| Terms A-C |
| Acceleration
Clause |
| It is a provision
in a mortgage that gives the lender the right to demand repayment
of the entire principal balance upon the default of the borrower. |
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| Adjustable
Rate Mortgage |
| A mortgage, which
allows 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. The change in interest rate
will result in a change in the periodic payments due under the mortgage. |
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| Agent |
| A person authorized
to act for and under the direction of another person when dealing
with third parties. |
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| Alternative
Financing |
| Mortgage financing,
usually provided by an institutional lender, other than a 30-year
Fixed Rate Mortgage. |
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| Amortization |
| Reducing the
principle and interest on a loan with a payment plan that allows for
equal payments to be made to the creditor at consistent intervals
over the life of the loan (the amortization period). |
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| Amortization
Schedule |
| The time table
of the payments to be made on an amortized loan showing the following
information: the date and amount of each payment, the amount of each
payment which will be applied to interest and to principal and the
balance of principal still outstanding on the loan after the payment
is made. |
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| Annual
Percentage Rate |
| A rate designed
to allow for the comparison of one type of loan to another. The APR
reflects the cost of your mortgage loan as a yearly rate. It will
often be higher than the interest rate designated on the note because
it includes such items as interest, mortgage insurance, and loan origination
fee (points). |
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| Application |
| A printed form
used by a mortgage lender to record required information concerning
a prospective mortgage. |
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| Application
Fee |
| The fees the
lender charges the applicant. May include costs of a property appraisal
and a credit report on the applicant. |
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| Appraisal |
| A written analysis
made by a qualified person setting forth an estimation of the value
of a property, usually after an inspection of the property. The appraisal
usually determines the amount of money that a lender will loan on
that property. |
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| Assessed
Valuation |
| The value assigned
to a property by a public tax assessor for purposes of taxation. This
valuation does not necessarily correspond to the market valuation. |
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| Assessment |
| The process of
placing a value on property for purposes of taxation. This may take
the form of a levy against property for a special purpose, such as
a sewer assessment where the property owner pays a share of the cost
according to the valuation of the property. |
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| Assets |
| Assets refer
to the value of the entire property and resources of a person or corporation.
A fund's assets generally include the securities in its portfolio
plus any cash. |
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| Assumption |
| A mortgage obligation
that can be taken over by the buyer when a home is sold. The new owner
assumes the mortgage obligations and assumes title to the property. |
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| Assumption
Fee |
| The fee paid
to a lender (usually by the purchaser of real property) which results
from the assumption of an existing mortgage. |
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| Balloon
Mortgages |
| Usually a short-term
fixed-rate loan that involves small payments for a certain period
of time with the balance due in a single, large payment at a time
specified in the contract. |
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| Balloon
Payment |
| When the final
installment payment on a note is greater than the preceding installment
payments that extinguishes the debt. |
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| Basis
Point |
| One basis point
equals 1/100 of 1% in interest. Basis points are used by Lenders to
measure interest rates in yield calculations. |
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| Binder |
| A preliminary
agreement, which is written in evidence of insurance coverage for
a limited time. It is usually secured by the payment of an earnest
money deposit and is replaced later with a permanent policy. |
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| Blanket
Mortgage |
| A mortgage that
covers two or more pieces of real estate for security on a single
loan. |
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| Borrower |
| A person or company
(also know as Mortgagor) who receives funds in the form of a loan
in exchange for a written promise to repay principal with interest. |
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| Bridge
Loan |
| A loan used to
fill a gap in financing. It is usually a temporary mortgage to help
a borrower obtain the necessary cash funds to purchase another home,
prior to the sale of their currently owned home. |
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| Buydown |
| The payment of
extra money on a loan now so as to provide a lower interest rate over
either a given period or over the life of the loan. |
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| Cash
Flow |
| The amount of
cash derived over a given period of time from an income producing
property, such as a rental house, after all expenses of holding and
carrying the property are paid. Theoretically, the cash flow should
be large enough to pay all property expenses including mortgages,
taxes, etc. |
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| Cash
Out |
| The refinancing
of a mortgage in which the money received from the new loan exceeds
the amount due on the old loan. This refinance transaction results
in additional cash for the homeowner that can be used for any purpose. |
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| Cash
To Close |
| Liquid assets
that are accessible to be used to pay the closing cost in a mortgage
transaction. |
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| Closing |
| The culmination
of a real estate transaction in which documents are signed and recorded,
funds are exchanged and the property is transferred. |
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| Closing
Costs |
| Expenses (over
and above the price of the property) incurred by buyers and sellers
in connection with the closing of a mortgage loan. This usually involves
an origination fee, discount points, appraisal, credit report, title
insurance, attorney's fees, survey, and prepaid items such as taxes
and insurance escrow payments. |
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| Closing
Statement |
| A document that
details an account of the funds between a buyer and seller received
and paid at the closing. |
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| Co-Borrower |
| An additional
individual who is both obligated on the loan and whose name appears
on all documents with equal legal obligations. |
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| Collateral |
| Additional security
for a debt, such as the real estate pledged as security for a mortgage.
The lender has the right, if the debt is not paid, to slll the collateral
to recoup the outstanding principal and interest on the loan. |
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| Commitment
Fee (Loan) |
| An up-front fee
paid by a potential borrower to a lender for the lender's promise
to lend money at a specified rate and within a give time. |
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| Condominium |
| A development
where individuals have title to their own dwelling units in a multi-family
structure with joint ownership of common areas of structure and the
land. |
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| Conforming
Loan |
| Conventional
home mortgages, first mortgages up to loan amounts mandated by Congressional
directive, which meets the qualifications for sale or delivery to
either the Federal National Mortgage Association (FNMA) or the Federal
Home Loan Mortgage Corporation (FHLMC). |
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| Construction
Loan |
| A structured,
short-term loan to provide funds necessary to begin construction on
buildings or homes. |
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| Contingency |
| A condition that
must occur before a contract is legally binding. For example: The
sale of a house is contingent upon the buyer obtaining financing. |
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| Conventional
Mortgage |
| A mortgage loan
made by an institutional lender without the inclusion of government
guarantees such as VA or FHA loans. |
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| Conversation
Option |
| The right for
the borrower for a fee to convert an Adjustable Rate Mortgage into
a Fixed Rate Mortgage within a specific time frame. |
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| Convertible
ARM |
| The convertible
ARM is a combination of both fixed-rate and adjustable rate mortgages,
allowing the best of both options in one package. |
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| Co-Op |
| Short for Cooperative,
a structure of two or more units, owned by a corporation that gives
each resident the right to occupy a specific apartment or unit. It
is a mode of land ownership where the occupiers of individual units
in a building own an interest in the Cooperative Corporation that
owns the whole property. |
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| Creative
Financing |
| When institutional
financing of the purchase of a property does not meet the purchaser's
need, another party may provide additional financing. Creative financing
is outside the normal practice of residential financing because the
lender does not have to follow the same stringent rules governing
the institutional lenders. |
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| Current
Index |
| The
current value of a recognized index as calculated and published nationally
or regionally. It is used in calculating the new note at each adjustment
period as periodically, the current index changes. |
