Amortization Schedule - A
monthly repayment schedule outlining how a loan will
be paid off in fixed payments combining principal
and interest.
Annual Percentage Rate (APR)
- A calculation that expresses the total cost of a
mortgage loan as a yearly rate (according to a
federally mandated procedure). The APR calculation
takes into account monthly interest payments,
mortgage insurance, points, and certain fees paid at
origination. It generally results in a rate slightly
higher than the stated interest rate on the loan.
Appraised Value - An
opinion of value reached by an appraiser based upon
recent sales information for similar properties, the
condition of the property and the neighborhood’s
impact on future property value.
Appraisal - An opinion of
value reached by an appraiser based upon recent
sales information for similar properties, the
condition of the property and the neighborhood’s
impact on future property value. The cost of the
appraisal is part of closing costs.
Assumable - A loan feature
that allows the loan to be transferred from the
seller to the purchaser of a home with the same
terms and conditions, subject to lender approval.
Balance Sheet - A document
showing the financial situation--assets,
liabilities, and net worth--of a company at a
specific point in time.
Balloon Mortgage - A
short-term, fixed-rate loan with low payments for a
set number of years and a large balloon payment of
the remainder of the principal due at the end of the
term.
Assignment - The transfer
of property rights by one person, the assignor, to
another, the assignee.
Bi-weekly Mortgage - A
payment plan under which the borrower pays one half
of a monthly payment every two weeks. This often
results in a faster pay-off of a mortgage.
Caps (payment) - Consumer safeguards which
limit the amount monthly payments on an adjustable
rate mortgage may change. Since they do not limit
the amount of interest the lender is earning,
payment caps may cause negative amortization.
Cash Available - Your
housing affordability depends on the amount of money
you have for the down payment, closing costs and a
cash reserve. The more you can come up with, the
less you will have to borrow.
Cash Out - A refinance for
more than the balance of the current mortgage. The
excess money taken out reduces the borrower’s
equity.
Cash required to close -
Money needed by borrower to cover down payment,
closing costs, Cash reserves, and prepaids.
Cash Reserve - Funds that
the borrower will have remaining after all expenses
(down payment, closing costs & prepaid expenses) of
the transaction have been paid.
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Closing (settlement) - The
conclusion of a transaction. In real estate, closing
includes the delivery of a deed, the signing of
notes and security instruments, and the disbursement
of funds necessary to the sale or loan transaction.
Closing Agent - Neutral
third party appointed to act as a custodian for
documents and funds during the transfer of property
from seller to buyer. Depending on local law and
custom, this could be an attorney, escrow agent or
title company.
Closing Costs - Fees
incurred in a real estate or mortgage transaction
paid by borrower and/or seller at the closing of the
transaction.
Contingency - A condition
which must be satisfied before a contract is legally
binding--before a sale can close.
Credit Rating - An
expression of the borrower's creditworthiness based
upon present financial condition and past credit
history.
Credit Report -A detailed
account of the credit, employment and residence
history of an individual used by a prospective
lender to help determine creditworthiness. Credit
reports also list any judgments, tax liens,
bankruptcies or similar matters of public record
entered against the individual. A fee is usually
charged.
Current PITI - An
abbreviation for a monthly payment that includes
principal, interest, taxes and insurance. In
mortgage lending it is common for the monthly
mortgage payment to include not only the principal
and interest payment on the loan, but an escrow
amount for real estate taxes and hazard insurance as
well.
Deed - Legal document by
which title to a property is transferred from one
owner to another. The deed contains a description of
the property and is signed, witnessed, and delivered
to the buyer at closing.
Deed of Trust - Document
creating a lien on a property as security for the
payment of a debt. In some states, a mortgage is
used instead.
Default - Failure to meet
legal obligations in a contract, including failure
to make payments on a loan. A mortgage is generally
considered to be in default when a payment is 30
days past due
Deferred Interest - Amount
added to the balance of a loan when monthly payments
are insufficient to cover the interest incurred.
This results in negative amortization.
Delinquency - Failure to
make required payments on time.
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Document Preparation or Review - This
fee covers the expenses associated with the process
of preparing the legal documents that you will be
signing at the time of closing, such as the
mortgage, note, and truth-in-lending statement.
Down Payment - In a home
purchase, the difference between the purchase price
and the mortgage amount.
Down Payment Percent - The
down payment percentage is calculated by dividing
the amount you plan on putting down on the purchase
of a home by the selling price.
Earnest Money - Deposit
made by a buyer toward the down payment as evidence
of good faith when the purchase agreement is signed.
Equal Credit Opportunity Act
(ECOA) - Federal law requiring 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.
Escrow/Attorney/Title - A
neutral third party who carries out the instructions
of both the buyer and seller to handle all the
paperwork of settlement or "closing." You will
either use an escrow company, an attorney or a title
company depending on which state you reside in.
Fixed-Rate Mortgage - A
mortgage whose interest rate does not change for the
life of the loan. Payments are also fixed.
Flood Check - If the house
is close to a source of water, a survey is conducted
to determine whether a property is in a flood zone.
A fee is charged.
Floor - The minimum
interest rate payable on an adjustable-rate
mortgage.
Gross Monthly Income -
Total monthly income before taxes or expenses are
deducted. Used in the loan origination process to
calculate borrower’s ability to make payments on a
loan.
Hazard Insurance - A policy
that protects the insured against loss due to fire
or certain natural disasters in exchange for a
premium paid to the insurer. Also known as Home
Owner’s Insurance or fire insurance.
Impound (or Reserves) -
Portion of a borrower's monthly payments held by the
lender to pay for taxes, insurance, and other items
as they become due.
Lending Guidelines - Every
loan program has different guidelines. Guidelines
are used to meet Federal, State and Local laws and
enforce minimum requirements by the lender.
Guidelines ensure that prospective borrowers won't
purchase a home that they won't be able to afford.
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Loan Amount - The actual
amount borrowed from the lending institution
including any financed fees, debt consolidation,
etc.
Loan Balance The current
outstanding balance (the amount you owe) on your
present mortgage loan.
Lock or Lock In - A
lender's guarantee of an interest rate and related
points for a set period of time, usually between
loan application and loan closing. This protects
borrower against rate increases during that time.
Processing - The
preparation and documentation of a mortgage loan
application for underwriting.
Property Value - LTV or
Loan to Value Ratio refers to the relationship
between the unpaid principal balance of the mortgage
and the property's appraised value (or sales price
if it is lower).
Rate - The annual rate of
interest on a loan.
Recording - The act of
entering documents concerning title to a property
into the public records.
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 improvements.
Tax Savings - This is the
amount of money you save in income taxes. You save
this money because in most cases the interest you
pay on your home loan is tax deductible! (Ask your
tax advisor).
Term - The number of years
the home loan is amortized for. Home loans are
generally amortized over 15, 20 or 30 years.
Termite Report - A report
that results from an inspection by a professional to
determine if the property has termites. A fee is
charged.
Title Insurance - The
process of determining the history of the ownership
of a property in order to determine if the seller
has legal ownership in the property they are
selling. A fee is Charged.
Underwriting - The analysis
of risk, the determination of the appropriate loan
amount, and the setting of loan terms and
conditions, based on the borrower's creditworthiness
and the value of the real property that will secure
the loan.
Walk-through - A final
inspection of a home to check for problems that may
need to be corrected before closing.
Wire Transfer Fee - Loan
proceeds are typically transferred via electronic
wire. This is the transaction fee that is charged by
the bank to execute the wire.
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