rate
established by law.
TOP - VA Loan
- A long-term, low- or no-down payment loan guaranteed
by the Department of Veterans Affairs. Restricted to individuals qualified by
military service or other entitlements.
TOP - VA Mortgage Funding Fee
- A premium of up to 1-7/8 percent (depending on the
size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate
mortgage with no down payment, this would amount to $1,406 either paid at
closing or added to the amount financed.
TOP - Variable Rate Mortgage (VRM)
- see adjustable rate mortgage
TOP - Verification of Deposit (VOD)
- A document signed by the borrower's financial
institution verifying the status and balance of his/her financial
accounts.
TOP - Verification of Employment (VOE)
- A document signed by the borrower's employer
verifying his/her position and salary.
TOP - Warehouse Fee
- Many mortgage firms must borrow funds on a short term
basis in order to originate loans which are to be sold later in the secondary
mortgage market (or to investors). When the prime rate of interest is higher
on short term loans than on mortgage loans, the mortgage firm has an economic
loss which is offset by charging a warehouse fee.
TOP - Wraparound mortgage
- Results when an existing assumable loan is combined
with a new loan, resulting in an interest rate somewhere between the old rate
and the current market rate. The payments are made to a second lender or the
previous homeowner, who then forwards the payments to the first lender after
taking the additional amount off the top.
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