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Mortgage Glossary
What is a 7/23 mortgage? What is a 5/25 mortgages?
Mortgages with a one time rate adjustment after seven years and five years respectively.
What is a 3/1 ARM, what is a 5/1 ARM, what is a 7/1 ARM, what is a 10/1 ARM?
Adjustable-rate mortgages in which the interest rate is fixed for three-year, five-year, seven-year and 10-year periods, respectively, but may adjust annually after that.
What is an “A” Credit Loan?
A mortgage for a borrower with a very good credit report and history of employment, often referred to as “vanilla loans”. These home loans are very easy to sell into the secondary market such as to the Fannie Mae because they match all the guidelines for these investors. These “A” borrows tend to get the very best rates, those rates which one sees advertised right across America, the ‘”teaser” rates.
What is an ”A-minus” Credit Loan?
A mortgage for a borrower with a very good credit report and history of employment, but with up to two 30 day late payments on the mortgage. They may also have a few 60 day late payments on other installment loans, like car payments, in the last year. . These home loans are very easy to sell into the secondary market such as to the Fannie Mae because they match all the guidelines for these investors.
What is meant by acceleration in mortgages?
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.
What is an Adjustable Rate Mortgage (ARM)?
A mortgage with an interest rate that changes periodically based on the changes in a specified index.
What is abstract title in propert?
A shortened history of a property’s legal status derived from the public records. These abstracts guide lawyers with recorded liens and encumbrances and other information about the property.
What is an Acceleration Clause in a mortgage?
A clause in a Mortgage that permits the lender to demand immediate repayment of the total home loan if a certain event occurs.
What is Accrual Rate on a mortgage?
The documented annual interest rate applied to a home loan. With Adjustable Rate Mortgages this interest rate is linked to a market index rate. Some bankers also refer to this as the note rate or the coupon rate as in a bond.
What is Accrued Interest on a mortgage?
The amount of interest that has accumulated on a home loan since the last payment was made by the borrower.
What is Adjusted Basis in mortgages
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
What is the Adjustment Date on a mortgage?
The date on which the interest rate changes on an adjustable-rate Mortgage (ARM).
What is the Adjustment interval in a mortgage?
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.
What is the Adjustment Period in a mortgage?
The time between one rate change and the next, for an adjustable rate mortgage (ARM). Typically the adjustment period is 1, 3, 5 or 7 years.
What is an Affordability Analysis for mortgages?
An analysis of a buyer’s 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.
What is an Agency Closing in property purchase?
Where a lender prefers to have a third party handling the closing on a property purchase. This is a very common type of escrow arrangement where title companies act as the agent for the lender.
What are Alternative Documentation Loans in mortgages?
These types of home loans have almost become the norm whereby less verification and documentation is required by the lender. Most of the time we will only require the most recent pay stubs and W-2 and the lender will verify employment with a simple phone call to your employer.
What is the American Land Title Association (ALTA)?
The national association of title insurance companies, charged with the responsibility of laying down rules and procedures and creating standard forms for title abstracts and title insurance policy forms.
What is Amortization on a mortgage?
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.
What is the Amortization Term on a mortgage?
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.
What is the Annual percentage rate (A.P.R.) on a mortgage?
APR is a measurement of the full cost of a home loan including interest and home 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 home loans.
What is an Application for a mortgage?
A form, commonly referred to as a 1003 form (ten-o-three), used to apply for a Mortgage and to provide information regarding a prospective borrower and the proposed security.
What is an Appraisal for a mortgage?
A written analysis of the estimated value of a property prepared by a qualified appraiser.
What is the Appraised Value of a property?
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
What is Appreciation in property?
An increase in the value of a property due to changes in market conditions or other causes.
What is Appurtenance in property?
Anything which is connected to, forms part of or relates to the land and which is transferred with the change of title. This could be a physical building such as a garage or farm building like a barn or it may be a right of way, and easement.
What is an Architect’s Inspection Certificate?
On new construction this document certifies that the house has been constructed in accordance with the approved specifications and agreed plans. With home loans this document is often required before the lender will allow the mortgage to close.
What is an Asset in mortgages?
Anything of monetary value that is owned by a person. Assets include real property, personal property and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).
What is an ARM in mortgages?
Adjustable-rate Mortgages in which the interest rate is fixed for three-year, five-year, seven-year and 10-year periods, respectively, but may adjust annually after that.
What is an ARM Cap in mortgages?
Although an adjustable rate Mortgage can fluctuate the changes are confined between limits. These limits are referred to as “caps” and control the maximum changes for both the annual or periodic changes and over the full life of the home loan. The maximum rate cap is called the ceiling and the minimum rate cap, the floor.
What is an ARM Loan Description?
This is the explanation of how an adjustable rate home loan works and will give examples of adjustments and worse cases. These can be requested from any lender.
What are Arrearages in mortgages?
The total accumulated amount owed in principal, interest, taxes and insurance (the PITI) by a delinquent borrower to a lender.
What is an Assessment in property?
The value that a local taxing authority places on real estate so that a local tax can be levied against the property for a specific purpose.
What are Assessments in property?
Annual charges for city or county improvements like sidewalks and sewers or the home owner’s fee in a condominium.
What is an Assignee in mortgages?
The one to whom a right, title or interest has been transferred for a home loan.
What is an Assignment in mortgages?
The transfer of a Mortgage from one person to another.
What are Assignment of Rents in a mortgage?
A document that can often be included in a Mortgage that transfers all rents and income from the property to the mortgagee.
What is an Assumable Mortgage?
A Mortgage that can be taken over ("assumed") by the buyer when a home is sold. A mortgage is assumable if it does not carry a "due on sale" clause. Assumable mortgages are most typically seen on VA mortgages.
What is Assumption in mortgages?
The transfer of the seller's existing Mortgage to the buyer. Assuming a home 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.
What is an Assumption clause in mortgages?
A provision that allows a buyer to assume, or take over, the responsibility for the seller's (original borrower's) Mortgage. The home loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
What is an Assumption Fee in mortgages?
The lender's charge for paperwork involved in processing records for a new buyer assuming an existing Mortgage.
What is an Automated Underwriting System in mortgages?
A way of processing and underwriting Mortgages. It is a fast way form Mortgage brokers to obtain an approval for a Mortgage using the internet. The idea is to get an approval from the lender within hours instead of weeks. These automated underwriting systems tend to use a data base of approved loans on which to base their approvals.
What is a Balance sheet?
A financial statement that shows assets, liabilities and net worth as of a specific date.
What is a Balloon mortgage?
A home loan which is amortized for a longer period than the term of the home loan. Usually this refers to a thirty-year amortization and a five year term. At the end of the term of the home loan, the remaining outstanding principal on the home loan is due. This final payment is known as a balloon payment.
What is a "B" Credit Loan?
A mortgage for a borrower that has had some credit problems, a few late mortgage payments or too much debt to qualify for a conventional mortgage. Rates and terms will generally be higher than the current market rates. The Loan to Value Ratio on this type of credit usually ranges between 70% LTV and 80% LTV depending on the lender.
What is a Balloon Payment for a mortgage?
The final lump sum paid at the maturity date of a balloon mortgage.
What is the definition of Bankruptcy?
The manner in which an individual or business is relieved on the payment of all debts after the submission of all assets to a court-appointed trustee, for the protection of the creditors.
What is Chapter 7 bankruptcy? Chapter 7 bankruptcy covers liquidation of the assets of a debtor in their order of priority.
What is Chapter 11 bankruptcy? Chapter 11 bankruptcy allows for a plan of reorganization to provide full or partial payment to all creditors.
What is Chapter 12 bankruptcy? Chapter 12 covers certain farm bankruptcies.
What is Chapter 13 bankruptcy? Chapter 13 covers restructuring of the consumer's debts. Fannie Mae and Freddie Mac will allow an individual to apply for a mortgage after the bankruptcy has been discharged for two years.
What are Basis Points in a mortgage?
One-hundredth of 1%. Used to describe the amount of change in yield in mortgages. For example, 1/2 of 1 percent (.50%) equals 50 basis points.
What is a Bill of Sale
A written document that transfers title of personal property.
What is a Binder in property purchase?
The document relating to a buyer’s commitment to purchase a home from a seller, subject to certain terms and conditions. This document normally gives a buyer five working days to consult with a mortgage banker and to apply for a loan.
What is meant by a Biweekly payment Mortgage?
A Mortgage that requires payments every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required, and they are usually drafted directly from the borrower's bank account. The result for the borrower is a substantial savings in interest.
What is a Blanket Mortgage?
A Mortgage covering at least two pieces of real estate as security for the same Mortgage.
What is a Bond in real estate?
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a Mortgage or a deed of trust.
Who is the Borrower (Mortgagor) in a mortgage?
One who applies for and receives a home loan in the form of a Mortgage with the intention of repaying the home loan in full.
What is a Breach in a mortgage contract?
A violation of any legal obligation.
What is a Bridge loan in real estate?
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."
What is a Broker in the mortgage business?
A company in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers receive a commission for their services which is normally paid by the lender. Brokers are able to arrange Home loans and Mortgages for their clients on a wholesale basis (reduced interest rate), due to the volume of Home loans they originate for lenders.
What is a Bundle of Rights in property?
The rights or interest of a person in a property. They are the exclusive rights to own, possess, use, enjoy and dispose of real property.
What is a Buydown Mortgage?
A temporary buydown is a Mortgage on which an initial lump sum payment is made to reduce a borrower's monthly payments during the first few years of a Mortgage. A permanent buydown reduces the interest rate over the entire life of a Mortgage.
What are "C" Paper Loans in mortgages?
A Mortgage for borrowers that have very little documented income, poor credit or a recent bankruptcy. Interest rates will usually be about 3 to 5% higher than the current rates. The Loan to Value Ratio on this type of home loan usually ranges between 65% and 75% depending on the lender.
What is a Call option in a mortgage?
A provision in the Mortgage agreement that gives the lender the right to call, or request, the Mortgage due and payable at the end of a specified period, for any reason.
What is a Cap in a mortgage?
A provision in an adjustable-rate Mortgage (ARM) agreement that limits how much the interest rate or Mortgage payments may increase.
What is a Capital Gain in property?
The taxable profit resulting from the sale of a property.
What is a Capital improvement in real estate?
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
What is Cash Flow in mortgages and real estate?
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.).
What is Cash on Hand when applying for a mortgage?
Cash held by a borrower that is not verifiable in a bank or other holding institution. This money is very rarely able to be counted as an asset.
What are interest rate Caps on a mortgage?
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 home loan.
What are Caps? (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate Mortgage may change.
What is a Cash-out refinance?
A refinance transaction in which the amount of money received from the new home loan exceeds the total of the money needed to repay the existing first Mortgage, closing costs, points and the amount required to satisfy any outstanding subordinate Mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
What are Cash Reserves?
Liquid assets (savings, money market funds, etc.) that the borrower retains after making the down payment and paying closing costs for his home loan.
What is a Census Tract?
A geographical area designated by the U.S. Bureau of Census for purposes of identifying the location of a specific property. The Home Mortgage Disclosure Act (HMDA) requires lenders report loan application data by the census tract in which the property is located.
What is a Certificate of Eligibility?
The document given to qualified veterans which entitles them to VA guaranteed Home 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)
What is a CO? What is a Certificate of Occupancy?
Written authorization given by a local municipality that allows a newly completed structure to be inhabited.
What is a Certificate of Reasonable Value? (CRV)
An appraisal issued by the Veterans Administration showing the property's current market value
What is a Certificate of title?
A statement provided by an abstract company, title company or attorney, stating that the title to real estate is legally held by the current owner.
What is a 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 home loans).
What is a Chain of title?
The chronological order of the title's transfer from the original owner to the present owner.
What is meant by Change Frequency?
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate Mortgage (ARM).
What is a Chattel?
An item of personal property such as a lighting fixture.
What is Clear title?
A title that is free of liens or legal questions as to ownership of the property.
What is a Closer?
Your closer is your contact at Acorn Home Mortgage CT. Your closer is responsible for reviewing and clearing your title work and any other legal documentation applicable to your Mortgage. Once your title is clear and your underwriter has issued a clear to close, your closer will arrange for a closing.
What is a 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.
What is a Closing cost item?
A fee that a homebuyer must pay at closing for a single service, tax or product (ie. origination fees and attorney's fees). Many closing cost items are included as numbered items on the HUD-1 statement.
What are 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. Mortgage Closing Costs
What is a Closing statement?
Also referred to as the HUD1, it is the final statement of costs incurred to close on a home loan or to purchase a home.
What is a Cloud on title?
Any conditions found during the title search that adversely affect the title to real estate. Clouds on title usually cannot be removed except by a quitclaim deed or court action.
What is a Co-borrower?
A person who signs a promissory note (Mortgage) along with the borrower. A co-borrower's signature guarantees that the home loan will be repaid, because the borrower and the co-borrower are equally responsible for the repayment. Also referred to as a co-maker or co-signor.
What is a COFI?
Adjustable-rate Mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.
What is Collateral?
An asset (such as a car or a home) that guarantees the repayment of a home loan. The borrower risks losing the asset if the home loan is not repaid according to the terms of the home loan contract.
What is a Collection?
The efforts used to make a delinquent Mortgage current and to file the notices needed to proceed with foreclosure. .
What is Combined Loan to Value? (CLTV)
The combined loan-to-value ratio is the sum of the balance of the loan in first position and all subordinate financing as a percentage of the value of the property.
What is a broker’s Commission?
The fee charged by a broker or agent for negotiating a real estate or home loan transaction. A commission is generally a percentage of the price of the property or home loan. .
What is a mortgage Commitment?
An agreement between the lender and borrower, an approval of the Mortgage to close at a future date subject to specific terms and conditions.
What is a mortgage Commitment Fee?
A fee paid usually at the time an interest rate is locked in. It commits both the lender and borrower to a specific interest rate for a specific time. Some commitment fees are refundable at closing. This fee is also known as the "up front lock-in fee."
What is a mortgage Commitment letter?
A document provided by the lender that details the terms and conditions of the loan approval for the borrower. See Mortgage Commitment Letter.
What are Common areas?
Those portions of a building, land and amenities that are owned (or managed) by a planned unit development (PUD)/condominium project's homeowners association (or a cooperative project's cooperative corporation) and used by all of the unit owners who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc. .
What is a Co-mortgager?
Another term to describe a Co-borrower.
What is a Community Home Improvement mortgage loan?
An alternative financing option that allows low to moderate income homebuyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
What is Community property?
In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse. .
What are Comparables in property?
An abbreviation for "comparable properties." Comparables are recently sold properties with traits similar to those of the property being purchased, ie. similar size, in a nearby location, with similar amenities. These properties can be used as a base comparison to help the appraiser determine the approximate fair market value of the property being purchased. .
What is the Community Reinvestment Act?
Federal legislation to offer Mortgages in areas historically undeveloped by lenders. This legislation enables lenders to be more flexible in the loan programs they offer low income and minority people.
What is a Comparable in Real Estate?
Recently sold properties that are used in the appraisal to determine the fair market value of the subject property. These comparable properties are approximately the same size, location and have similar amenities. Also known as "comps."
What is a Comparative Market Analysis?
A report prepared by a real estate company that shows recent sales prices of comparable homes that are in the neighborhood in which a client wants to purchase or sell a home. This report will also show the prices of properties currently listed for sale in the same neighborhood.
What is a Condominium?
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project and the exclusive use of certain limited common areas. When purchasing a condominium, lenders may have specific guidelines for providing a mortgage on a condo. The percent of owner occupied units is always required by the lender. Fannie Mae will allow up to 40% of the units to be non-owner occupied (leased to tenants). It is very important that the percentage of owner occupied units be know by the buyer at the beginning. If the unit has more than 40% of the condos leased, then a portfolio type of lender will have to be used. (A lender who will not sell the mortgage to the secondary market - see also Portfolio Lender). Lenders will also want documentation that the building has substantial financial reserves and a good record of payment as a condo association.
What is a Condominium conversion?
The changing of a rental property (two or more units) to the condominium form of ownership. Physical changes, as well as paperwork, may be necessary to conform to building and safety codes. .
What is a Condominium Declaration?
The basic condominium document that must be registered by the original property owner prior to selling the first unit. This document describes each unit, common areas and specifies elements of ownership that permanently govern its operation. Also known as a master deed.
What is a Conforming Mortgage loan?
Any home loan that meets the criteria and limits set forth by the largest buyers of home loans, Fannie Mae and Freddie Mac. .
What is a Constant Renewal?
An insurance renewal with the premium amount based on the original amount of the loan-not on the outstanding balance.
What is a Construction Escrow?
A title company pays the contractors for the lender. The title company also collects contractor's affidavits and lien waivers that the law requires. Before each draw of funds, the title company will update the title search to validate that no mechanic's liens have been filed.
What is Construction Financing?
A short term loan for financing the cost of construction. The lender will make payments to the builder at intervals as the work progresses, as evidenced through third party inspection certificates of completion.
What is a Construction loan?
A short term interim home 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.
What is a Construction Loan Draw?
The partial distribution of construction loan, based on the schedule of payments in the loan agreement.
What is a 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.
What is a Contingency in property purchase?
A condition that must be met before a contract is legally binding. For example, homebuyers often include a contingency that specifies that the contract is not binding until they obtain a satisfactory home inspection report from a qualified home inspector.
What is a 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.
What is a Conventional home loan or Mortgage?
A Mortgage not insured by FHA or guaranteed by the VA.
What is a Conversion Clause or Convertibility Clause or Option?
A provision in an ARM allowing the home 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.
What is a Convertible ARM?
An adjustable-rate Mortgage (ARM) that can be converted to a fixed-rate Mortgage under specified conditions. .
What is a Conveyance?
The transfer of title to real estate from one person to another by a written document such as a deed.
What is a Cooperative (co-op)?
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock. .
What is a Corporate relocation?
Arrangements under which an employer moves an employee to another location as part of the employer's normal course of business, or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity. .
What is a Cost Approach to Value?
An appraisal method by which the value of a property is calculated by estimating the replacement cost of the improvements, deducting the estimated depreciation then adding the value of the land as estimated by use of the market data approach.
What is a Cost of funds index (COFI)?
An index that is used to determine interest rate changes for certain adjustable-rate Mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings and advances of the 11th District members of the Federal Home loan Bank of San Francisco. .
What is a Counter-offer?
In a sales contract negotiation, a new offer made in response to an offer received. The counter-offer terminates the original offer.
What is a Coupon Rate?
The annual interest rate shown on the face of a Mortgage note.
What is a Covenant?
A clause in a Mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure. .
What are Covenants, Conditions and Restrictions? (CC&Rs)
These are used to designate restrictions on the use of the land and provide penalties for failure to comply. They are used by subdivider on newly divided areas. They include items such as setbacks and easements. They are usually recorded and disclosed in an investigation of public records.
What is a Credit in mortgages?
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date. .
What is a Credit bureau?
An agency that keeps your credit record on file. See also Credit Reporting Agency and Credit Repository. .
What is Credit history?
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner. .
What is a Credit Officer?
A credit officer has the authority to approve or decline a home loan. The credit officer uses the documentation that your underwriter collects from you and decides whether or not your home loan is approved. See also Underwriting and Underwriter. .
What is a Credit Rating?
A rating given to a person or business to establish credit worthiness based on present and past financial conditions.
What is a Credit Report?
A report documenting the credit history and current status of a borrower's credit standing.
What is a Credit reporting agency?
Company that collects information from several credit repositories, merges all the information and reports it in one form - merged credit report.
What is a Credit repository?
An organization that gathers, records, updates and stores financial information on an individual's credit history and reports it in one form - in-file credit report.
What is a 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.
What is a "D" Credit Loan?
A mortgage for a borrower that has no income or job history and a very poor payment history on all debts. If someone is a D Paper candidate he may expect to pay 4 to 6% higher than the current interest rates. The loan to value ratio on this type of credit usually averages between 50% and 70% LTV depending on the individual lender.
What is Debt?
An amount owed to another.
What is a 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.
What is a Deed?
The legal document conveying title to a property.
What is a Deed and Money Escrow?
This type of escrow is used by buyers and sellers. It is used when the buyer does not want to release funds until he is certain he has received title and the seller does not want to give the buyer a deed until he receives the funds. Disbursement of the proceeds is normally not made until the deed is recorded and title is updated to be certain no intervening liens have occurred.
What is a Deed-in-lieu?
A deed given by a borrower to the lender to avoid foreclosure proceedings.
What is a Deed of trust?
In many states, this document is used in place of a Mortgage to secure the payment of a note.
What is a Deed Restriction?
A limitation placed in a deed limiting or restricting the use of real estate.
What is a Default?
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a Mortgage.
What is 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 home loan balance. See negative amortization.
What is Deferred Maintenance?
Repair or maintenance of property that should have been done but has been postponed resulting in physical deterioration of the property.
What is a Deficiency Judgment?
An amount the borrower must pay if the sale at foreclosure does not raise enough money to pay the balance of the loan.
What is Delinquency on a loan?
Failure to make payments on time. This can lead to foreclosure.
What is the 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.
What is a de minimis PUD?
A planned unit development (PUD) in which the common areas are of minimal value and have little influence on the value of the property.
What is a Deposit in property?
Money given in advance to show intention to complete the purchase of a property. See also Good Faith Deposit.
What is Depreciation in property?
A decline in the value of property due to wear and tear, adverse changes in a neighborhood, or any other reason.
What are Disclosures in a mortgage?
Information that must be given to consumers about their financial dealings.
What is a Discount Point?
Additional charges required by a lender to buy the interest rate to a below-market rate. Each point represents one per cent of the total home loan amount.
What is a Devise in real estate?
Transfer of real estate under a will.
What is Documentation with a loan?
A list of documents that you will be required to provide when submitting a home loan application. See our Required Documents page.
What is a Down Payment in real estate?
Money paid to make up the difference between the purchase price and the Mortgage amount.
What is a Due-on-Sale-Clause in mortgages?
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.
What is Earnest Money?
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
What is an Easement in real estate?
A limited right to use another's land for a specific purpose which could include the running of utility cables or for gaining access to another property as in a shared driveway.
What is Economic Life in real estate?
The period over which a property will yield a return on the investment. The time during which a building is considered to be valuable.
What is the11th District Cost of Funds Index?
This index is the monthly weighted average cost of savings, borrowing and advances of member institutions of the Federal Home Loan Bank of San Francisco. This index usually reacts more slowly in fluctuating markets, adjustments in interest rates tied to this index will lag behind some other market indicators.
What is an Eminent Domain?
The process by which the government takes private land for public use.
What is Encroachment in real estate?
An unauthorized intrusion of real estate or personal property such as an overhanging roof, tree branches or roots or misplaced fences or walkway.
What is an Encumbrance in real estate?
A lien or claim to the title to real estate such as a Mortgage or easement.
What is an End Loan?
Permanent Mortgage financing secured to payoff a construction loan.
What is Entitlement in mortgages?
The VA home home loan benefit is called an entitlement (i.e. entitlement for a VA guaranteed home home loan). This is also known as eligibility.
What is the 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.
What is Equity in real estate?
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.
What is an Escrow in real estate?
An account held by the lender into which the home buyer pays money for tax or insurance payments. Also earnest deposits held pending home loan closing.
What are Escrow Disbursements in mortgages?
The use of escrow funds to pay real estate taxes, hazard insurance, Mortgage insurance, and other property expenses as they become due.
What is an Escrow Payment in real estate?
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.
What is an E-Z Doc Home Loan?
Mortgage loans that require less documentation than fully processed loans.
What is the Fair Housing Act?
Title VIII of the Civil Rights Act of 1968, prohibits discrimination in the sale, rental, or financing of housing and the provision of brokerage services on the basis of race, color, religion, national origin, sex, handicap or familial status. Section 801 (Policy) states: ''It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States."
What is Fannie Mae?
see Federal National Mortgage Association.
What is the Farmers Home Administration (FmHA)?
Provides financing to farmers and other qualified borrowers who are unable to obtain Home loans elsewhere.
What is the 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
What is the 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.
What is the 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.
What is the 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.
What is Fee Simple in real estate?
The most complete form of ownership conveyed for possibly infinite duration. There are no limitations with this type of ownership. Most property is owned fee simple.
What is an FHA home loan?
A home loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA Home loans ($155,250 as of 1/1/96), they are generous enough to handle moderately-priced homes almost anywhere in the country.
What is FHA Mortgage insurance?
Requires a fee (up to 2.25 percent of the home loan amount) paid at closing to insure the home loan with FHA. In addition, FHA Mortgage insurance requires an annual fee of up to 0.5 percent of the current home loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.
What is the FHLMC?
The Federal Home Loan Mortgage Corporation provides a secondary market for savings and Home loans by purchasing their conventional home loans. Also known as "Freddie Mac."
What is a Firm Commitment in mortgages?
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.
What is the Federal National Mortgage Association (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 makes Mortgage money more available and more affordable.
What is a First mortgage?
The primary lien against a property.">
What is a Fixed Installment?
The monthly payment due on a Mortgage loan including payment of both principal and interest.
What is a Fixed Rate home loan or Mortgage?
The Mortgage interest rate will remain the same on these Mortgages throughout the term of the Mortgage for the original borrower.
What is a Floating Rate?
An interest rate that normally uses the prime rate a base. The lender will charge a certain rate over the prime rate. This interest rate can change month to month and must be paid off in a short time frame. Construction loans usually use floating interest rate loans. The term floating rate can also refer to a borrower who chooses not to lock in an interest rate at time of application or during the loan process. He is usually hoping that the rates will go down and he can get better terms. During the time the loan is not locked in it is considered having a floating interest rate.
What is a Float Period?
The float period refers to the time between when you accept a home loan and when you lock in your rate. During this time the interest rate and points on your home loan will fluctuate with the market until you lock.
What is Flood Insurance?
Coverage above normal hazard insurance to cover damage caused by rising water. If the property is located in a flood zone area, flood insurance is required to obtain mortgages from any federally regulated lenders. Flood zones are designated through government flood plain maps and flood insurance is only obtainable if you live within these designated areas.
What is a Forbearance Agreement?
An agreement that a lending institution will delay exercising its right to foreclose on a loan as long as the borrower performs certain agreed upon terms and conditions.
What is a 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.
What is Freddie Mac?
see Federal Home Loan Mortgage Corporation
What is Free and Clear in mortgages?
A term used to describe the status of a Mortgage that has been completely paid off. The property is free of any liens or encumbrances such as tax liens, etc.
What is a 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.
What is the 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."
What is a Full Documentation Loan?
Mortgages that require the most information from the borrower. All information presented in the application must be verified. Most mortgage loans will use full documentation.
What is a Fully Indexed Rate?
The base index rate plus the margin on an adjustable rate mortgage plus the highest gross margin during the life of the loan.
What is a Gift Letter?
A letter verifying that funds given to a borrower are truly a gift and need not be repaid.
What is the Ginnie Mae?
see Government National Mortgage Association.
What is a Good Faith Deposit?
A sum of money given to demonstrate intention to complete the purchase. With regard to Mortgages, it is the sum of money given to demonstrate intention to complete the home loan, a show of good faith.
What is a Good Faith Estimate?
An estimate of charges that a borrower is likely to incur in connection with a settlement. This is required under RESPA (the Real Estate Settlement Proceedures Act)
What is the Government National Mortgage Association (GNMA)?
Also known as "Ginnie Mae," provides sources of funds for residential Mortgages, insured or guaranteed by FHA or VA.
What is a 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.
What is a Grantee in real estate?
In a deed, the buyer of real estate.
What is a Grantor in real estate?
In a deed, the seller of real estate.
What is Gross Income?
Total income before any expenses are deducted.
What is a Gross Monthly Rent ,Multiplier Approach? (GMRM)
An income approach to appraising income property that uses the rent that a property is expected to earn to obtain an indication of the property's value.
What is a 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.
What is a Guaranty in loans?
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.
What is a Guarantee Mortgage?
A Mortgage that is guaranteed by a third party.
What is Hazard Insurance?
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
What is a Home Equity home loan?
Sometimes referred to as a second Mortgage or borrowing against your home. The home loan allows you to tap into your home's built-up equity, which is the difference between the amount your home could be sold for, and the amount that you still owe. Homeowners often use a home-equity home loan for home improvements, to pay for a new car, or to finance their child's college education. A home-equity home loan is a good way to borrow money for two main reasons: 1.) the interest rate is usually one of the lowest home loan rates a borrower can get and 2.) the interest you pay on the home loan is usually tax-deductible. (Consult your own tax council for details)
There are two types of financing available from your home equity, a home equity loan and a home equity line of credit (he-lock). A home equity loan is like any other loan, agreed on an initial loan amount and repayable in equal installments of interest and principal over an agreed period. A home equity line of credit (HELOC) is an agreed amount where the borrower can draw up to this total amount and repay and reborrow as often as required over a set period of time, usually ten years. After that time the line of credit will revert to a loan and any outstanding balance must be repaid on a regular monthly basis covering both interest and outstanding principal over an agreed period.
What is a Homestead Exemption?
In some states, the home and property occupied by an owner are protected by law up to a certain amount from attachment and sale for involuntary liens.
What is a Housing Affordability Index?
Estimate of housing affordability based on the price of the median sales price of an existing single-family home, median income, mortgage rates and assumptions concerning down payment, property taxes and insurance.
What is 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.
What is a Hubbard Clause Contingency?
A clause in a property purchase contract that protects a buyer from having to close on the purchase of a new home until they have successfully managed to sell their current home. Many sellers do not wish to accept these clauses in their sales contracts in case the sales contract doesn’t close. A seller may favor a potential purchaser that doesn’t have a current property to sell or who does not make the purchase of the new home contingent on selling their current home. A seller may even accept a lower offer from such an unencumbered buyer. Understanding the Hubbard Clause
What is the HUD - U.S. Department of Housing and Urban Development?
Office of Housing/Federal Housing Administration within HUD insures home Mortgage loans made by lenders and sets minimum standards for such homes.
What is a 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, home 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.
What is an 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.
What is an 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 U.S. Treasury Security yields, the monthly average interest rate on Home loans closed by savings and home loan institutions and the monthly average Costs-of-Funds incurred by savings and home loans), which is then used to adjust the interest rate on an adjustable-rate Mortgage.
What is an 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.
What is an 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."
What is an Installment?
The regular periodic payment that a borrower agrees to make to a lender.
What is an Installment Sales Contract?
A contract to buy a home where the buyer purchases the home directly from the seller. The seller acts as the lender in this type of sale. The borrower usually does not receive title to the property until all payments and terms of the contract have been met. We are often able to arrange financing prior to the end of the installment sale contract. Also known as Seller Financing.
What is an Institutional Lender?
A financial institution that invests in mortgages and keeps them in their portfolio, often called a portfolio lender. Savings and Loans, mutual savings banks, life insurance companies, commercial banks, pension and trust funds are institutional or portfolio lenders.
What is an Insurance Binder?
Written evidence of temporary hazard coverage that. runs for a limited time only and must be replaced by a permanent policy on the subject property.
What is an Insured Mortgage?
A Mortgage that is protected by the Federal Housing Administration (FHA) or by private Mortgage insurance (MI).
What is Interest?
A charge paid for borrowing money. Interest is usually expressed as a percentage of the amount borrowed, or interest rate.
What is an 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.
What is an Interest Only Mortgages - What are Interest Only Loans?
A home loan where the borrower is only required to pay the accrued interest on the outstanding principal each period. There are no principal payments associated with these types of Mortgages. Interest only loans can be useful in reducing the monthly payment obligations for a borrower who is above the maximum permissible level of monthly loan payments, expressed as a ratio of gross monthly income. Interest only mortgages can also be used to enable a borrower to buy a more expensive property than would be possible with a regular amortizing loan. In recent years, the capital growth in the value of a home has often exceeded the annual principal payments on a Mortgage.
What is Interest Rate?
The annual rate of interest on the home loan, expressed as a percentage of 100.
What is an 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.
What is an Interest Rate Ceiling or Cap?
For an adjustable-rate Mortgage (ARM), the maximum interest rate, as specified in the Mortgage note.
What is an Interest Rate Floor?
For an adjustable-rate Mortgage (ARM), the minimum interest rate, as specified in the Mortgage note.
What is Interim Financing?
A construction home loan made during completion of a building or a project. A permanent home loan usually replaces this home loan after completion.
What is an Investor?
A money source for a lender.
What is a Joint Tenancy?
An equal undivided ownership of a property by two or more persons. The survivors take complete interest in the property upon death of any of the owners.
What is a Judgment in real estate?
The decision of a court that become liens against an individual or a lien on real estate of the individual.
What is a Jumbo home loan?
A home loan which is larger (more than $333,700 as of 1/1/03) than the limits set by the Federal National Mortgage Association and the Federal Home Mortgage Corporation. Because jumbo Home loans cannot be funded by these two agencies, they usually carry a higher interest rate.
What is a Junior Lien?
A mortgage that does not stand in first lien position. For example, a home equity loan.
What is a Late Charge?
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
What is a Leasehold Estate?
An estate whereby one has possession but not ownership of land and/or property.
What is a Legal Description?
A description of land sufficiently accurate so that an independent surveyor can locate and identify the property.
What is a 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.
What is a Lender?
Any licensed person or entity advancing funds that are to be repaid. Also known as a Mortgagee.
What are Liabilities in mortgages?
A person's financial obligations. Liabilities include long-term and short-term debt.
What is a Lien?
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
What is a 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.
What is a 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 home loan. See cap.
What is a Limited Documentation Loan?
Mortgage loans that require less documentation than fully processed loans.
What are Liquid Assets?
Cash or assets that can be immediately converted to cash.
What is a Loan?
A sum of borrowed money (principal) that is generally repaid with interest.
What is a Loan Amount?
The amount of debt, not including interest.
What is a Loan Officer?
Your home loan officer is your personal guide throughout the Mortgage process. He or she will help you to identify your needs, select a home loan program, complete the application process, offer advice and answer any questions you may have.
What is Loan Servicing?
The lender that provides the borrower's mortgage will service the loan in the following ways:
Collect all monthly payments
Make all disbursements to the lender
Place predetermined monies in all escrow accounts
Make all payments from escrow accounts to appropriate agencies (real estate taxes, insurance, PMI companies, etc.)
What is a Loan-to-Value Ratio? (LTV)
The relationship between the amount of the Mortgage loan and either the appraised value of the property or the purchase price (which ever is the lesser amount) expressed as a percentage.
What is a Lock?
Lender's guarantee that the Mortgage rate quoted will be good for a specific number of days from day of application.
What is a Lock Period?
A lock period refers to the amount of time prior to closing that you can secure an interest rate for your home loan. Generally, lock periods range from 30 days to over 90 days.
What is a Margin?
The amount a lender adds to the index on an adjustable rate Mortgage to establish the adjusted interest rate.
What is 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.
What is a Marketable Title?
A title that is free and clear of objectionable liens, clouds or other title defects. A title that enables an owner to sell his property freely to others and that others will accept without objection.
What is Maturity for a mortgage loan?
The date on which the principal balance of a home loan becomes due and payable.
What is a Mechanics Lien?
A lien allowed by statue to contractors, laborers and suppliers on buildings where work has been performed or for which materials were supplied and payment is still due. In a new subdivision it is important to obtain lien waivers for the off-site improvements such as street paving, sewers, street lights and water lines. A lien waiver can be a partial waiver or a final waiver. A partial waiver is used where only partial payment has been provided to the contractor.
What is a Median Sales Price?
The year-to-year percent change in the median sales price of an existing single-family home. The median price is that price at which one-half of the homes sold fell below the price and one-half of the sales were above it.
What is a Member, Appraisal Institute? (MAl)
A designation awarded to a member of the American Institute Qf Real Estate Appraisers.
What are Metes and Bounds?
A description of land Iocation where the boundaries are defined by directions and distances.
What is a Minimum Down Payment?
Minimum down payment is the amount of money you are required to put down at closing. If the minimum is 10%, you must make a down payment of at least $10,000 on a $100,000 house.
What is a MIP (Mortgage Insurance Premium)?
It is insurance from FHA to the lender against incurring a loss on account of the borrower's default.
What is a Monthly Payment?
The amount paid each month towards the principal and interest amount of a home loan. The monthly payment may or may not include taxes and insurance.
What is a 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 home loan balance therefore increases instead of decreasing.
What is a Mortgage?
A legal document that pledges a property to the lender as security for payment of a debt. A home loan for a house. Also referred to as a lien or claim against real property.
What is a Mortgage Banker?
A company that originates Mortgages exclusively for resale in the secondary Mortgage market.
What is a Mortgage Broker?
An entity that specializes in home loan originations and receives a commission, usually from the lender, for matching borrowers with lenders. The Mortgage broker performs some or most of the home loan processing functions such as taking home loan applications, ordering credit reports, appraisals and title reports. Typically, the Mortgage broker does not underwrite the home loan and generally does not use its own funds for closing.
What is a Mortgagee?
The lender.
What is a Mortgage Commitment Letter
A formal offer from a bank, or other lending institution, which states the terms under which it agrees to advance Mortgage funds to a homebuyer.
What is Mortgage Insurance
Money paid to insure the Mortgage when the down payment is less than 20 percent.
What is a Mortgage Insurance Premium
The payment made by a borrower to the lender for transmittal to HUD. These payments help defray the cost of the FHA Mortgage insurance program and provide a reserve fund to protect lenders against loss in insured Mortgage transactions. In FHA insured Mortgages, this represents an annual rate of one-half of 1 percent paid by the borrower on a monthly basis.
What is a 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.
What is a Mortgage Servicing Disclosure?
The lender must inform the homeowner if the servicing rights of this Mortgage loan may be sold to another lender.
What is a Mortgage Note?
A written promise to pay a sum of money at a stated interest rate over a specific term. It is secured by the Mortgage.
What is a Mortgagor?
The borrower or homeowner.
What is Negative Amortization?
Occurs when your monthly payments are not large enough to pay all the interest due on the home loan. This unpaid interest is added to the unpaid balance of the home loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the home loan.
What is Net Effective Income?
The borrower's gross income minus federal income tax.
What is a No Documentation Mortgage?
A no-documentation, or "no-doc", Mortgage is a specialty home loan product that generally requires a down payment of at least 5% to 30% of the home purchase price. No-doc Mortgages are generally a wise choice for self-employed people, those who do not wish to verify their income and those with a brief or blemished credit history, or no credit at all. The benefits of a no-doc Mortgage include a shorter application process, since you are not required to provide income, employment or asset documentation, as well as a streamlined approval, because there is little subsequent verification. However, no-doc Mortgages generally will be at slightly higher interest rates. Lenders will still require to see evidence that the borrower has income, usually by requesting recent bank statements and by having access to tax returns.
What is Net Worth?
The value of all assets, including cash less total liabilities.
What is a No Income Verifying Loan?
A mortgage program, especially for the self employed that does not need to verify the income reported by the borrower.
What is a 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.
What is a Non-conforming home loan?
A conventional home Mortgage that does not meet the criteria of Fannie Mae or Freddie Mac for various reasons including home loan amount, home loan characteristics or underwriting guidelines. Non-conforming Home loans usually incur a higher rate and/or points.
What is a Non-Owner Occupant?
A borrower on the Mortgage who will not be living in the property. The borrower on an investment property is also known as a non-owner occupant.
What is a Note in a mortgage?
A legal document that obligates a borrower to repay a Mortgage loan at a stated interest rate during a specified period of time.
What is the Office of Thrift Supervision (OTS)?
The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home loan Bank Board
What is a 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.
What is an Open-End Mortgage?
A mortgage that provides that the outstanding loan balance may be increased upon mutual agreement of the lender and the borrower.
What is an Option ARM?
The Option ARM has been developed to offer a client an opportunity to decide monthly how much money to pay toward the mortgage. The Option ARM payment may be a low introductory rate below prime, interest only, 30 year fixed, or 15 year fixed. The homeowner selects what payment fits each month. This mortgage is usually calculated off an index such as the LIBOR, COSI, or COFI. (These indices are tracked daily in most financial papers.) These indexes are more stable than the bond and therefore are less likely to incur large swings.
What are Operating Expenses?
The cost of maintaining a multi-unit property.
What is an Origination Fee?
The fee charged by a lender to prepare home loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the home loan.
What is Owner Financing?
A property purchase transaction in which the party selling the property provides all or part of the financing.
What is an Owner Occupant?
A borrower who will be residing in the subject property as his principal residence.
What is Par?
The principle amount of a Mortgage with no premiums or discounts. A loan interest rate that is quoted at no points.
What is a 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.
What is Payment Shock?
For underwriting purposes, a situations where the borrower has a significant increase in his monthly housing debt.
What is a Periodic Payment Cap?
A limit on the amount that payments can increase or decrease during any one adjustment period.
What is a 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.
What is a Permanent home loan?
A long term Mortgage, usually ten years or more. Also called an "end loan."
What is a Piggyback loan?
An alternative to private Mortgage insurance, also known as a second trust loan. The most common type is an 80/10/10 where a first Mortgage is taken out for 80% of the home's value, a down payment of 10% is made and another 10% is financed in a second trust at a higher interest rate. In some cases, you may even qualify for a piggyback loan with as little as a 5% down payment.
What is PITI?
Principal, Interest, Taxes and Insurance. Also called monthly housing expense.
What is a Planned Unit Development? (PUD)
This type of property is a cross between a single family home and a condominium. The property can be a single family home, condominium or townhome with an owner's association. PUD units are taxed individually. They also have individual utility meters. A PUD generally requires the same mortgage documentation as a single family home.
What is a 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.
What are Points (loan discount points)?
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the home loan amount (i.e. two points on a $100,000 Mortgage would cost $2,000).
What is a Power of Attorne?
A legal document authorizing one person to act on behalf of another.
What is a Pre-Approval?
The process of determining how much money you will be eligible to borrow before you apply for a home loan.
What are 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.
What is a Prepayment?
A privilege in a Mortgage permitting the borrower to make payments in advance of their due date. Allows the borrower to pay the home loan off sooner and save on interest. Not all Mortgage agreements allow for prepayment, and some lenders will charge a fee for early repayment of debt, see Prepayment Premium.
What is a Prepayment Penalty or Premium?
Money charged for an early repayment of debt. Prepayment penalties are permitted to be charged on home loans.
What is a Pre-Qualification?
A process to determine how much of a mortgage a borrower may qualify for based on income and credit information. This is not an approval of a mortgage but does indicate to a realtor how much a potential purchaser could borrow.
What is a 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.
What is a Primary Residence?
A property where the homeowner occupies and takes title to. A person can have only one primary residence.
What is Principal in a loan?
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a Mortgage.
What is a Principal Balance?
The outstanding balance of principal on a Mortgage not including interest or any other charges.
What is Principal, Interest, Taxes, and Insurance (PITI - pronounced ‘pitty’)?
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.
What is 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 home 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 home loan's structure.
What is Processing in mortgages?
Processing is the steps a lender takes to gather borrower information for underwriting. Processing includes getting the credit report, appraisal, verification of employment, assets, etc.
What is Proration of Taxes?
A calculation to divide the taxes equally or proportionately. At the time of the sale, the seller pays taxes covering his period of ownership of the property and the buyer pays taxes covering his period of ownership of the property.
What is a Purchase Money Mortgage?
A Mortgage given by a purchaser of real estate to the seller as part of consideration in a sales contract.
What is a Quick Claim Deed?
A deed that releases any claim or interest in a property. This deed is used very often in a divorce situation where one spouse quick claims his interest in the home owned jointly. It is important to remember that this does not limit the liability for paying the mortgage. Both parties are still on the note and mortgage. If the spouse who receives the house in the divorce does not make mortgage payments in a timely manner, the other spouse who has quick claimed the property will be responsible for the mortgage payments. Any late mortgage payments will also show up on both spouse's credit reports. This has surprised many divorced people trying to get a new mortgage.
What is Qualification with mortgages?
Qualification is the initial process to verify that a borrower has enough cash and sufficient income to purchase a home. Qualification is not an approval because necessary documents have not been collected and check from the borrower. At Acorn Home Mortgage, we will have made credit enquiries to access the credit worthiness of the borrower and the likely interest rate that they would pay. Without this, we cannot estimate the maximum amount of money that the borrower could borrow. Once pre-approved, a lender has actually confirmed the current interest rate at which they would be prepared to lend, subject to satisfactory documentation.
What is a Qualifying Ratio?
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.
What is Rate?
In lending, the amount of interest on the home loan expressed as an interest rate or annual percentage rate (APR) of the principal.
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.
What are Rate/Point Options?
These options are all the combinations of interest rate and points that are offered on a particular home loan. Usually, paying more points lowers interest rates.
What is a Real Estate Broker?
A middleman or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property but generally represents the owner.
What is a Realtor?
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
What is a Real Estate Agent?
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
What is the Real Estate Settlement Procedures Act (RESPA)?
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
What is Rescind or Recission in mortgages?
To cancel a contract. With respect to Mortgage refinancing, the law that gives the homeowner three days to cancel a contract once it is signed if the transaction uses equity in the home as security.
What are Recording Fees?
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.
What is a Redemption Period?
The time period in a foreclosure that a borrower who is in default cannot be evicted or be divested of legal title. This time period also allows the borrower to repay his debt in full.
What is Redlining?
The alleged identification by some lenders of specific geographic areas for the purpose of denying mortgages in a discriminating way.
What is a Refinance?
Obtaining a new Mortgage loan on a property already owned. Often to replace existing Home loans on the property.
What is Regulation H?
A Federal regulation used by the Secretary of Housing and Urban Development (HUD) to implement the Real Estate Settlement Procedures Act (RESPA).
What is Regulation Z?
Federal regulation by the Federal Reserve Board to carry out the purpose of the Truth-in-Lending Act.
What is a Renegotiable Rate Mortgage?
A home loan in which the interest rate is adjusted periodically. See adjustable rate Mortgage.
What is Rescind in mortgage contracts?
To cancel in such a way as to treat the contract as if it never existed.
What is a Rescission?
The right of a borrower to cancel a credit transaction where the borrower's primary residence is used as security for the debt. Used in a refinance or home equity loan.
What is a Resident Alien?
An individual who is not a U.S. citizen but who has an Alien Registration Receipt Card. He is authorized to live and work in the U.S. on a permanent basis. Generally, no problem in obtaining a mortgage.
What is 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.
What is a Restrictive Covenant?
An agreement that restricts the use of one's land in some way.
What is a Reverse Annuity Mortgage (RAM) (Reverse Mortgage)?
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 home loan.
What is a 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.
What is a Right of Recision?
The right of a borrower on some types of loans (refinancing, home equity loan) under the Truth in Lending law, to rescind a transaction within a period of 3 days after the closing has taken place. If the borrower does not exercise his Right of Recision, all monies are then disbursed to the borrower on the fourth day after the closing.
What are Sales Concessions?
Money or other things of value paid or transferred by the seller to the buyer to entice him to purchase the property. These concessions will be deducted from the sales price before the loan amount to be borrowed will be calculated.
What is a Satisfaction of Mortgage?
The document issued by the Mortgagee when the Mortgage loan is paid in full. Also called a "release of Mortgage."
What is a Second Home?
A single-family home that the borrower occupies in addition to his primary residence. This home cannot be income producing property.
What is a Second Mortgage?
A Mortgage made subsequent to another Mortgage and subordinate to the first one.
What is the Secondary Mortgage Market?
The place where primary Mortgage lenders sell the Mortgages they make to obtain more funds to originate more new home loans. It provides liquidity for the lenders.
What is Security in mortgages?
The property that will be pledged as collateral for a home loan.
What is Selling the Mortgage?
This occurs when the current lender that the borrower is paying his Mortgage to sells his loan to another mortgage servicing company. The old lender is required by federal law to inform the borrower if servicing rights have been sold. The only change this means for the borrower is where to send his Mortgage payments. All terms of the borrower's Mortgage do not change.
What is a Seller Carry-back?
An agreement in which the owner of a property provides financing, often in combination with an assumable Mortgage. See owner financing.
What is a 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.
What is a Servicing in mortgages?
All the steps and operations a lender performs to keep a home loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
What are Settlement/Settlement Costs?
see closing/closing costs
What is a 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.
What is Simple Interest?
Interest which is computed only on the principle balance.
What is the Society of Real Estate Appraisers? (SREA)
A professional organization for qualified appraisers.
What is a 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.
What is a 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 home loan.
What is Subordinate Financing?
A mortgage that is junior to the mortgage in first position on a property. Usually a home equity mortgage would be subordinate to the first or primary mortgage.
What is a Subordination Agreement?
A recorded legal agreement that acknowledges that a debt is inferior to the interest of another debt in the same property. In a refinance, when replacing the first mortgage with a new loan but keeping the second or third mortgage, the lender of the second or third mortgage must agree in writing to subordinate their loan to the new first mortgage.
What is a Subordination Clause?
The clause inserted into a Mortgage document that keeps the Mortgage secondary to any other Mortgages. Mortgages are valued according to the chronological order on which they are put onto a property. In the event of a foreclosure, all the money from the foreclosure sale goes to payoff the lender of the first mortgage. Whatever money is left goes to payoff the holder of the second third or fourth mortgages. When a first mortgage is paid off, the second advances to become the first, the third to second and so on. When a second advances to first position, it could prevent a homeowner from refinancing. Hence a subordination clause is inserted in the second mortgage so that it remains in second position.
What is a 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.
What is Sweat Equity?
Equity created by a purchaser performing work on a property being purchased.
What is a Tax Lien?
A claim against the property for non-payment of property taxes. May also mean non-payment of income tax.
What is a Tenancy in Common?
Ownership of property by two or more persons with no right of survivorship. Interest is passed on to heirs after the death of an owner. This form of ownership is usually requested if the mortgage is part of a business deal.
What is a Tenancy at Will?
An interest created with the consent of owner and tenant, which may be terminated at the will of either party.
What is a Tenancy of Sufferance?
The interest of a tenant who enters lawfully, but stays on after the expiration of the lease without the landlord's permission.
What is a Tenancy by the Entirety?
A form of ownership offered only to married couples. This ownership allows for automatic right of survivorship if one of the spouses die.
What is a Term in a mortgage?
The life of the home loan. The period of time between the beginning loan date on the legal documents and the date the entire balance of the home loan is due.
What is a 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.
What is a Title?
A document that gives evidence of an individual's ownership of property.
What is 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.
What is a Title Search?
An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.
What is a Total Expense Ratio?
Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.
What is a Trailing Spouse?
A person who leaves his existing employment and moves with his spouse who has been relocated by her employer. Usually, the underwriter will want to know if the trailing spouse has the potential for employment in the new location but has not found a job yet. Not all lenders count trailing spouse income.
What is a Transfer Fees?
Fees collected from buyer and seller of a property to defray city or county charges for changing the mortgage records.
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What is a Transfer Tax?
A tax levied on the sale of real property, a sales tax on real estate.
What is a Treasury Securities Index?
This ARM index is published weekly by the Federal Reserve Board. It gives the constant maturity interest rate for treasury securities. This interest rate is the one that investors pay to buy government debts.
What is a Trust Deed? (Deed of Trust)
An instrument in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary) and reconveyed upon payment in full.
What is Truth-In-Lending?
A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the home loan. Also known as Regulation Z.
What is a 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 home loan due with 30 days notice at the end of seven or 10 years. also called "Super Seven" or "Premier" Mortgage.
What is an Unimproved Property?
Vacant land
What is Underwriting in mortgages?
The analysis of risk involved in granting a Mortgage loan to a particular borrower and the process by which a lender determines whether the risk is acceptable. Underwriting involves the evaluation of the property as outlined in the appraisal report, and of the borrower's ability and willingness to repay the home loan.
What is an Underwriter in mortgages?
The underwriter is responsible for reviewing and verifying all your documents and information and submitting it to a credit officer.
What is Usury?
Interest charged in excess of the legal rate established by law.
What is a Vacancy Factor?
A percentage rate showing the loss from gross rental income due to vacancy on income property.
What is a Veteran Affairs (VA) loan?
A long-term, low- or no-down payment home loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.
What is a 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 home 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.
What is a Variable Rate Mortgage (VRM)?
see adjustable rate Mortgage
What is a Verification of Deposit (VOD)?
A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.
What is a Verification of Employment (VOE)?
A document signed by the borrower's employer verifying his/her position and salary.
What is a Verification of Mortgage (VOM)?
A written verification that is sent by the lender to the borrower's current mortgage holder. It will provide a 12 to 24 month payment history on the current mortgage.
What is a Voluntary Conveyance?
A transfer of title, usually from a delinquent mortgagor to the mortgagee, given voluntarily to satisfy the balance due on a defaulted loan and to avoid foreclosure proceedings. Also called" deed in lieu of foreclosure" or "voluntary deed."
What is a Waiver of Lien?
Usually a contractor who holds legal claim to the value of materials provided until paid in full. If this contractor executes a waiver of lien, the claim is surrendered against the property that the work has been done on.
What is Warehousing?
Depositing loans in a bank by a lender for sale at a later date. The lender borrows lending funds on a short-term basis with the permanent real estate loan pledged as collateral. This form of interim financing is used until the real estate loan is sold to the permanent investor.
What is a Warehouse Fee?
Many Mortgage firms must borrow funds on a short term basis in order to originate Home 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.
What is a Warranty Deed?
A deed in which the grantor guarantees good clear title to the property. This is always the best deed to want when buying a home.
What is a Wire Transfer?
A quick way to move cash between banks. Very often funds for closing a wire transferred from the lender to whomever is doing the closing on mortgage loan.
What is a Wraparound Mortgage?
Results when an existing assumable home loan is combined with a new home 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.
What is a Yield on an investment?
The effective annual amount of income that is being accrued on an investment. Yield is expressed as a percentage of the price originally paid.
What is a Zero Lot Line?
The placing of a structure on a lot so one side rests directly on the lot's boundary line. Such construction is restricted by setback ordinances.
What is Zoning?
Public regulations to control land use in a district.
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