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| Help Foreclosure Center |
Adjustable rate mortgage
APR
Annual percentage rate
CRV
Certificate of Reasonable Value
ECOA
Equal Credit Opportunity Act
FHA
Federal Housing Administration
FHLBB
Federal Home Loan Bank Board
FHLMC
Federal Home Loan Mortgage Corporation (a.k.a. "Freddie Mac")
FmHA
Farmers Home Administration
FNMA
Federal National Mortgage Association (a.k.a. "Fannie Mae")
GNMA
Government National Mortgage Association
GPM
Graduated Payment Mortgage
GPO
Guaranteed Purchase Offer
APR
Annual percentage rate
CRV
Certificate of Reasonable Value
ECOA
Equal Credit Opportunity Act
FHA
Federal Housing Administration
FHLBB
Federal Home Loan Bank Board
FHLMC
Federal Home Loan Mortgage Corporation (a.k.a. "Freddie Mac")
FmHA
Farmers Home Administration
FNMA
Federal National Mortgage Association (a.k.a. "Fannie Mae")
GNMA
Government National Mortgage Association
GPM
Graduated Payment Mortgage
GPO
Guaranteed Purchase Offer
Adjustable rate mortgage
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.
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.
Annual percentage rate
Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is
likely to be higher than the stated note rate or advertised rate on the mortgage,
because it takes into account point and other credit cost. The APR allows home
buyers to compare different types of mortgages based on the annual cost for each
loan.
Appraisal
An estimate of the value of property, made by a qualified professional called an
"appraiser".
Assessment
A local tax levied against a property for a specific purpose, such as a sewer or
street lights.
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.
Balloon payment mortgage
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 principle at
a time specified in the contract.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same
mortgage.
One who applies for and receives a loan in the form of a mortgage with the
intention of repaying the loan in full.
Broker
An individual in the business of assisting in arranging funding or negotiating
contracts for a client buy who does not loan the money himself. Brokers usually
charge a fee or receive a commission for their services.
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.
Callable debt
A debt security whose issuer has the right to redeem the security at a specified
price on or after a specified date, but prior to its stated final maturity.
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).
Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate
mortgage may change per year and/or the life of the loan.
Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable
rate mortgage may change.
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 DD-214 (Separation Paper) to the local VA office with VA
form 1880 (request for Certificate of Eligibility).
Certificate of Reasonable Value
An appraisal issued by the Veterans Administration showing the property's current
market value
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.
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.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a
borrower or builder. A promise by an investor to purchase mortgages from a
lender with specific terms or conditions. An agreement, often in writing, between
a lender and a borrower to loan money at a future date subject to the completion
of paper work or compliance with stated conditions.
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
progresses.
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.
Conventional loan
A mortgage not insured by FHA or guaranteed by the VA.
Credit Report
A report documenting the credit history and current status of a borrower's credit
standing.
Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a
transaction or assure payment.
Entitlement
The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed
home loan. This is also known as eligibility.
Equal Credit Opportunity Act
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.
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.
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.
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, they are generous
enough to handle moderately-priced homes almost anywhere in the country.
FHA mortgage insurance
Requires a fee paid at closing to insure the loan with FHA. In addition, FHA
mortgage insurance requires an annual fee paid in monthly installments.
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."
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.
First Mortgage
A mortgage which is in first lien position, taking priority over all other liens.
Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout
the term of the mortgage for the original borrower.
FNMA
The Federal National Mortgage Association ("Fannie Mae") 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.
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.
Graduated Payment Mortgage
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.
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.
Hazard Insurance
A form of insurance in which the insurance company protects the insured from
specified losses, such as fire, windstorm and the like.
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.
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.
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.
Annual percentage rate
Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is
likely to be higher than the stated note rate or advertised rate on the mortgage,
because it takes into account point and other credit cost. The APR allows home
buyers to compare different types of mortgages based on the annual cost for each
loan.
Appraisal
An estimate of the value of property, made by a qualified professional called an
"appraiser".
Assessment
A local tax levied against a property for a specific purpose, such as a sewer or
street lights.
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.
Balloon payment mortgage
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 principle at
a time specified in the contract.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same
mortgage.
One who applies for and receives a loan in the form of a mortgage with the
intention of repaying the loan in full.
Broker
An individual in the business of assisting in arranging funding or negotiating
contracts for a client buy who does not loan the money himself. Brokers usually
charge a fee or receive a commission for their services.
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.
Callable debt
A debt security whose issuer has the right to redeem the security at a specified
price on or after a specified date, but prior to its stated final maturity.
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).
Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate
mortgage may change per year and/or the life of the loan.
Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable
rate mortgage may change.
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 DD-214 (Separation Paper) to the local VA office with VA
form 1880 (request for Certificate of Eligibility).
Certificate of Reasonable Value
An appraisal issued by the Veterans Administration showing the property's current
market value
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.
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.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a
borrower or builder. A promise by an investor to purchase mortgages from a
lender with specific terms or conditions. An agreement, often in writing, between
a lender and a borrower to loan money at a future date subject to the completion
of paper work or compliance with stated conditions.
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
progresses.
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.
Conventional loan
A mortgage not insured by FHA or guaranteed by the VA.
Credit Report
A report documenting the credit history and current status of a borrower's credit
standing.
Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a
transaction or assure payment.
Entitlement
The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed
home loan. This is also known as eligibility.
Equal Credit Opportunity Act
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.
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.
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.
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, they are generous
enough to handle moderately-priced homes almost anywhere in the country.
FHA mortgage insurance
Requires a fee paid at closing to insure the loan with FHA. In addition, FHA
mortgage insurance requires an annual fee paid in monthly installments.
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."
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.
First Mortgage
A mortgage which is in first lien position, taking priority over all other liens.
Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout
the term of the mortgage for the original borrower.
FNMA
The Federal National Mortgage Association ("Fannie Mae") 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.
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.
Graduated Payment Mortgage
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.
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.
Hazard Insurance
A form of insurance in which the insurance company protects the insured from
specified losses, such as fire, windstorm and the like.
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.
Mortgage Insurance Premium
OTS
Office of Thrift Supervision
PITI
Principle, Interest, Taxes and Insurance
PMI
Private Mortgage Insurance
RAM
Reverse Annuity Mortgage
RESPA
Real Estate Settlement Procedures Act
SAM
Shared Appreciation Mortgage
SFR
Single Family Housing
VOD
Verification of Deposit
VOE
Verification of Employment
VRM
Variable Rate Mortgage
OTS
Office of Thrift Supervision
PITI
Principle, Interest, Taxes and Insurance
PMI
Private Mortgage Insurance
RAM
Reverse Annuity Mortgage
RESPA
Real Estate Settlement Procedures Act
SAM
Shared Appreciation Mortgage
SFR
Single Family Housing
VOD
Verification of Deposit
VOE
Verification of Employment
VRM
Variable Rate Mortgage
Investor
A money source for a lender.
Jumbo Loan
A loan which is larger 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.
Lien
A claim upon a piece of property for the payment or satisfaction of a debt or
obligation.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of
the property expressed as a percentage.
Margin
The amount a lender adds to the index on an adjustable rate mortgage to establish the
adjusted interest rate.
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.
Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent.
See private mortgage insurance, FHA mortgage insurance.
Mortgagee
The lender.
Mortgagor
The borrower or homeowner.
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.
Net Effective Income
The borrower's gross income minus federal income tax.
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.
Office of Thrift Supervision
The regulatory and supervisory agency for federally chartered savings institutions.
Formally known as Federal Home Loan Bank Board.
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.
Permanent Loan
A long term mortgage, usually ten years or more.
Pledged account Mortgage
Money is placed in a pledged savings account and this fund plus earned interest is
gradually used to reduce mortgage payments.
Points
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of
the loan amount.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
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.
Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of
their due date.
Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in
some form (but not necessarily imposed) in many states.
Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan
associations, commercial banks, and mortgage companies. These lenders sometimes
sell their mortgages into the secondary mortgage markets such as to FNMA or
GNMA.
Principle
The amount of debt, not counting interest, left on a loan. Realtor
A real estate broker or an associate holding active membership in a local real estate
board affiliated with the National Association of Realtors.
Recision
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.
Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby
making it part of the public records.
Refinance
Obtaining a new mortgage loan on a property already owned. Often to replace
existing loans on the property.
Renegotiable Rate Mortgage
A loan in which the interest rate is adjusted periodically.
Reverse Annuity Mortgage
A form of mortgage in which the lender makes periodic payments to the borrower
using the borrower's equity in the home as Satisfaction of Mortgage: The document
issued by the mortgagee when the mortgage loan is paid in full.
Second Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first one.
Secondary Mortgage Market
The place where primary mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans.
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.
Shared Appreciation Mortgage
A mortgage in which a borrower receives a below-market interest rate in return for
which the lender receives a portion of the future appreciation in the value of the
property.
Simple Interest
Interest which is computed only on the principle balance.
Survey
A measurement of land, prepared by a registered land surveyor, showing the location
of the land with reference to know points, its dimensions, and the location and
dimensions of any buildings.
Sweat Equity
Equity created by a purchaser performing work on a property being purchased.
Title
A document that gives evidence of an individual's ownership of property.
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.
Title Search
An examination of municipal records to determine the legal ownership of property.
Usually is performed by a title company.
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.
Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a
specified number of years, and then receives a new interest rate adjusted to market
conditions at that time.
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.
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.
Verification of Deposit
A document signed by the borrower's financial institution verifying the status and
balance of his/her financial accounts.
Verification of Employment
A document signed by the borrower's employer verifying his/her position and salary.
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.
A money source for a lender.
Jumbo Loan
A loan which is larger 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.
Lien
A claim upon a piece of property for the payment or satisfaction of a debt or
obligation.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of
the property expressed as a percentage.
Margin
The amount a lender adds to the index on an adjustable rate mortgage to establish the
adjusted interest rate.
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.
Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent.
See private mortgage insurance, FHA mortgage insurance.
Mortgagee
The lender.
Mortgagor
The borrower or homeowner.
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.
Net Effective Income
The borrower's gross income minus federal income tax.
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.
Office of Thrift Supervision
The regulatory and supervisory agency for federally chartered savings institutions.
Formally known as Federal Home Loan Bank Board.
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.
Permanent Loan
A long term mortgage, usually ten years or more.
Pledged account Mortgage
Money is placed in a pledged savings account and this fund plus earned interest is
gradually used to reduce mortgage payments.
Points
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of
the loan amount.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
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.
Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of
their due date.
Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in
some form (but not necessarily imposed) in many states.
Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan
associations, commercial banks, and mortgage companies. These lenders sometimes
sell their mortgages into the secondary mortgage markets such as to FNMA or
GNMA.
Principle
The amount of debt, not counting interest, left on a loan. Realtor
A real estate broker or an associate holding active membership in a local real estate
board affiliated with the National Association of Realtors.
Recision
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.
Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby
making it part of the public records.
Refinance
Obtaining a new mortgage loan on a property already owned. Often to replace
existing loans on the property.
Renegotiable Rate Mortgage
A loan in which the interest rate is adjusted periodically.
Reverse Annuity Mortgage
A form of mortgage in which the lender makes periodic payments to the borrower
using the borrower's equity in the home as Satisfaction of Mortgage: The document
issued by the mortgagee when the mortgage loan is paid in full.
Second Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first one.
Secondary Mortgage Market
The place where primary mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans.
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.
Shared Appreciation Mortgage
A mortgage in which a borrower receives a below-market interest rate in return for
which the lender receives a portion of the future appreciation in the value of the
property.
Simple Interest
Interest which is computed only on the principle balance.
Survey
A measurement of land, prepared by a registered land surveyor, showing the location
of the land with reference to know points, its dimensions, and the location and
dimensions of any buildings.
Sweat Equity
Equity created by a purchaser performing work on a property being purchased.
Title
A document that gives evidence of an individual's ownership of property.
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.
Title Search
An examination of municipal records to determine the legal ownership of property.
Usually is performed by a title company.
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.
Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a
specified number of years, and then receives a new interest rate adjusted to market
conditions at that time.
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.
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.
Verification of Deposit
A document signed by the borrower's financial institution verifying the status and
balance of his/her financial accounts.
Verification of Employment
A document signed by the borrower's employer verifying his/her position and salary.
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.
Mortgage Term Definition
If your loan is sold, you still have the same term, and the same loan; you just make the check out to another
institution. You will receive written instructions from both lenders notifying you when the loan will be transferred
and other relevant payment information.
Ideally, you will want to come up with at least 20% of the value of your new home as a down payment, to avoid
things like mortgage insurance payments. But, you probably qualify for plenty of financing arrangements that will get
you into a new home for as little as 3% of the asking price. We'll talk more about mortgages and those special
programs later.
The lender will also plug your income numbers into a couple of formulas: the front-end ratio (having to do with your
mortgage payments) and the back-end ratio (having to do with your debt).
Check the market closely to determine the available rates and costs associated with refinancing. These costs can
include items such as an appraisal and other various fees and points. Then determine what your new payment would
be if you refinanced. You can estimate how long it will take to recover the costs of refinancing by dividing your
closing costs by the difference between your new and old payments (your monthly savings). However, the ultimate
amount you may save depends on many factors, including your total refinancing costs, whether you sell your home
in the near future, and the effects of refinancing on your taxes. The old rule of thumb used to be that you shouldn't
refinance unless the new interest rate is at least two percentage points lower. However, many companies are now
offering zero point loans and low cost refinancing. Therefore, even if your rate change is less than one percentage
point, you may be able to save some money by refinancing.
If your current interest rate is significantly higher than today's lowest rates, you may be able to roll your loan costs
into the loan and still get a lower rate than you have today, thereby reducing your interest payments and saving
money immediately.
Second, if you are planning to stay in your home for at least three to five years, it may make sense to pay "points" (a
point equals 1% of the loan amount) and closing costs to get the lowest available rate.
And third, you can avoid laying out cash and still get a low rate by adding the points and closing costs to your new
mortgage. Does that mean shouldering a lot of extra debt? Not necessarily. If you've had your current mortgage for
at least three years, you've probably reduced your balance by several thousand dollars. So you may be able to tack
your closing costs onto your new loan and still end up with a mortgage that's smaller than your original one -- plus,
of course, a lower rate and lower monthly payment.
institution. You will receive written instructions from both lenders notifying you when the loan will be transferred
and other relevant payment information.
Ideally, you will want to come up with at least 20% of the value of your new home as a down payment, to avoid
things like mortgage insurance payments. But, you probably qualify for plenty of financing arrangements that will get
you into a new home for as little as 3% of the asking price. We'll talk more about mortgages and those special
programs later.
The lender will also plug your income numbers into a couple of formulas: the front-end ratio (having to do with your
mortgage payments) and the back-end ratio (having to do with your debt).
Check the market closely to determine the available rates and costs associated with refinancing. These costs can
include items such as an appraisal and other various fees and points. Then determine what your new payment would
be if you refinanced. You can estimate how long it will take to recover the costs of refinancing by dividing your
closing costs by the difference between your new and old payments (your monthly savings). However, the ultimate
amount you may save depends on many factors, including your total refinancing costs, whether you sell your home
in the near future, and the effects of refinancing on your taxes. The old rule of thumb used to be that you shouldn't
refinance unless the new interest rate is at least two percentage points lower. However, many companies are now
offering zero point loans and low cost refinancing. Therefore, even if your rate change is less than one percentage
point, you may be able to save some money by refinancing.
If your current interest rate is significantly higher than today's lowest rates, you may be able to roll your loan costs
into the loan and still get a lower rate than you have today, thereby reducing your interest payments and saving
money immediately.
Second, if you are planning to stay in your home for at least three to five years, it may make sense to pay "points" (a
point equals 1% of the loan amount) and closing costs to get the lowest available rate.
And third, you can avoid laying out cash and still get a low rate by adding the points and closing costs to your new
mortgage. Does that mean shouldering a lot of extra debt? Not necessarily. If you've had your current mortgage for
at least three years, you've probably reduced your balance by several thousand dollars. So you may be able to tack
your closing costs onto your new loan and still end up with a mortgage that's smaller than your original one -- plus,
of course, a lower rate and lower monthly payment.
A FEW FACTS!
| In this page you can learn how is loan system work plus some good and easy definition for mortgage term. We add it up some abbreviation just in case. As always let us know by email if you need to know something we don't have it here. We guaranty if we don't know it we will find the right answer for you |
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