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Glossary of Terms
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payment on a smaller amount, the APR is always higher than the actual not rate on your loan.
full amount of the loan by the end of the loan term, therefore a final
lump sum payment is made at the end of the loan to cover the remaining
principal amount. Balloon payment:
a balloon mortgage.
is relieved from the payment of all debts after the surrender of all assets
to a court-appointed trustee.
can restructure or relieve themselves of debts and liabilities. Bankruptcies
are of various types, but the most common for an individual seem to be
a “Chapter 7 No Asset” bankruptcy which relieves the borrower
of most types of debts. A borrower cannot usually qualify for an “A”
paper loan for a period of two years after the bankruptcy has been discharged
and requires the re-establishment of an ability to repay debt.
of 6.75 percent versus a loan of 6.82 percent has a difference of 7 basis
points.
or a deed of trust.
example, when selling an automobile to acquire funds which will be used
as a source of down payment or for closing costs, the lender will usually
require the bill of sale (in addition to other items) to help document
this source of funds.
deposit, under which a buyer offers to purchase real estate.
once a month. The basic result is that instead of making twelve monthly
payments during the year, you make thirteen. The extra payment reduces
the principal, substantially reducing the time it takes to pay off a thirty
year mortgage. Note: there are independent companies that encourage you
to set up bi-weekly payment schedules with them on your thirty year mortgage.
They charge a set-up fee and a transfer fee for every payment. Your funds
are deposited into a trust account from which your monthly payment is
then made, and the excess funds then remain in the trust account until
enough has accrued to make the additional payment which will then be paid
to reduce your principle. You could save money by doing the same thing
yourself, plus you have to have faith that once you transfer money to
them that they will actually transfer your funds to your lender.
to the share loans on individual units within the project.
and in good faith.
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.
bonds. Lenders follow this market intensely because as the yields of bonds
go up and down, fixed rate mortgages do approximately the same thing.
The same factors that affect the Treasury Bond market also affect mortgage
rates at the same time. That is why rates change daily, and in a volatile
market can and do change during the day as well.
not yet sold their previous property, but must close on a purchase property.
The bridge loan becomes the source of their funds for the down payment.
One reason for their fall from favor is that there are more and more second
mortgage lenders now that will lend at a high loan to value. In addition,
sellers often prefer to accept offers from buyers who have already sold
their property.
are “agents” who work under a “broker.” Some agents
are brokers as well, either working form themselves or under another broker.
In the mortgage industry, broker usually refers to a company or individual
that does not lend the money for the loans themselves, but broker loans
to larger lenders or investors. (See the Home Loan Library that discusses
the different types of lenders). As a normal definition, a broker is anyone
who acts as an agent, bringing two parties together for any type of transaction
and earns a fee for doing so.
is “bought down” for a temporary period, usually one to three
years. After that time and for the remainder of the term, the borrower’s
payment is calculated at the note rate. In order to buy down the initial
rate for the temporary payment, a lump sum is paid and held in an account
used to supplement the borrower’s monthly payment. These funds usually
come from the seller (or some other source) as a financial incentive to
induce someone to buy their property. A “lender funded buydown”
is when the lender pays the initial lump sum. They can accomplish this
because the note rate on the loan (after the buydown adjustments) will
be higher than the current market rate. One reason for doing this is because
the borrower may get to “qualify” at the start rate and can
qualify for a higher loan amount. Another reason is that a borrower may
expect his earnings to go up substantially in the near future, but wants
a lower payment right now.
agent or as an exclusive buyer’s broker.
corporation to govern activities.
group’s education and performance requirements.
to call the mortgage due and payable at the end of a specified period
for whatever reason.
those fluctuations are usually limited to a certain amount. Those limitations
may apply to how much the loan may adjust over a six month period, an
annual period, and over the life of the loan, and are referred to as “caps.”
Some ARMs, although they may have a life cap, allow the interest rate
to fluctuate freely, but require a certain minimum payment which can change
once a year. There is a limit on how much that payment can change each
year, and that limit is also referred to as a cap.
real property that adds to its value and useful life.
or extends the property life.
based on the income derived from the property.
operating expenses and loan payments.
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.
to the depositor. (top)
some adjustable rate mortgages. It is an average of what banks are paying
on certificates of deposit. (top)
a veteran’s eligibility for a VA loan.(top)
has met all building codes.
with a VA loan, the Veterans Administration issues a CRV.
confirmation of the purchase of the property. The document is issued by
a judicial sale.
the years.
in an adjustable-rate mortgage (ARM).
of the property.
a real estate transaction is not consider “closed” until the
documents record at the local recorders office. In others, the “closing”
is a meeting where all of the documents are signed and money changes hands.
closing costs” and “pre-paid items.” Non-recurring closing
costs are any items which are paid just once as a result of buying the
property or obtaining a loan. “Pre-paids” are items which recur
over time, such as property taxes and homeowners insurance. A lender makes
an attempt to estimate the amount of non-recurring closing costs and prepaid
items on the Good Faith Estimate which they must issue to the borrower
within three days of receiving a home loan application.
to close on a loan or to purchase a home.
the title to real estate. Usually clouds on title cannot be removed except
by deed, release, or court action.
is on title to the property.
losing the property if the loan is not repaid according to the terms of
the mortgage or deed of trust.
to bring the loan current. The loan goes to “collection.” As
part of the collection effort, the lender must mail and record certain
documents in case they are eventually required to foreclose on the property.
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.
of the loan amount, and a second mortgage at the same time for the remainder
of the balance. If avoiding PMI (mortgage insurance) is important to you,
consider combination loans–known as 80/10/10 loans or 80/20’s.
(first and second usually) divided by the property’s appraised value.
there are many sales professionals involved in each transaction, including
Realtors, loan officers, title representatives, attorneys, escrow representative,
and representatives for pest companies, home warranty companies, home
inspection companies, insurance agents, and more. The commissions are
paid out of the charges paid by the seller or buyer in the purchase transaction.
Realtors generally earn the largest commissions, followed by lenders,
then the others.
to lend money to a home buyer. Also known as a “loan commitment.”
specified period.
are charges paid to the Homeowners Association by the owners of the individual
units in a condominium or planned unit development (PUD) and are generally
used to maintain the property and common areas. (top)
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.
used to an extent in some states.
by condominium owners.
home buyers 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.
to property accumulated by a husband and wife.
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.
and unpaid interest of the loan.
the property, common areas and buildings together, with the exception
of the interior of the unit to which they have title. Often mistakenly
referred to as a type of construction or development, it actually refers
to the type of ownership.
project) to the condominium form of ownership.
occupancy, food and telephone services, and daily cleaning services and
that is operated as a commercial hotel even though the units are individually
owned. These are often found in resort areas like Hawaii.
loan limits change annually.
The lender makes payments to the builder at periodic intervals as the
work progresses.
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.
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.
price and conditions of the transaction by the buyer and is accepted by
the seller.
the borrower to change the ARM to a fixed-rate mortgage at specified timeframes
after loan origination.
mortgage under specified conditions.
by another broker.
housing complex own shares in the cooperative corporation that owns the
property, giving each resident the right to occupy a specific apartment
or unit.
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.
for certain adjustable-rate mortgages. It represents the weighted-average
cost of savings, borrowings, and advances of the financial institutions
such as banks and savings & loans, in the 11th District of the Federal
Home Loan Bank.
and that, if violated, can result in foreclosure.
exchange for a promise to repay the lender at a later date.
history helps a lender to determine whether a potential borrower has a
history of repaying debts in a timely manner.
and financial status.
history. Used by lenders to determine the credit worthiness of an individual.
and public records information about the payment records of individuals
who are being considered for credit.