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Also known as a variable
rate mortgage. This is a type of mortgage
where the interest rate changes periodically.
As a result, the principal and interest
payments may vary over the life of the
loan. This is because the loan is linked
to a financial index. The lower initial
payments may make it easier for buyers
to qualify.
This is the length of time for
which the interest rate is fixed on an adjustable.
Therefore if the adjustment period is six months,
then the interest rate will remain fixed for six
months, after which time it will adjust.
A gradual paying off of a debt
through your payments on principal and interest.
APR is a measurement
of the full cost of a loan including interest
and loan fee expressed as a yearly percentage
rate. This is one way to compare the cost
of loans offered by different lenders.
The assessment of the market value
of the property at a given date.
A person who is educated and trained
in the methods of determining the value of property
through analysis of various factors, which determine
said value.
An increased value of property
due to either a positive improvement of the area
or the elimination of negative factors. The term
is commonly used to describe an increase in property
value due to changes in market conditions.
Any item owned by a person that
has monetary value.
A loan, which involves small payments
for a certain period of time and one final balloon
payment for the remaining amount of the principal
at a time specified in the contract.
The final lump sum paid at the
maturity date of a balloon mortgage.
The financial inability to pay
one's debts when due. A proceeding in which the debtor
surrenders his assets to the bankruptcy court thereby
relieving him from insurmountable debt.
A yield of 1/100th of a percentage
point.
Income before any taxes have been
deducted. Also known as Gross Income.
The limit on how much an interest
rate can change, either at each adjustment or over
the life of the mortgage.
A refinance transaction that allows
the borrower to take out additional funds above the
existing mortgage amount. This extra cash can be
used for closing costs, escrow, home improvement,
education, etc.
Expenses incurred in a real estate
or mortgage transaction. There are two types of costs:
recurring (One time transactional cost) and non recurring
(costs associated with owning the property and they
recur month after month).
A type of asset (such as a car
or a home) that can be used as a guarantee to pay
off a loan. In the event that the terms of the loan
are not met, the borrow risks losing the asset.
Individual ownership of a dwelling
unit and an individual interest in the common areas
and facilities which serve the multi-unit property.
A provision in some ARMs that
enable home buyers to change an ARM to a fixed rate
loan, usually after the first adjustment period.
An adjustable rate mortgage that
can be converted into a fixed-rate mortgage under
specific conditions.
Adjustable-rate mortgage with
rates that adjust based on a cost-of-funds index,
often the 11th District Cost of Funds.
The financial worthiness of the
borrower. The history of whether this borrower has
met financial obligations on time in the past.
An agreement made between a borrower
and a lender in which the borrower receives something
of value in exchange for the promise of repayment
to the lender.
A complete record detailing a
person's open and repaid debts. This is generally
a good indicator of the individual's history of timely
debt repayment.
A report detailing a borrowers
credit history including payment history on revolving
accounts (eg. credit cards) and installment accounts
(e.g.. car loan), and current status of a borrower's
credit standing. A credit report also includes information
found from public records including tax liens and
judgements.
An amount that is owed.
Failure to meet legal obligations
in a contract - such as the failure to make payments
on time. This can lead to foreclosure.
A sum of money that is given to
show good faith in order to secure the sale of a
property.
Decline in the value of a property
due to wear and tear, obsolescence, adverse changes
in the neighborhood, or any other reason.
Money paid to make up the difference
between the purchase price and the mortgage amount.
A clause that requires a full
payment of a mortgage or deed of trust when the secured
property changes ownership.
A deposit made by a buyer of real
estate towards the down payment to evidence good
faith. This money is typically held by the real estate
brokers or the escrow company.
The difference between the fair
market value and current indebtedness. The value
an owner has in real estate over and above the obligation
against the property.
Neutral third party that handles
all funds in a real estate transaction.
The part of a mortgagor's monthly
payment that is held by the servicer to pay for taxes,
hazard insurance, mortgage insurance, lease payments,
and other items as they become due.
A taxable entity that is established
upon the death of a taxpayer. It consists of all
the decedent's property and personal effects. The
estate exists until the final distribution of its
assets to the heirs and other beneficiaries. During
the period of administration, the executor must usually
file a return.
Price, which is usually arrived
at by comparable sales in the area, that is negotiated
between the seller and buyer in a reasonable time.
Federal National Mortgage Association;
a federally sponsored secondary market agency that
purchases loans made by mortgage lenders.
A loan insured by the Federal
Housing Administration open to all qualified home
purchasers. While there are limits to the size of
FHA loans, they are generous enough to handle moderately
priced homes almost anywhere in the country.
A mortgage that has priority as
a lien over all other mortgages. In the case of a
foreclosure the first mortgage will be satisfied
before other mortgages.
A type of loan where the interest
rate is locked in for the full term of the loan.
The index plus the margin, rounded
to the next highest eighth.
A revolving line of
credit that is usually secured by a second
deed of trust and lasts for the term of
the loan. This operates like a credit card
in which you can pay down or charge up.
Often referred to as a second
mortgage, a home equity loan allows you to borrow
against the equity accumulated in your home.
The relationship of the total
housing payments (PITI- Principal, Interest, Taxes,
Insurance) to the gross monthly income.
That portion of a borrower's monthly
payments held by the lender or servicer to pay for
taxes, hazard insurance, mortgage insurance, lease
payments and other items as they become due. Also
known as reserves or escrow account.
A measure by which Adjustable
Rate Mortgage interest rates are raised and lowered.
By law the index must be published and is able to
be verified by the borrower and not controlled by
any one financial institution.
A loan, which is larger (more
than $359,650 currently) than the limits set by the
Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation. Because jumbo loans
cannot be funded by these two agencies, they usually
carry a higher interest rate.
An encumbrance against the property
as security for a debt or charge.
The institution, i.e., bank, mortgage
company or mortgage broker that is offering the loan.
The relationship between the amount
of the mortgage loan and the appraised value of the
property expressed as a percentage.
The amount a lender adds to the
index on an adjustable rate mortgage to establish
the adjusted interest rate.
A loan for the purpose of buying
a home. The four basic components are principal,
interest, taxes and insurance (PITI).
A point is equal to one percent
of your mortgage loan. You may want to consider "buying
down" your interest rate by paying discount
points up front - especially if you plan to own your
home for a long time.
A process that mortgage lenders
use to determine how much money they would lend based
on a limited review of the buyers’ financial
situation. Lenders issue a pre-approval letter to
strengthens buyers’ position when bidding on
a home, as it shows sellers that buyers will be able
to raise funds needed to purchase.
A penalty charged to the borrower
when full or partial payment of the principal is
paid before the due date. Not allowed for FHA or
VA loans.
A preliminary assessment of the
buyer's ability to secure a loan, based on a specific
set of lending guidelines and representations made
by the buyer. A prequal is not a guarantee or commitment
by the lender to extend credit.
Principal, Interest, Taxes and
Insurance. This is usually referred to as the total
monthly payment on a loan.
The amount borrowed or outstanding
balance on a loan.
Insurance against a
loss by the lender in the event of default
by the borrower. Borrowers are usually
required to carry private mortgage insurance
if the down payment is less than 20%. The
premium is paid by the borrower and is
included in the mortgage payment.
Repaying an existing loan from
the proceeds of a new loan on the same property.
Evidence of an individual's ownership
of property.
Research of public records to
determine the history of ownership and loans for
a particular piece of real estate.
A long-term, low- or no-down payment
loan guaranteed by the Department of Veteran Affairs.
Restricted to individual's qualified by military
service or other entitlements.
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