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Mortgage
Glossary
| Acceleration
Clause |
A
provision in a mortgage that gives the lender the right
to demand payment of the entire principal balance if a
monthly payment is missed. |
| Acceptance |
An
offeree’s consent to enter into a contract and be
bound by the terms of the offer. |
| Additional
Principal Payment |
A
payment by a borrower of more than the scheduled
principal amount due in order to reduce the remaining
balance on the loan. |
| Adjustable-Rate
Mortgage (ARM) |
A
mortgage that permits the lender to adjust the
mortgage's interest rate periodically on the basis of
changes in a specified index. Interest rates may move up
or down, as market conditions change. |
| Adjusted
Basis |
The
original cost of a property plus the value of any
capital expenditures for improvements to the property
minus any depreciation taken. |
| Adjustment
Date |
The
date on which the interest rate changes for an
adjustable-rate mortgage (ARM). |
| Adjustment
Period |
The
period that elapses between the adjustment dates for an
adjustable-rate mortgage (ARM). |
| Administrator |
A
person appointed by a probate court to administer the
estate of a person who died intestate. |
| Affordability
Analysis |
A
detailed analysis of your ability to afford the purchase
of a home. An affordability analysis takes into
consideration your income, liabilities, and available
funds, along with the type of mortgage you plan to use,
the area where you want to purchase a home, and the
closing costs that you might expect to pay. |
| Amenity |
A
feature of real property that enhances its
attractiveness and increases the occupant’s or
user’s satisfaction although the feature is not
essential to the property’s use. Natural amenities
include a pleasant or desirable location near water,
scenic views of the surrounding area, etc. Human-made
amenities include swimming pools, tennis courts,
community buildings, and other recreational facilities. |
| Amortization |
The
gradual repayment of a mortgage loan by installments. |
| Amortization
Schedule |
A
timetable for payment of a mortgage loan. An
amortization schedule shows the amount of each payment
applied to interest and principal and shows the
remaining balance after each payment is made. |
| Amortization
Term |
The
amount of time required to amortize the mortgage loan.
The amortization term is expressed as a number of
months. For example, for a 30-year fixed-rate mortgage,
the amortization term is 360 months. |
| Amortize |
To
repay a mortgage with regular payments that cover both
principal and interest. |
| Annual
Mortgagor Statement |
A
report sent to the mortgagor (the borrower) each year.
The report shows how much was paid in taxes and interest
during the year, as well as the remaining mortgage loan
balance at the end of the year. |
| Annual
Percentage Rate (Apr) |
The
cost of a mortgage stated as a yearly rate; includes
such items as interest, mortgage insurance, and loan
origination fee (points). |
| Annuity |
An
amount paid yearly or at other regular intervals, often
on a guaranteed dollar basis. |
| Application |
A
form used to apply for a mortgage loan and to record
pertinent information concerning a prospective mortgagor
and the proposed security. Lenders use the information
on the loan application to evaluate whether or not they
can give the loan, and if so, the amount of money they
can lend. |
| Appraisal |
A
written analysis of the estimated value of a property
prepared by a qualified appraiser. Contrast with home
inspection. |
| Appraised
Value |
An
opinion of a property's fair market value, based on an
appraiser's knowledge, experience, and analysis of the
property. |
| Appraiser |
A
person qualified by education, training, and experience
to estimate the value of real property and personal
property. |
| Appreciation |
An
increase in the value of a property due to changes in
market conditions or other causes. The opposite of
depreciation. |
| Assessed
Value |
The
valuation placed on property by a public tax assessor
for purposes of taxation. |
| Assessment |
The
process of placing a value on property for the strict
purpose of taxation. May also refer to a levy against
property for a special purpose, such as a sewer
assessment. |
| Assessment
Rolls |
The
public record of taxable property. |
| Assessor |
A
public official who establishes the value of a property
for taxation purposes. |
| Asset |
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, and so on). More |
| Assignment |
The
transfer of a mortgage from one person to another. |
| Assumable
Mortgage |
A
mortgage that can be taken over ("assumed") by
the buyer when a home is sold. |
| Assumption |
The
transfer of the seller’s existing mortgage to the
buyer. See assumable mortgage. |
| Assumption
Clause |
A
provision in an assumable mortgage that allows a buyer
to assume responsibility for the mortgage from the
seller. The loan does not need to be paid in full by the
original borrower upon sale or transfer of the property. |
| Assumption
Fee |
The
fee paid to a lender (usually by the purchaser of real
property) resulting from the assumption of an existing
mortgage. |
| Attorney-In-Fact |
One
who holds a power of attorney from another to execute
documents on behalf of the grantor of the power. |
|
|
- B -
| Balance
Sheet |
A
financial statement that shows assets, liabilities, and
net worth as of a specific date. |
| Balloon
Mortgage |
A
mortgage that has level monthly payments that will
amortize it over a stated term but that provides for a
lump sum payment to be due at the end of an earlier
specified term. The principal and interest on the loan
are amortized over a longer period than the actual term
of the mortgage. |
| Balloon
Payment |
The
final lump sum payment that is made at the maturity date
of a balloon mortgage. |
| Bankrupt |
A
person, firm, or corporation that, through a court
proceeding, is relieved from the payment of all debts
after the surrender of all assets to a court-appointed
trustee. |
| Bankruptcy |
A
proceeding in a federal court in which a debtor who owes
more than his or her assets can relieve the debts by
transferring his or her assets to a trustee. |
| Before-Tax
Income |
Income
before taxes are deducted. |
| Beneficiary |
The
person designated to receive the income from a trust,
estate, or a deed of trust. |
| Bequeath |
To
transfer personal property through a will. |
| Betterment |
An
improvement that increases property value as
distinguished from repairs or replacements that simply
maintain value. |
| Bill Of
Sale |
A
written document that transfers title to personal
property. |
| Binder |
A
preliminary agreement, secured by the payment of an
earnest money deposit, under which a buyer offers to
purchase real estate. |
| Biweekly
Payment Mortgage |
A
mortgage that requires payments to reduce the debt every
two weeks (instead of the standard monthly payment
schedule). The 26 (or possibly 27) biweekly payments are
each equal to one-half of the monthly payment that would
be required if the loan were a standard 30-year
fixed-rate mortgage, and they are usually drafted from
the borrower’s bank account. The result for the
borrower is a substantial savings in interest. |
| Blanket
Insurance Policy |
A
single policy that covers more than one piece of
property (or more than one person). |
| Blanket
Mortgage |
The
mortgage that is secured by a cooperative project, as
opposed to the share loans on individual units within
the project. |
| Bona
Fide |
In
good faith, without fraud. |
| Bond |
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. |
| Breach |
A
violation of any legal obligation. |
| Bridge
Loan |
A
form of second trust that is collateralized by the
borrower's present home (which is usually for sale) in a
manner that allows the proceeds to be used for closing
on a new house before the present home is sold. Also
known as "swing loan." |
| Broker |
A
person who, for a commission or a fee, brings parties
together and assists in negotiating contracts between
them. |
| Budget |
A
detailed plan of income and expenses expected over a
certain period of time. A budget can provide guidelines
for managing future investments and expenses. |
| Budget
Category |
A
category of income or expense data that you can use in a
budget. You can also define your own budget categories
and add them to some or all of the budgets you create.
"Rent" is an example of an expense category.
"Salary" is a typical income category. |
| Building
Code |
Local
regulations that control design, construction, and
materials used in construction. Building codes are based
on safety and health standards. |
| Buydown
Account |
An
account in which funds are held so that they can be
applied as part of the monthly mortgage payment as each
payment comes due during the period that an interest
rate buydown plan is in effect. |
| Buydown
Mortgage |
A
temporary buydown is a mortgage on which an initial lump
sum payment is made by any party 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. |
|
|
- C-
| Call
Option |
A
provision in the mortgage that gives the mortgagee (the
lender) the right to call the mortgage due and payable
at the end of a specified period for whatever reason. |
| Cap |
A
provision of an adjustable-rate mortgage (ARM) that
limits how much the interest rate or mortgage payments
may increase or decrease. See lifetime payment cap,
lifetime rate cap, periodic payment cap, and periodic
rate cap. |
| Capital |
(1)
Money used to create income, either as an investment in
a business or an income property. (2) The money or
property comprising the wealth owned or used by a person
or business enterprise. (3) The accumulated wealth of a
person or business. (4) The net worth of a business
represented by the amount by which its assets exceed
liabilities. |
| Capital
Expenditure |
The
cost of an improvement made to extend the useful life of
a property or to add to its value. |
| Capital
Improvement |
Any
structure or component erected as a permanent
improvement to real property that adds to its value and
useful life. |
| Cash-Out
Refinance |
A
refinance transaction in which the amount of money
received from the new 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. |
| Certificate
Of Deposit |
A
document written by a bank or other financial
institution that is evidence of a deposit, with the
issuer's promise to return the deposit plus earnings at
a specified interest rate within a specified time
period. See adjustable rate mortgage (ARM). |
| Certificate
Of Deposit Index |
An
index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans. It
represents the weekly average of secondary market
interest rates on six-month negotiable certificates of
deposit. See adjustable-rate mortgage. |
| Certificate
Of Eligibility |
A
document issued by the federal government certifying a
veteran's eligibility for a Department of Veterans
Affairs (VA) mortgage. |
| Certificate
Of Reasonable Value (CRV) |
A
document issued by the Department of Veterans Affairs
(VA) that establishes the maximum value and loan amount
for a VA mortgage. |
| 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. |
| Chain
Of Title |
The
history of all of the documents that transfer title to a
parcel of real property, starting with the earliest
existing document and ending with the most recent. |
| Change
Frequency |
The
frequency (in months) of payment and/or interest rate
changes in an adjustable-rate mortgage (ARM). |
| Chattel |
Another
name for personal property. |
| Clear
Title |
A
title that is free of liens or legal questions as to
ownership of the property. |
| Closing |
A
meeting at which a sale of a property is finalized by
the buyer signing the mortgage documents and paying
closing costs. Also called "settlement." At
this meeting, ownership of the property is transferred
from the seller to the buyer. |
| Closing
Cost Item |
A
fee or amount that a home buyer must pay at closing for
a single service, tax, or product. Closing costs are
made up of individual closing cost items such as
origination fees and attorney's fees. Many closing cost
items are included as numbered items on the HUD-1
statement. |
| Closing
Costs |
Expenses
(over and above the price of the property) incurred by
buyers and sellers in transferring ownership of a
property. Closing costs normally include an origination
fee, an attorney's fee, taxes, an amount placed in
escrow, and charges for obtaining title insurance and a
survey. Closing costs percentage will vary according to
the area of the country; lenders or Realtors® often
provide estimates of closing costs to prospective
homebuyers. |
| Closing
Statement |
See
HUD-1 statement. |
| Cloud
On Title |
Any
conditions revealed by a title search that adversely
affect the title to real estate. Usually clouds on title
cannot be removed except by a quitclaim deed, release,
or court action. |
| Coinsurance |
A
sharing of insurance risk between the insurer and the
insured. Coinsurance depends on the relationship between
the amount of the policy and a specified percentage of
the actual value of the property insured at the time of
the loss. |
| Coinsurance
Clause |
A
provision in a hazard insurance policy that states the
amount of coverage that must be maintained -- as a
percentage of the total value of the property -- for the
insured to collect the full amount of a loss. |
| Collateral |
An
asset (such as a car or a home) that guarantees the
repayment of a loan. The borrower risks losing the asset
if the loan is not repaid according to the terms of the
loan contract. |
| Collection |
The
efforts used to bring a delinquent mortgage current and
to file the necessary notices to proceed with
foreclosure when necessary. |
| Co-Maker |
A
person who signs a promissory note along with the
borrower. A co-maker's signature guarantees that the
loan will be repaid, because the borrower and the
co-maker are equally responsible for the repayment. See
endorser. |
| Commission |
The
fee charged by a broker or agent for negotiating a real
estate or loan transaction. A commission is generally a
percentage of the price of the property or loan. |
| Commitment
Letter |
A
formal offer by a lender stating the terms under which
it agrees to lend money to a home buyer. Also known as a
"loan commitment." |
| Common
Area Assessments |
Levies
against individual unit owners in a condominium or
planned unit development (PUD) project for additional
capital to defray homeowners' association costs and
expenses and to repair, replace, maintain, improve, or
operate the common areas of the project. |
| Common
Areas |
Those
portions of a building, land, and amenities owned (or
managed) by a planned unit development (PUD) or
condominium project's homeowners' association (or a
cooperative project's cooperative corporation) that are
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. |
| Common
Law |
An
unwritten body of law based on general custom in England
and used to an extent in the United States. |
| Community
Land Trust Mortgage Option |
An
alternative financing option that enables low- and
moderate-income home buyers to purchase housing that has
been improved by a nonprofit Community Land Trust and to
lease the land on which the property stands. |
| 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. |
| Community
Seconds® |
An
alternative financing option for low- and
moderate-income households under which an investor
purchases a first mortgage that has a subsidized second
mortgage behind it. The second mortgage may be issued by
a state, county, or local housing agency, foundation, or
nonprofit organization. Payment on the second mortgage
is often deferred and carries a very low interest rate
(or no interest rate at all). Part of the debt may be
forgiven incrementally for each year the buyer remains
in the home. |
| Comparables |
An
abbreviation for "comparable properties"; used
for comparative purposes in the appraisal process.
Comparables are properties like the property under
consideration; they have reasonably the same size,
location, and amenities and have recently been sold.
Comparables help the appraiser determine the approximate
fair market value of the subject property. |
| Compound
Interest |
Interest
paid on the original principal balance and on the
accrued and unpaid interest. |
| Condemnation |
The
determination that a building is not fit for use or is
dangerous and must be destroyed; the taking of private
property for a public purpose through an exercise of the
right of eminent domain. |
| 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 sometimes the exclusive
use of certain limited common areas. |
| Condominium
Conversion |
Changing
the ownership of an existing building (usually a rental
project) to the condominium form of ownership. |
| Condominium
Hotel |
A
condominium project that has rental or registration
desks, short-term occupancy, food and telephone
services, and daily cleaning services and that is
operated as a commercial hotel even though the units are
individually owned. |
| Construction
Loan |
A
short-term, interim loan for financing the cost of
construction. The lender makes payments to the builder
at periodic intervals as the work progresses. |
| Contingency |
A
condition that must be met before a contract is legally
binding. For example, home purchasers often include a
contingency that specifies that the contract is not
binding until the purchaser obtains a satisfactory home
inspection report from a qualified home inspector. |
| Contract |
An
oral or written agreement to do or not to do a certain
thing. |
| Conventional
Mortgage |
A
mortgage that is not insured or guaranteed by the
federal government. Contrast with government mortgage. |
| Convertibility
Clause |
A
provision in some adjustable-rate mortgages (ARMs) that
allows the borrower to change the ARM to a fixed-rate
mortgage at specified timeframes after loan origination. |
| Convertible
ARM |
An
adjustable-rate mortgage (ARM) that can be converted to
a fixed-rate mortgage under specified conditions. |
| Cooperative
(Co-Op) |
A
type of multiple ownership in which the residents of a
multiunit housing complex own shares in the cooperative
corporation that owns the property, giving each resident
the right to occupy a specific apartment or unit. |
| Cooperative
Corporation |
A
business trust entity that holds title to a cooperative
project and grants occupancy rights to particular
apartments or units to shareholders through proprietary
leases or similar arrangements. |
| Cooperative
Mortgages |
Mortgages
related to a cooperative project. This usually refers to
the multifamily mortgage covering the entire project but
occasionally describes the share loans on the individual
units. |
| Cooperative
Project |
A
residential or mixed-use building wherein a corporation
or trust holds title to the property and sells shares of
stock representing the value of a single apartment unit
to individuals who, in turn, receive a proprietary lease
as evidence of title. |
| Corporate
Relocation |
Arrangements
under which an employer moves an employee to another
area 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. |
| 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. See
adjustable-rate mortgage (ARM). |
| Covenant |
A
clause in a mortgage that obligates or restricts the
borrower and that, if violated, can result in
foreclosure. |
| Credit |
An
agreement in which a borrower receives something of
value in exchange for a promise to repay the lender at a
later date. |
| 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. |
| Credit
Life Insurance |
A
type of insurance often bought by mortgagors because it
will pay off the mortgage debt if the mortgagor dies
while the policy is in force. |
| Creditor |
A
person to whom money is owed. |
| Credit
Report |
A
report of an individual's credit history prepared by a
credit bureau and used by a lender in determining a loan
applicant's creditworthiness. |
| Credit
Reporting Agency (Or Bureau) |
An
organization that prepares reports that are used by
lenders to determine a potential borrower's credit
history. The agency obtains data for these reports from
a credit repository as well as from other sources. |
| Credit
Repository |
An
organization that gathers, records, updates, and stores
financial and public records information about the
payment records of individuals who are being considered
for credit. |
|
|
- D-
| Debt |
An
amount owed to another. See installment loan and
revolving liability. |
| Deed |
The
legal document conveying title to a property. |
| Deed-In-Lieu |
A
deed given by a mortgagor to the mortgagee to satisfy a
debt and avoid foreclosure. Also called a
"voluntary conveyance." |
| Deed Of
Trust |
The
document used in some states instead of a mortgage;
title is conveyed to a trustee. |
| Default |
Failure
to make mortgage payments on a timely basis or to comply
with other requirements of a mortgage. |
| Delinquency |
Failure
to make mortgage payments when mortgage payments are
due. |
| Deposit |
A
sum of money given to bind the sale of real estate, or a
sum of money given to ensure payment or an advance of
funds in the processing of a loan. See earnest money
deposit. |
| Depreciation |
A
decline in the value of property; the opposite of
appreciation. |
| Discount
Points |
See
point. |
| Dower |
The
rights of a widow in the property of her husband at his
death. |
| Down
Payment |
The
part of the purchase price of a property that the buyer
pays in cash and does not finance with a mortgage. |
| Due-On-Sale
Provision |
A
provision in a mortgage that allows the lender to demand
repayment in full if the borrower sells the property
that serves as security for the mortgage. |
| Due-On-Transfer
Provision |
This
terminology is usually used for second mortgages. See
due-on-sale provision. |
|
|
- E-
| Earnest
Money Deposit |
A
deposit made by the potential home buyer to show that he
or she is serious about buying the house. |
| Easement |
A
right of way giving persons other than the owner access
to or over a property. |
| Effective
Age |
An
appraiser’s estimate of the physical condition of a
building. The actual age of a building may be shorter or
longer than its effective age. |
| Effective
Gross Income |
Normal
annual income including overtime that is regular or
guaranteed. The income may be from more than one source.
Salary is generally the principal source, but other
income may qualify if it is significant and stable. |
| Eminent
Domain |
The
right of a government to take private property for
public use upon payment of its fair market value.
Eminent domain is the basis for condemnation
proceedings. |
| Employer-Assisted
Housing |
A
special housing initiative that offers several different
ways for employers to work with local lenders to develop
plans to assist their employees in purchasing homes. |
| Encroachment |
An
improvement that intrudes illegally on another’s
property. |
| Encumbrance |
Anything
that affects or limits the fee simple title to a
property, such as mortgages, leases, easements, or
restrictions. |
| Endorser |
A
person who signs ownership interest over to another
party. Contrast with co-maker. |
| Equal
Credit Opportunity Act (Ecoa) |
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 |
A
homeowner's financial interest in a property. Equity is
the difference between the fair market value of the
property and the amount still owed on its mortgage. |
| Escrow |
An
item of value, money, or documents deposited with a
third party to be delivered upon the fulfillment of a
condition. For example, the deposit by a borrower with
the lender of funds to pay taxes and insurance premiums
when they become due, or the deposit of funds or
documents with an attorney or escrow agent to be
disbursed upon the closing of a sale of real estate. |
| Escrow
Account |
The
account in which a mortgage servicer holds the
borrower’s escrow payments prior to paying property
expenses. |
| Escrow
Analysis |
The
periodic examination of escrow accounts to determine if
current monthly deposits will provide sufficient funds
to pay taxes, insurance, and other bills when due. |
| Escrow
Collections |
Funds
collected by the servicer and set aside in an escrow
account to pay the borrower’s property taxes, mortgage
insurance, and hazard insurance. |
| Escrow
Disbursements |
The
use of escrow funds to pay real estate taxes, hazard
insurance, mortgage insurance, and other property
expenses as they become due. |
| Escrow
Payment |
The
portion 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. Known as "impounds" or
"reserves" in some states. |
| Estate |
The
ownership interest of an individual in real property.
The sum total of all the real property and personal
property owned by an individual at time of death. |
| Eviction |
The
lawful expulsion of an occupant from real property. |
| Examination
Of Title |
The
report on the title of a property from the public
records or an abstract of the title. |
| Exclusive
Listing |
A
written contract that gives a licensed real estate agent
the exclusive right to sell a property for a specified
time, but reserving the owner’s right to sell the
property alone without the payment of a commission. |
| Executor |
A
person named in a will to administer an estate. The
court will appoint an administrator if no executor is
named. "Executrix" is the feminine form. |
|
|
- F-
| Fair
Credit Reporting Act |
A
consumer protection law that regulates the disclosure of
consumer credit reports by consumer/credit reporting
agencies and establishes procedures for correcting
mistakes on one's credit record. |
| Fair
Market Value |
The
highest price that a buyer, willing but not compelled to
buy, would pay, and the lowest a seller, willing but not
compelled to sell, would accept. |
| Fannie
Mae |
A
New York Stock Exchange company and the largest non-bank
financial services company in the world. It operates
pursuant to a federal charter and is the nation's
largest source of financing for home mortgages. |
| Fannie
Mae Properties |
Fannie
Mae owns, manages, and has available for sale,
single-family detached homes, two- to four-unit
properties, condominiums, and townhouses in a variety of
neighborhoods. The number, type, and sales price may
vary substantially. The homes vary in age and may
require repairs. Fannie Mae homes are sold through local
real estate brokers whose contact information is
provided in the Fannie Mae Properties for Sale search
results on homepath.com. |
| Fannie
Mae's Community Home Buyer's Programsm |
An
income-based community lending model, under which
mortgage insurers and Fannie Mae offer flexible
underwriting guidelines to increase a low- or
moderate-income family's buying power and to decrease
the total amount of cash needed to purchase a home.
Borrowers who participate in this model are required to
attend pre-purchase home-buyer education sessions. |
| Fannie
97® |
A
financing option for a fixed-rate mortgage that offers
home buyers a 3 percent down payment loan with a term
between 15 and 30 years. The mortgage features a
loan-to-value (LTV) percentage of 97 percent, and is
designed to expand homeownership opportunities for
people with modest incomes. Borrowers must take a
pre-purchase home-buyer education session to qualify for
a Fannie 97 mortgage. |
| Federal
Housing Administration (FHA) |
An
agency of the U.S. Department of Housing and Urban
Development (HUD). Its main activity is the insuring of
residential mortgage loans made by private lenders. The
FHA sets standards for construction and underwriting but
does not lend money or plan or construct housing. |
| Fee
Simple |
The
greatest possible interest a person can have in real
estate. |
| Fee
Simple Estate |
An
unconditional, unlimited estate of inheritance that
represents the greatest estate and most extensive
interest in land that can be enjoyed. It is of perpetual
duration. When the real estate is in a condominium
project, the unit owner is the exclusive owner only of
the air space within his or her portion of the building
(the unit) and is an owner in common with respect to the
land and other common portions of the property. |
| FHA
Coinsured Mortgage |
A
mortgage (under FHA Section 244) for which the Federal
Housing Administration (FHA) and the originating lender
share the risk of loss in the event of the mortgagor's
default. |
| FHA
Mortgage |
A
mortgage that is insured by the Federal Housing
Administration (FHA). Also known as a government
mortgage. |
| Finder's
Fee |
A
fee or commission paid to a mortgage broker for finding
a mortgage loan for a prospective borrower. |
| Firm
Commitment |
A
lender’s agreement to make a loan to a specific
borrower on a specific property. |
| First
Mortgage |
A
mortgage that is the primary lien against a property. |
| Fixed
Installment |
The
monthly payment due on a mortgage loan. The fixed
installment includes payment of both principal and
interest. |
| Fixed-Rate
Mortgage (FRM) |
A
mortgage in which the interest rate does not change
during the entire term of the loan. |
| Fixture |
Personal
property that becomes real property when attached in a
permanent manner to real estate. |
| Flood
Insurance |
Insurance
that compensates for physical property damage resulting
from flooding. It is required for properties located in
federally designated flood areas. |
| Foreclosure |
The
legal process by which a borrower in default under a
mortgage is deprived of his or her interest in the
mortgaged property. This usually involves a forced sale
of the property at public auction with the proceeds of
the sale being applied to the mortgage debt. |
| Forfeiture |
The
loss of money, property, rights, or privileges due to a
breach of legal obligation. |
| 401(K)/403(B) |
An
employer-sponsored investment plan that allows
individuals to set aside tax-deferred income for
retirement or emergency purposes. 401(k) plans are
provided by employers that are private corporations.
403(b) plans are provided by employers that are not for
profit organizations. |
| 401(K)/403(B)
Loan |
Some
administrators of 401(k)/403(b) plans allow for loans
against the monies you have accumulated in these plans
-- monies must be repaid to avoid serious penalty
charges. |
| 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.
|
|
|
- G-
| Government
Mortgage |
A
mortgage that is insured by the Federal Housing
Administration (FHA) or guaranteed by the Department of
Veterans Affairs (VA) or the Rural Housing Service (RHS).
Contrast with conventional mortage. |
| Government
National Mortgage Association |
A
government-owned corporation within the U.S. Department
of Housing and Urban Development (HUD). Created by
Congress on September 1, 1968, GNMA assumed
responsibility for the special assistance loan program
formerly administered by Fannie Mae. Popularly known as
Ginnie Mae. |
| Grantee |
The
person to whom an interest in real property is conveyed. |
| Grantor |
The
person conveying an interest in real property. |
| Ground
Rent |
The
amount of money that is paid for the use of land when
title to a property is held as a leasehold estate rather
than as a fee simple estate. |
| Group
Home |
A
single-family residential structure designed or adapted
for occupancy by unrelated developmentally disabled
persons. The structure provides long-term housing and
support services that are residential in nature. |
| Growing-Equity
Mortgage (GEM) |
A
fixed-rate mortgage that provides scheduled payment
increases over an established period of time, with the
increased amount of the monthly payment applied directly
toward reducing the remaining balance of the mortgage. |
| Guarantee
Mortgage |
A
mortgage that is guaranteed by a third party. |
| Guaranteed
Loan |
Also
known as a government mortgage. |
|
|
- H-
| Hazard
Insurance |
Insurance
coverage that compensates for physical damage to a
property from fire, wind, vandalism, or other hazards. |
| Home
Equity Conversion Mortgage (Hecm) |
A
special type of mortgage that enables older home owners
to convert the equity they have in their homes into
cash, using a variety of payment options to address
their specific financial needs. Unlike traditional home
equity loans, a borrower does not qualify on the basis
of income but on the value of his or her home. In
addition, the loan does not have to be repaid until the
borrower no longer occupies the property. Sometimes
called a reverse mortgage. |
| Home
Equity Line Of Credit |
A
mortgage loan, which is usually in a subordinate
position, that allows the borrower to obtain multiple
advances of the loan proceeds at his or her own
discretion, up to an amount that represents a specified
percentage of the borrower's equity in a property. |
| Home
Inspection |
A
thorough inspection that evaluates the structural and
mechanical condition of a property. A satisfactory home
inspection is often included as a contingency by the
purchaser. Contrast with appraisal. |
| Homekeepersm |
Fannie
Mae's adjustable-rate conventional reverse mortgage,
which allows older homeowners to borrow against the
value of their homes and receive the proceeds according
to the payment option they select. The amount available
is based on the number of borrowers and their ages and
the adjusted property value. Anyone 62 years or older
who either owns his or her own home free and clear or
has very low mortgage debt is eligible. |
| Homeowners'
Association |
A
nonprofit association that manages the common areas of a
planned unit development (PUD) or condominium project.
In a condominium project, it has no ownership interest
in the common elements. In a PUD project, it holds title
to the common elements. |
| Homeowner's
Insurance |
An
insurance policy that combines personal liability
insurance and hazard insurance coverage for a dwelling
and its contents. |
| Homeowner's
Warranty (HOW) |
A
type of insurance that covers repairs to specified parts
of a house for a specific period of time. It is provided
by the builder or property seller as a condition of the
sale. |
| Homestyle®
Mortgage Loan |
A
mortgage that enables eligible borrowers to obtain
financing to remodel, repair, and upgrade their existing
homes or homes that they are purchasing. See also
HomeStyle Standard Mortgage, HomeStyle Remodeler,
HomeStyle Community Mortgage and HomeStyle Consumer
Energy Loan. |
| Housing
Expense Ratio |
The
percentage of gross monthly income that goes toward
paying housing expenses. |
| HUD
Median Income |
Median
family income for a particular county or metropolitan
statistical area (MSA), as estimated by the Department
of Housing and Urban Development (HUD). |
| HUD-1
Statement |
A
document that provides an itemized listing of the funds
that are payable at closing. Items that appear on the
statement include real estate commissions, loan fees,
points, and initial escrow amounts. Each item on the
statement is represented by a separate number within a
standardized numbering system. The totals at the bottom
of the HUD-1 statement define the seller's net proceeds
and the buyer's net payment at closing. The blank form
for the statement is published by the Department of
Housing and Urban Development (HUD). The HUD-1 statement
is also known as the "closing statement" or
"settlement sheet." |
|
|
- I-
| Income
Property |
Real
estate developed or improved to produce income. |
| Index |
A
number used to compute the interest rate for an
adjustable-rate mortgage (ARM). The index is generally a
published number or percentage, such as the average
interest rate or yield on Treasury bills. A margin is
added to the index to determine the interest rate that
will be charged on the ARM. This interest rate is
subject to any caps that are associated with the
mortgage. |
| In-File
Credit Report |
An
objective account, normally computer-generated, of
credit and legal information obtained from a credit
repository. |
| Inflation |
An
increase in the amount of money or credit available in
relation to the amount of goods or services available,
which causes an increase in the general price level of
goods and services. Over time, inflation reduces the
purchasing power of a dollar, making it worth less. |
| Initial
Interest Rate |
The
original interest rate of the mortgage at the time of
closing. This rate changes for an adjustable-rate
mortgage (ARM). Sometimes known as "start
rate" or "teaser." |
| Installment |
The
regular periodic payment that a borrower agrees to make
to a lender. |
| Installment
Loan |
Borrowed
money that is repaid in equal payments, known as
installments. A furniture loan is often paid for as an
installment loan. |
| Insurable
Title |
A
property title that a title insurance company agrees to
insure against defects and disputes. |
| Insurance |
A
contract that provides compensation for specific losses
in exchange for a periodic payment. An individual
contract is known as an insurance policy, and the
periodic payment is known as an insurance premium. |
| Insurance
Binder |
A
document that states that insurance is temporarily in
effect. Because the coverage will expire by a specified
date, a permanent policy must be obtained before the
expiration date. |
| Insured
Mortgage |
A
mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance
(MI). If the borrower defaults on the loan, the insurer
must pay the lender the lesser of the loss incurred or
the insured amount. |
| Interest |
The
fee charged for borrowing money. |
| 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, although it is not used
for an adjustable-rate mortgage (ARM) with payment
change limitations. |
| Interest
Rate |
The
rate of interest in effect for the monthly payment due. |
| Interest
Rate Buydown Plan |
An
arrangement wherein the property seller (or any other
party) deposits money to an account so that it can be
released each month to reduce the mortgagor's monthly
payments during the early years of a mortgage. During
the specified period, the mortgagor's effective interest
rate is "bought down" below the actual
interest rate. |
| Interest
Rate Ceiling |
For
an adjustable-rate mortgage (ARM), the maximum interest
rate, as specified in the mortgage note. |
| Interest
Rate Floor |
For
an adjustable-rate mortgage (ARM), the minimum interest
rate, as specified in the mortgage note. |
| Investment
Property |
A
property that is not occupied by the owner. |
| Ira
(Individual Retirement Account) |
A
retirement account that allows individuals to make
tax-deferred contributions to a personal retirement
fund. Individuals can place IRA funds in bank accounts
or in other forms of investment such as stocks, bonds,
or mutual funds. |
|
|
- J-
| Joint
Tenancy |
A
form of co-ownership that gives each tenant equal
interest and equal rights in the property, including the
right of survivorship. |
| Judgment |
A
decision made by a court of law. In judgments that
require the repayment of a debt, the court may place a
lien against the debtor's real property as collateral
for the judgment's creditor. |
| Judgment
Lien |
A
lien on the property of a debtor resulting from the
decree of a court. |
| Judicial
Foreclosure |
A
type of foreclosure proceeding used in some states that
is handled as a civil lawsuit and conducted entirely
under the auspices of a court. |
| Jumbo
Loan |
A
loan that exceeds Fannie Mae’s mortgage amount limits.
Also called a nonconforming loan. |
|
|
There are no entries
for this letter
|
|
|
|
- L-
| Late
Charge |
The
penalty a borrower must pay when a payment is made a
stated number of days (usually 15) after the due date. |
| Lease |
A
written agreement between the property owner and a
tenant that stipulates the conditions under which the
tenant may possess the real estate for a specified
period of time and rent. |
| Leasehold
Estate |
A
way of holding title to a property wherein the mortgagor
does not actually own the property but rather has a
recorded long-term lease on it. |
| Lease-Purchase
Mortgage Loan |
An
alternative financing option that allows low- and
moderate-income home buyers to lease a home from a
nonprofit organization 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 is earmarked for
deposit to a savings account in which money for a
downpayment will accumulate. |
| Legal
Description |
A
property description, recognized by law, that is
sufficient to locate and identify the property without
oral testimony. |
| Liabilities |
A
person's financial obligations. Liabilities include
long-term and short-term debt, as well as any other
amounts that are owed to others. |
| Liability
Insurance |
Insurance
coverage that offers protection against claims alleging
that a property owner's negligence or inappropriate
action resulted in bodily injury or property damage to
another party. |
| Lien |
A
legal claim against a property that must be paid off
when the property is sold. |
| 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. See cap. |
| Lifetime
Rate Cap |
For
an adjustable-rate mortgage (ARM), a limit on the amount
that the interest rate can increase or decrease over the
life of the loan. See cap, interest rate ceiling and
interest rate floor. |
| Line Of
Credit |
An
agreement by a commercial bank or other financial
institution to extend credit up to a certain amount for
a certain time to a specified borrower. See home equity
line of credit. |
| Liquid
Asset |
A
cash asset or an asset that is easily converted into
cash. |
| Loan |
A
sum of borrowed money (principal) that is generally
repaid with interest. |
| Loan
Commitment |
See
commitment letter. |
| Loan
Origination |
The
process by which a mortgage lender brings into existence
a mortgage secured by real property. |
| Loan-To-Value
(LTV) Percentage |
The
relationship between the principal balance of the
mortgage and the appraised value (or sales price if it
is lower) of the property. For example, a $100,000 home
with an $80,000 mortgage has a LTV percentage of 80
percent. |
| Lock-In |
A
written agreement in which the lender guarantees a
specified interest rate if a mortgage goes to closing
within a set period of time. The lock-in also usually
specifies the number of points to be paid at closing. |
| Lock-In
Period |
The
time period during which the lender has guaranteed an
interest rate to a borrower. See lock-in. |
|
|
- M-
| Margin |
For
an adjustable-rate mortgage (ARM), the amount that is
added to the index to establish the interest rate on
each adjustment date, subject to any limitations on the
interest rate change. |
| Master
Association |
A
homeowners' association in a large condominium or
planned unit development (PUD) project that is made up
of representatives from associations covering specific
areas within the project. In effect, it is a
"second-level" association that handles
matters affecting the entire development, while the
"first-level" associations handle matters
affecting their particular portions of the project. |
| Maturity |
The
date on which the principal balance of a loan, bond, or
other financial instrument becomes due and payable. |
| Maximum
Financing |
A
mortgage amount that is within 5 percent of the highest
loan-to-value (LTV) percentage allowed for a specific
product. Thus, maximum financing on a fixed-rate
mortgage would be 90 percent or higher, because 95
percent is the maximum allowable LTV percentage for that
product. |
| Merged
Credit Report |
A
credit report that contains information from three
credit repositories. When the report is created, the
information is compared for duplicate entries. Any
duplicates are combined to provide a summary of a your
credit. |
| Modification |
The
act of changing any of the terms of the mortgage. |
| Money
Market Account |
A
savings account that provides bank depositors with many
of the advantages of a money market fund. Certain
regulatory restrictions apply to the withdrawal of funds
from a money market account. |
| Money
Market Fund |
A
mutual fund that allows individuals to participate in
managed investments in short-term debt securities, such
as certificates of deposit and Treasury bills. |
| 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. |
| Monthly
Payment Mortgage |
A
mortgage that requires payments to reduce the debt once
a month. |
| Mortgage |
A
legal document that pledges a property to the lender as
security for payment of a debt. |
| Mortgage
Banker |
A
company that originates mortgages exclusively for resale
in the secondary mortgage market. |
| Mortgage
Broker |
An
individual or company that brings borrowers and lenders
together for the purpose of loan origination. Mortgage
brokers typically require a fee or a commission for
their services. |
| Mortgagee |
The
lender in a mortgage agreement. |
| Mortgage
Insurance |
A
contract that insures the lender against loss caused by
a mortgagor's default on a government mortgage or
conventional mortgage. Mortgage insurance can be issued
by a private company or by a government agency such as
the Federal Housing Administration (FHA). Depending on
the type of mortgage insurance, the insurance may cover
a percentage of or virtually all of the mortgage loan.
See private mortgage insurance. |
| Mortgage
Insurance Premium (MIP) |
The
amount paid by a mortgagor for mortgage insurance,
either to a government agency such as the Federal
Housing Administration (FHA) or to a private mortgage
insurance (MI) company. |
| Mortgage
Life Insurance |
A
type of term life insurance often bought by mortgagors.
The amount of coverage decreases as the principal
balance declines. In the event that the borrower dies
while the policy is in force, the debt is automatically
satisfied by insurance proceeds. |
| Mortgagor |
The
borrower in a mortgage agreement. |
| Multidwelling
Units |
Properties
that provide separate housing units for more than one
family, although they secure only a single mortgage. |
| Multifamily
Mortgage |
A
residential mortgage on a dwelling that is designed to
house more than four families, such as a high-rise
apartment complex. |
| Multifamily
Properties |
Fannie
Mae provides financing for multifamily (buildings with
five or more units) rental properties through a
nationwide network of mortgage lenders. |
|
|
- N-
| Negative
Amortization |
A
gradual increase in mortgage debt that occurs when the
monthly payment is not large enough to cover the entire
principal and interest due. The amount of the shortfall
is added to the remaining balance to create
"negative" amortization. |
| Net
Cash Flow |
The
income that remains for an investment property after the
monthly operating income is reduced by the monthly
housing expense, which includes principal, interest,
taxes, and insurance (PITI) for the mortgage,
homeowners' association dues, leasehold payments, and
subordinate financing payments. |
| Net
Worth |
The
value of all of a person's assets, including cash, minus
all liabilities. |
| No
Cash-Out Refinance |
A
refinance transaction in which the new mortgage amount
is limited to the sum of the remaining balance of the
existing first mortgage, closing costs (including
prepaid items), points, the amount required to satisfy
any mortgage liens that are more than one year old (if
the borrower chooses to satisfy them), and other funds
for the borrower's use (as long as the amount does not
exceed 1 percent of the principal amount of the new
mortgage). |
| Nonliquid
Asset |
An
asset that cannot easily be converted into cash. |
| Note |
A
legal document that obligates a borrower to repay a
mortgage loan at a stated interest rate during a
specified period of time. |
| Note
Rate |
The
interest rate stated on a mortgage note. |
| Notice
Of Default |
A
formal written notice to a borrower that a default has
occurred and that legal action may be taken. |
|
|
- O-
| Original
Principal Balance |
The
total amount of principal owed on a mortgage before any
payments are made. |
| Origination
Fee |
A
fee paid to a lender for processing a loan application.
The origination fee is stated in the form of points. One
point is 1 percent of the mortgage amount. |
| Owner
Financing |
A
property purchase transaction in which the property
seller provides all or part of the financing. |
|
|
- P-
| Partial
Payment |
A
payment that is not sufficient to cover the scheduled
monthly payment on a mortgage loan. |
| Payment
Change Date |
The
date when a new monthly payment amount takes effect on
an adjustable-rate mortgage (ARM) or a graduated-payment
adjustable-rate mortgage (GPARM). Generally, the payment
change date occurs in the month immediately after the
adjustment date. |
| Periodic
Payment Cap |
For
an adjustable-rate mortgage (ARM), a limit on the amount
that payments can increase or decrease during any one
adjustment period. |
| Periodic
Rate Cap |
For
an adjustable-rate mortgage (ARM), 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. |
| Personal
Property |
Any
property that is not real property. |
| Piti |
See
principal, interest, taxes and insurance (PITI) below. |
| PITI
Reserves |
A
cash amount that a borrower must have on hand after
making a down payment and paying all closing costs for
the purchase of a home. The principal, interest, taxes,
and insurance (PITI) reserves must equal the amount that
the borrower would have to pay for PITI for a predefined
number of months. |
| Planned
Unit Development |
See
PUD below. |
| Point |
A
one-time charge by the lender for originating a loan. A
point is 1 percent of the amount of the mortgage. |
| Power
Of Attorney |
A
legal document that authorizes another person to act on
one’s behalf. A power of attorney can grant complete
authority or can be limited to certain acts and/or
certain periods of time. |
| Prearranged
Refinancing Agreement |
A
formal or informal arrangement between a lender and a
borrower wherein the lender agrees to offer special
terms (such as a reduction in the costs) for a future
refinancing of a mortgage being originated as an
inducement for the borrower to enter into the original
mortgage transaction. |
| Preforeclosure
Sale |
A
procedure in which the investor allows a mortgagor to
avoid foreclosure by selling the property for less than
the amount that is owed to the investor. |
| Prepayment |
Any
amount paid to reduce the principal balance of a loan
before the due date. Payment in full on a mortgage that
may result from a sale of the property, the owner's
decision to pay off the loan in full, or a foreclosure.
In each case, prepayment means payment occurs before the
loan has been fully amortized. |
| Prepayment
Penalty |
A
fee that may be charged to a borrower who pays off a
loan before it is due. |
| Pre-Qualification |
The
process of determining how much money a prospective home
buyer will be eligible to borrow before he or she
applies for a loan. |
| Prime
Rate |
The
interest rate that banks charge to their preferred
customers. Changes in the prime rate influence changes
in other rates, including mortgage interest rates. |
| Principal |
The
amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance of a
mortgage. More |
| Principal
Balance |
The
outstanding balance of principal on a mortgage. The
principal balance does not include interest or any other
charges. See remaining balance. |
| Principal,
Interest, Taxes, And Insurance (PITI) |
The
four components of a monthly mortgage payment. Principal
refers to the part of the monthly payment that reduces
the remaining balance of the mortgage. Interest is the
fee charged for borrowing money. Taxes and insurance
refer to the amounts that are paid into an escrow
account each month for property taxes and mortgage and
hazard insurance. |
| Private
Mortgage Insurance (MI) |
Mortgage
insurance that is provided by a private mortgage
insurance company to protect lenders against loss if a
borrower defaults. Most lenders generally require MI for
a loan with a loan-to-value (LTV) percentage in excess
of 80 percent. |
| Promissory
Note |
A
written promise to repay a specified amount over a
specified period of time. |
| Public
Auction |
A
meeting in an announced public location to sell property
to repay a mortgage that is in default. |
| Pud
(Planned Unit Development) |
A
project or subdivision that includes common property
that is owned and maintained by a homeowners'
association for the benefit and use of the individual
PUD unit owners. |
| Purchase
And Sale Agreement |
A
written contract signed by the buyer and seller stating
the terms and conditions under which a property will be
sold. |
| Purchase
Money Transaction |
The
acquisition of property through the payment of money or
its equivalent. |
|
|
- Q-
| Qualifying
Ratios |
Calculations
that are used in determining whether 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. |
| Quitclaim
Deed |
A
deed that transfers without warranty whatever interest
or title a grantor may have at the time the conveyance
is made. |
|
|
- R-
| Radon |
A
radioactive gas found in some homes that in sufficient
concentrations can cause health problems. |
| Rate-Improvement
Mortgage |
A
fixed-rate mortgage that includes a provision that gives
the borrower a one-time option to reduce the interest
rate (without refinancing) during the early years of the
mortgage term. |
| Rate
Lock |
A
commitment issued by a lender to a borrower or other
mortgage originator guaranteeing a specified interest
rate for a specified period of time. See lock-in. |
| Real
Estate Agent |
A
person licensed to negotiate and transact the sale of
real estate on behalf of the property owner. |
| Real
Estate Settlement Procedures Act (Respa) |
A
consumer protection law that requires lenders to give
borrowers advance notice of closing costs. |
| Real
Property |
Land
and appurtenances, including anything of a permanent
nature such as structures, trees, minerals, and the
interest, benefits, and inherent rights thereof. |
| Realtor® |
A
real estate broker or an associate who holds active
membership in a local real estate board that is
affiliated with the National Association of Realtors. |
| Recission |
The
cancellation or annulment of a transaction or contract
by the operation of a law or by mutual consent.
Borrowers usually have the option to cancel a refinance
transaction within three business days after it has
closed. |
| Recorder |
The
public official who keeps records of transactions that
affect real property in the area. Sometimes known as a
"Registrar of Deeds" or "County
Clerk." |
| Recording |
The
noting in the registrar’s office of the details of a
properly executed legal document, such as a deed, a
mortgage note, a satisfaction of mortgage, or an
extension of mortgage, thereby making it a part of the
public record. |
| Refinance
Transaction |
The
process of paying off one loan with the proceeds from a
new loan using the same property as security. |
| Rehabilitation
Mortgage |
A
mortgage created to cover the costs of repairing,
improving, and sometimes acquiring an existing property. |
| Remaining
Balance |
The
amount of principal that has not yet been repaid. See
principal balance. |
| Remaining
Term |
The
original amortization term minus the number of payments
that have been applied. |
| Rent
Loss Insurance |
Insurance
that protects a landlord against loss of rent or rental
value due to fire or other casualty that renders the
leased premises unavailable for use and as a result of
which the tenant is excused from paying rent. |
| Rent
With Option To Buy |
See
lease-purchase mortgage loan. |
| Repayment
Plan |
An
arrangement made to repay delinquent installments or
advances. Lenders' formal repayment plans are called
"relief provisions." |
| Replacement
Reserve Fund |
A
fund set aside for replacement of common property in a
condominium, PUD, or cooperative project -- particularly
that which has a short life expectancy, such as
carpeting, furniture, etc. |
| 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. The borrower is
billed for the amount that is actually borrowed plus any
interest due. |
| Right
Of First Refusal |
A
provision in an agreement that requires the owner of a
property to give another party the first opportunity to
purchase or lease the property before he or she offers
it for sale or lease to others. |
| Right
Of Ingress Or Egress |
The
right to enter or leave designated premises. |
| Right
Of Survivorship |
In
joint tenancy, the right of survivors to acquire the
interest of a deceased joint tenant. |
| Rural
Housing Service (Rhs) |
An
agency within the Department of Agriculture, which
operates principally under the Consolidated Farm and
Rural Development Act of 1921 and Title V of the Housing
Act of 1949. This agency provides financing to farmers
and other qualified borrowers buying property in rural
areas who are unable to obtain loans elsewhere. Funds
are borrowed from the U.S. Treasury. |
|
|
- S-
| Sale-Leaseback |
A
technique in which a seller deeds property to a buyer
for a consideration, and the buyer simultaneously leases
the property back to the seller. |
| Second
Mortgage |
A
mortgage that has a lien position subordinate to the
first mortgage. |
| Secondary
Mortgage Market |
The
buying and selling of existing mortgages. |
| Secured
Loan |
A
loan that is backed by collateral. |
| Security |
The
property that will be pledged as collateral for a loan. |
| Seller
Take-Back |
An
agreement in which the owner of a property provides
financing, often in combination with an assumable
mortgage. See owner financing. |
| 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. |
| Servicing |
The
collection of mortgage payments from borrowers and
related responsibilities of a loan servicer. |
| Settlement |
See
closing. |
| Settlement
Sheet |
See
HUD-1 statement. |
| Single-Family
Properties |
One-
to four-unit properties including detached homes,
townhomes, condominiums, and cooperatives. |
| Special
Deposit Account |
An
account that is established for rehabilitation mortgages
to hold the funds needed for the rehabilitation work so
they can be disbursed from time to time as particular
portions of the work are completed. |
| 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. |
| Step-Rate
Mortgage |
A
mortgage that allows for the interest rate to increase
according to a specified schedule (i.e., seven years),
resulting in increased payments as well. At the end of
the specified period, the rate and payments will remain
constant for the remainder of the loan. |
| Subdivision |
A
housing development that is created by dividing a tract
of land into individual lots for sale or lease. |
| Subordinate
Financing |
Any
mortgage or other lien that has a priority that is lower
than that of the first mortgage. |
| Subsidized
Second Mortgage |
An
alternative financing option known as the Community
Seconds® mortgage for low- and moderate-income
households. An investor purchases a first mortgage that
has a subsidized second mortgage behind it. The second
mortgage may be issued by a state, county, or local
housing agency, foundation, or nonprofit corporation.
Payment on the second mortgage is often deferred and
carries a very low interest rate (or no interest rate).
Part of the debt may be forgiven incrementally for each
year the buyer remains in the home. |
| Survey |
A
drawing or map showing the precise legal boundaries of a
property, the location of improvements, easements,
rights of way, encroachments, and other physical
features. |
| Sweat
Equity |
Contribution
to the construction or rehabilitation of a property in
the form of labor or services rather than cash. |
|
|
- T-
| Tenancy
By The Entirety |
A
type of joint tenancy of property that provides right of
survivorship and is available only to a husband and
wife. Contrast with tenancy in common. |
| Tenancy
In Common |
A
type of joint tenancy in a property without right of
survivorship. Contrast with tenancy by the entirety and
with joint tenancy. |
| Tenant-Stockholder |
The
obligee for a cooperative share loan, who is both a
stockholder in a cooperative corporation and a tenant of
the unit under a proprietary lease or occupancy
agreement. |
| Third-Party
Origination |
A
rocess by which 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. See mortgage
broker. |
| Title |
A
legal document evidencing a person's right to or
ownership of a property. |
| Title
Company |
A
company that specializes in examining and insuring
titles to real estate. |
| Title
Insurance |
Insurance
that protects the lender (lender's policy) or the buyer
(owner's policy) against loss arising from disputes over
ownership of a property. |
| Title
Search |
A
check of the title records to ensure that the seller is
the legal owner of the property and that there are no
liens or other claims outstanding. |
| Total
Expense Ratio |
Total
obligations as a percentage of gross monthly income. The
total expense ratio includes monthly housing expenses
plus other monthly debts. |
| Trade
Equity |
Equity
that results from a property purchaser giving his or her
existing property (or an asset other than real estate)
as trade as all or part of the down payment for the
property that is being purchased. |
| Transfer
Of Ownership |
Any
means by which the ownership of a property changes
hands. Lenders consider all of the following situations
to be a transfer of ownership: the purchase of a
property "subject to" the mortgage, the
assumption of the mortgage debt by the property
purchaser, and any exchange of possession of the
property under a land sales contract or any other land
trust device. In cases in which an inter vivos revocable
trust is the borrower, lenders also consider any
transfer of a beneficial interest in the trust to be a
transfer of ownership. |
| Transfer
Tax |
State
or local tax payable when title passes from one owner to
another. |
| Treasury
Index |
An
index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans. It is
based on the results of auctions that the U.S. Treasury
holds for its Treasury bills and securities or is
derived from the U.S. Treasury's daily yield curve,
which is based on the closing market bid yields on
actively traded Treasury securities in the
over-the-counter market. See adjustable-rate mortgage
(ARM). |
| Truth-In-Lending |
A
federal law that requires lenders to fully disclose, in
writing, the terms and conditions of a mortgage,
including the annual percentage rate (APR) and other
charges. |
| Two-Step
Mortgage |
An
adjustable-rate mortgage (ARM) that has one interest
rate for the first five or seven years of its mortgage
term and a different interest rate for the remainder of
the amortization term. |
| Two-
To Four-Family Property |
A
property that consists of a structure that provides
living space (dwelling units) for two to four families,
although ownership of the structure is evidenced by a
single deed. |
| Trustee |
A
fiduciary who holds or controls property for the benefit
of another. |
|
|
- U-
| Underwriting |
The
process of evaluating a loan application to determine
the risk involved for the lender. Underwriting involves
an analysis of the borrower's creditworthiness and the
quality of the property itself. |
| Unsecured
Loan |
A
loan that is not backed by collateral. |
|
|
- V-
| VA
Mortgage |
A
mortgage that is guaranteed by the Department of
Veterans Affairs (VA). Also known as a government
mortgage. |
| Vested |
Having
the right to use a portion of a fund such as an
individual retirement fund. For example, individuals who
are 100 percent vested can withdraw all of the funds
that are set aside for them in a retirement fund.
However, taxes may be due on any funds that are actually
withdrawn. |
| Department
Of Veterans Affairs (VA) |
An
agency of the federal government that guarantees
residential mortgages made to eligible veterans of the
military services. The guarantee protects the lender
against loss and thus encourages lenders to make
mortgages to veterans. |
|
|
- W-
| What-If
Analysis |
An
affordability analysis that is based on a what-if
scenario. A what-if analysis is useful if you do not
have complete data or if you want to explore the effect
of various changes to your income, liabilities, or
available funds or to the qualifying ratios or down
payment expenses that are used in the analysis. |
| What-If
Scenario |
A
change in the amounts that is used as the basis of an
affordability analysis. A what-if scenario can include
changes to monthly income, debts, or down payment funds
or to the qualifying ratios or down payment expenses
that are used in the analysis. You can use a what-if
scenario to explore different ways to improve your
ability to afford a house. |
| Wraparound
Mortgage |
A
mortgage that includes the remaining balance on an
existing first mortgage plus an additional amount
requested by the mortgagor. Full payments on both
mortgages are made to the wraparound mortgagee, who then
forwards the payments on the first mortgage to the first
mortgagee. |
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