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| Allows the lender to speed up the rate at which your loan
comes due or even to demand immediate payment of the entire
outstanding balance of the loan should you default on your
loan or violate it's terms. |
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| Is a mortgage
in which the interest rate is adjusted periodically based on
a preselected index. |
| On an adjustable
rate mortgage, the time between changes in the interest rate
and/ or monthly payment, typically one year or less. (see Initial
Adjustment Period) |
| A process whereby recurring periodic payments are calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. |
| APR reflects the note rate charged on the loan adjusted for prepaid interest and financing costs you pay in obtaining the loan. It is used as a tool for comparing loan terms amongst available loans and lenders. The government requires lenders to disclose APR in an effort to protect borrowers; however, APR is easily manipulated and often misleading. |
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| An estimate of value of property, made by a qualified, certified professional called an "appraiser." |
| The agreement between buyer and seller where the buyer
takes over the payments on an existing mortgage from the
seller. Rare for conventional loans, it is much more common
for government lo |
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| Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract. |
| When the lender and/or the homebuilder subsidizes 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. |
| Consumer safeguards, which limit the amount of the interest rate on an adjustable rate mortgage. It may change per year and/or the life of the loan. |
| Consumer safeguards, which limit the monthly payment amount
on an adjustable rate mort |
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| The meeting between buyer, seller, and lender and/or their agents where the property and funds legally change hands. Also called settlement. |
| Usually include origination points, discount points, appraisal fees, credit report fees, title search and insurance fees, recording fees, and document preparation fees. They also include departmental fees like processing fees, underwriting fees, and closing agent fees. The costs of closing usually are about 3 percent to 6 percent of the mortgage amount if you are easily suckered. Closing costs are usually around $1000 for Kyle's customers as long as loan amount is over $100,000. |
| An agreement, often in writing, between a lender and a
borrower to lend money at a future date subject to the completion
of paperwork or compliance with stated condi |
| A short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses. |
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| A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FmHA). |
| 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 in |
| In many states, this document is used in place of a mortgage to secure the payment of a note. |
| Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage. |
| Failure to make payments on time. This can lead to foreclosure. |
| An independent agency of the Federal government, which guarantees long-term, low- or no-down payment mortgages to eligible veterans. |
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| The date that funds are transferred from the investor to the borrower's account. For a purchase transaction, this date is the same as the closing date. For a refinance, this date occurs three to four business days after closing. |
| 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). |
| Money paid to make up the difference between the purchase
price and mortgage amount, commonly expressed as a percent
of the purchase price. Down payments less than 20% often
require mortgage insurance. Down payments less than 5% commonly
require a borrower to obtain a "special"> |
| 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. |
| Money given by a buyer to a seller as part of the purchase
price to bind a transaction. This money is usually held
at the title co |
| 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. |
| The difference between the fair market value and current indebtedness. |
| An account held by the lender into which the homebuyer
makes monthly payments for tax, insurance payments. In less
common instances, escrows can include a lump-sum of moneys
needed to satisfy an outstanding obligation or necessary
repair to the property mortg |
| 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 standard for underwriting mortgages.
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| Also known 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 afford |
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| A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate priced homes almost anywhere in the country. |
| Requires a small fee
(up to 3 percent of the loan amount) paid at closing or a portion
of this fee added to each monthly payment of an FHA loan to insure
the loan with FHA. |
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| A mortgage on which the interest rate is set for the term of the loan. |
| A legal procedure in which property securing debt is sold by the lender to pay a defaulting borrower's debt. |
| The total amount the borrower earns per month, before any taxes or expenses are deducted. |
| A promise by one party to pay a debt or perform an obligation
contracted by another party if the original party fails
to pay or perform according to a cont |
| A form of insurance in which the insurance company protects
the insured from specified losses, such as fire, windstorm,
flood and the l |
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| The ratio, expressed
as a percentage, which results when a borrower's housing expenses
are divided by his/her gross monthly income. |
| That portion of a borrower's monthly payments held by
the lender or servicer to pay for taxes, hazard insurance,
mortgage insurance and other items as they become |
| 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. |
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| The period during which the rate on an ARM is fixed. Typically 1, 3, 5, or 7 years. |
| Money source for a
lender. |
| A loan which is larger than the limits set by the Federal
National Mortgage Association and the Federal Home Loan
Mortgage Corporation (currently $333,700). Because jumbo
loans cannot be funded by these two agencies, they usually
carry a higher interest |
| A claim upon a piece of property for the payment or satisfaction
of a debt or obligation. |
| The relationship between the amount of the mortgage loan
and the appraised value of the property expressed as a percent |
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| The amount a lender adds to the index on an adjustable
rate mortgage to establish the borrower's interest |
| 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. |
| Money paid to insure the mortgage when the down payment is less than 20 percent (See PMI). |
| The lender. |
| The borrower or homeowner. |
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| 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. A concern of negative amortization is that the homebuyer may end up owing more than the original amount of the loan. |
| A statement in a mortgage contract forbidding the assumption of the mortgage or writing assumptions without the prior approval of the lender. |
| The rate charged on
a loan. Payments are calculated as a function of the loan amount,
loan term, and the Note Rate. |
| The fee charged by
a lender to initiate and complete the loan process, usually computed
as a percentage of face value of the loan. |
| Principal, interest,
taxes, and insurance. Also called monthly housing expense. |
| See Discount Points
and Origination Points. |
| A legal document authorizing
one person to act on behalf of another. |
| The practice of taking advantage of an uninformed borrower. Methods include disguising or hiding closing costs, charging unnecessary fees, misrepresenting the terms of the financing, and not honoring a quoted rate (among others) |
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| 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. A portion of prepaids also includes interest
paid on the new loan from the date of disbursement to the end of the
month in which disbursement occurs. |
| A privilege in a mortgage permitting the borrower to make payments in advance of their due date. |
| Money charged for an
early repayment of debt on loans that are typically more risky. |
| The amount of debt,
not counting interest, remaining on a loan. |
| In the event that you
do not have a 20 percent down payment, lenders will allow a smaller
down payment. With the smaller down payments loans, however, borrowers
may be required to carry private mortgage insurance. Private mortgage
insurance will be based on the amount of down payment you have below
20% as well as other lender assessed risks. |
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| A real estate broker
or an associate holding active membership in a local real estate board
affiliated with the National Association of Realtors. |
| The cancellation of
a contract. With respect to mortgage refinancing, Federal law gives
the homeowner three business days to cancel a contract once it is
signed. |
| The amount of cash available to make a mortgage payment in the event that a borrower's income is discontinued. |
| Money paid to the title
company for recording a home sale with the local authorities, thereby
making it part of the public records. |
|
| RESPA is a Federal
law that allows consumers to review information on known or estimated
settlement costs once after application and once prior to or at settlement. |
| A form of mortgage in
which the lender makes periodic payments to the borrower using the
borrower's equity in the home as security. |
| All the steps and operations a lender performs after a
loan is closed; such as collection of payments, payment
of taxes and insurance, and customer satisfac |
| See Closing. |
| See Closing Costs. |
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| 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 building. |
| The amount of time
that it takes the mortgage to be paid off. Typically 30 or 15 years. |
| See Balloon Payment
Mortgage. |
| A document that gives evidence of an individual's ownership of property. |
| A policy, usually issued by a Title Insurance company, which insures a homebuyer 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. |
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| An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company. |
| A Federal law requiring
disclosure of the Annual Percentage Rate to homebuyers shortly after
they apply for the loan. |
| The decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount. |
| 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. |
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| A premium of up to
2 percent paid on a VA backed loan. On a $75,000 30-year fixed-rate
mortgage with no down payment, this would amount to $1500 either paid
at closing or added to the amount financed. |
| See Adjustable Rate
Mortgage. |
| A document signed by
the borrower's financial institution verifying the status and balance
of the borrower's financial accounts. |
| A document signed by
the borrower's employer verifying his/her position and salary. |
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