|
A provision in a mortgage that gives
the lender the right to demand payment of the entire
outstanding balance if a monthly payment is missed. |
|
|
Adjustable-rate mortgage (ARM): |
A
mortgage whose interest rate changes over time based
on an index and a margin. Rate changes are made
at prescribed times and within prescribed limits
(caps) as defined in the mortgage contract. |
|
|
|
The
gradual repayment of a mortgage by installments. |
|
|
|
A timetable for payment of a mortgage
showing the amount of each payment applied to interest
and principal and the remaining balance on the loan.
|
|
|
Annual
percentage rate (APR): |
The
total yearly cost of a mortgage stated as a percentage
of the loan amount. This includes the base interest
rate, mortgage insurance, origination fees, and
some other related fees. See your lender for a more
complete explanation of what fees are used to calculate
your APR. |
|
|
|
A professional opinion
of the market value of a property. |
|
|
| |
An increase in the
value of a house due to changes in market conditions
or other causes. |
|
|
| |
The valuation placed
upon a property by a public tax assessor for purposes
of taxation. |
|
|
| |
A mortgage that can
be taken over ("assumed") by the buyer when
a home is sold. |
|
|
|
|
The
transfer of the seller's existing mortgage to the
buyer. |
|
|
| |
A preliminary agreement,
secured by the payment of earnest money, under which
a buyer offers to purchase real estate. |
|
|
|
A provision of an
ARM limiting how much the interest rate or mortgage
payments may increase. |
|
|
|
A requirement of
some lenders that buyers have sufficient cash remaining
after closing to make the first two mortgage payments. |
|
|
|
A title that is free
of liens and legal questions as to ownership of the
property. |
|
|
|
The occasion where
a sale is finalized; the buyer signs the mortgage,
and closing costs are paid. Also called "settlement." |
|
|
|
Expenses (over and
above the price of the property) incurred by buyers
and sellers in transferring ownership of a property.
Also called "settlement costs." |
|
|
|
A
formal offer by a lender stating the terms under
which it agrees to loan money to a home buyer. |
|
|
Community
Home Buyer's Program: |
An
alternative financing option that allows households
of modest means to qualify for mortgages using nontraditional
credit histories, 33% housing-to-income and 38%
debt-to-income ratios, and the waiver of the usual
two payments cash reserves at closing. |
|
|
CommunityHome
Improvement Mortgage Loan: |
An alternative financing
option that allows low- and moderate-income home buyers
to obtain 95% financing for the purchase and improvement
of a home in need of modest repairs. |
|
|
Community
Land Trust Mortgage Loan: |
An alternative financing
option that enables low- and moderate-income home
buyers to purchase housing that has been improved
by a non-profit Community Land Trust, and to lease
the land on which the property stands. |
|
|
|
A form of property
ownership in which the homeowner holds title to an
individual dwelling unity plus an interest in common
areas of a multi-unit project. |
|
|
|
A condition that
must be met before a contract is legally binding. |
|
|
|
Any mortgage that
is not insured or guaranteed by the federal government. |
|
|
|
An
adjustable-rate mortgage that can be converted to
a fixed-rate mortgage under specified conditions. |
|
|
|
A form of common
property ownership in which the residents of an apartment
building do not own their own units, but rather own
shares in the corporation that owns the property. |
|
|
|
A clause in a mortgage
that obligates or restricts the borrower and which,
if violated, can result in foreclosure. |
|
|
|
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. |
|
|
|
The legal document
conveying title to a property. |
|
|
|
The document used
in some states instead of a mortgage; title is conveyed
to a trustee rather than to the borrower |
|
|
|
Failure to make mortgage
payments on a timely basis or to comply with other
conditions of a mortgage. |
|
|
|
A loan in which a
payment is overdue but not yet in default. |
|
|
|
Cash paid to the seller
when a formal sales contract is signed |
|
|
|
Depreciation: A decline
in the value of a property; the opposite of "appreciation." |
|
|
|
See "Points." |
|
|
|
The part of the purchase
price that the buyer pays in cash and does not finance
with a mortgage. |
|
|
|
A provision in a mortgage
allowing the lender to demand repayment in full if
the borrower sells the property securing the mortgage.
|
|
|
|
A deposit given to
the seller to show that a prospective buyer is serious
about buying the house. |
|
|
|
A right of way giving
persons other than the owner access to or over a property.
A common example is a utility easement, which gives
the power company the right to put power lines and
poles over properties to deliver electricity. |
|
|
Equal
Credit Opportunity Act (ECOA): |
A federal law that
prohibits lenders from denying mortgages on the basis
of the borrower's race, color, religion, national
origin, age, sex, marital status, or receipt of income
from public assistance programs |
|
|
|
The difference between
the market value of a property and the home owner's
outstanding mortgage balance. If your home is worth
$100,000 and you owe $65,000, you are said to have
35% equity in your home |
|
|
|
A loan based on the
borrower's equity in his or her home. |
|
|
|
The holding of documents
and money by a neutral third party prior to closing;
also, an account held by the lender into which a homeowner
pays money for taxes and insurance. |
|
|
Fair Credit Reporting Act: |
A consumer protection
law that sets up a procedure for correcting mistakes
on one's credit record. |
|
|
|
A
mortgage insured by the Federal Housing Administration.
|
|
|
|
The mortgage that
has first claim (or "lien") in the event
of a default. |
|
|
|
A mortgage in which the interest rate does not change
during the entire term of the loan |
|
|
|
Insurance required for properties
in federally designated flood areas. |
|
|
|
The lender's postponement of foreclosure
to give the borrower time to catch up on overdue payments
|
|
|
|
The process by which a mortgaged
property may be sold when a mortgage is in default. |
|
|
Graduated payment mortgage (GPM): |
A mortgage that starts with low monthly payments that
increase at a predetermined rate. Be aware that most
GPM's include a negative amortization clause. |
|
|
|
Insurance to protect the home owner
and the lender against physical damage to a property
from fire, wind, vandalism and other hazards. |
|
|
|
An insurance
policy that combines liability coverage and hazard
insurance. |
|
|
|
A type
of insurance that covers repairs to specified parts
of a house for a specific period of time. |
|
|
|
The fee,
or rent, charged by the lender for borrowing money.
|
|
|
|
A provision
of an ARM limiting how much interest rates may increase
in a given adjustment period. See also "Lifetime
cap." |
|
|
|
A form
of co-ownership giving each tenant equal interest
and equal rights in the property, including the right
of survivorship. |
|
|
|
The penalty
a borrower must pay when a payment is made after the
due date. |
|
|
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, and with each month's rent
payments consisting of "PITI" payments on
the first mortgage, plus an extra amount that is earmarked
for a savings account in which money for a down payment
accumulates. |
|
|
|
A legal
claim against a property that must be paid when the
property is sold. |
|
|
|
A provision
of an ARM that limits the total increase in interest
rates over the life of the loan. |
|
|
|
See "Commitment
letter." |
|
|
|
The collection
of mortgage payments from borrowers and the related
responsibilities of a loan servicer, such as foreclosure,
tax and insurance escrow, etc. |
|
|
Loan-to-value
ratio (LTV): |
The total
loan amount divided by the value of the house. |
|
|
|
A written
agreement guaranteeing the home buyer a specified
interest rate provided the loan closes with that buyer
within a set period of time. The lock-in also usually
specifies the number of points to be paid at closing
as well. |
|
|
|
The set
percentage the lender adds to the index rate to determine
the current interest rate of an ARM. |
|
|
|
A legal
document that pledges a property to the lender as
security for payment of a debt, usually a loan on
the house itself. |
|
|
|
A company
that originates mortgages exclusively for resale in
the secondary market (such as to GNMA, FNMA and FHMLC).
|
|
|
|
A company
that for a fee matches borrowers with lenders |
|
|
|
See "Private
Mortgage Insurance." |
|
|
Mortgage
insurance premium (MIP): |
The fee
paid by a borrower to FHA or a private insurer for
mortgage insurance. |
|
|
|
A legal
document obliging a borrower to repay a loan at a
stated interest rate during a specified period of
time; the agreement is secured by a mortgage. |
|
|
| Mortgagee:
|
The lender
in a mortgage agreement. |
| |
|
| Mortgagor:
|
The borrower
in a mortgage agreement. |
| |
|
| Negative
amortization: |
Payment
terms under which the borrower's monthly payments
do not cover the interest due; as a result, the balance
due is added to the loan balance making it rise --
thus, "negative amortization." |
| |
|
| Notice
of default: |
A formal
written notice to a borrower that a default has occurred
and that legal action may be taken. |
