A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
- 7/23 and 5/25 Mortgages
- Mortgages with a one time rate adjustment after seven years
and five years respectively.
- 3/1, 5/1, 7/1 and 10/1 ARMs
- Adjustable-rate mortgages in which rate is fixed for three-year,
five-year, seven-year and 10-year periods, respectively, but
may adjust annually after that.
- The right of the mortgagee (lender) to demand the immediate
repayment of the mortgage loan balance upon the default of the
mortgagor (borrower), or by using the right vested in the Due-on-Sale
- Adjustable rate mortgage (ARM)
- Is a mortgage in which the interest rate is adjusted periodically
based on a pre-selected index. Also sometimes known as the renegotiable
rate mortgage, the variable rate mortgage or the Canadian rollover
- Adjusted Basis
- The cost of a property plus the value of any capital expenditures
for improvements to the property minus any depreciation taken.
- Adjustment Date
- The date that the interest rate changes on an adjustable-rate
- Adjustment interval
- On an adjustable rate mortgage, the time between changes
in the interest rate and/or monthly payment, typically one,
three or five years depending on the index.
- Adjustment Period
- The period elapsing between adjustment dates for an adjustable-rate
- Affordability Analysis
- An analysis of a buyers ability to afford the purchase of
a home. Reviews income, liabilities, and available funds, and
considers the type of mortgage you plan to use, the area where
you want to purchase a home, and the closing costs that are
- Means loan payment by equal periodic payment calculated to
pay off the debt at the end of a fixed period, including accrued
interest on the outstanding balance.
- Amortization Term
- The length of time required to amortize the mortgage loan
expressed as a number of months. For example, 360 months is
the amortization term for a 30-year fixed-rate mortgage.
- Annual percentage rate (A.P.R.)
- APR is a measurement of the full cost of a loan including
interest and loan fees expressed as a yearly percentage rate.
Because all lenders apply the same rules in calculating the
annual percentage rate, it provides consumers with a good basis
for comparing the cost of loans.
- An estimate of the value of property, made by a qualified
professional called an "appraiser".
- Appraised Value
- An opinion of a property's fair market value, based on an
appraiser's knowledge, experience, and analysis of the property.
- A local tax levied against a property for a specific purpose,
such as a sewer or street lights.
- The transfer of a mortgage from one person to another.
- An assumable mortgage can be transferred from the seller
to the new buyer. Generally requires a credit review of the
new borrower and lenders may charge a fee for the assumption.
If a mortgage contains a due-on-sale clause, it may not be assumed
by a new buyer.
- The agreement between buyer and seller where the buyer takes
over the payments on an existing mortgage from the seller. Assuming
a loan can usually save the buyer money since this is an existing
mortgage debt, unlike a new mortgage where closing cost and
new, probably higher, market-rate interest charges will apply.
- Assumption Fee
- The fee paid to a lender (usually by the purchaser of real
property) when an assumption takes place.
- Balloon Mortgage
- A loan which is amortized for a longer period than the term
of the loan. Usually this refers to a thirty-year amortization
and a five year term. At the end of the term of the loan, the
remaining outstanding principal on the loan is due. This final
payment is known as a balloon payment.
- Balloon Payment
- The final lump sum paid at the maturity date of a balloon
- Biweekly Payment Mortgage
- A plan 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 required if the loan were a standard 30-year fixed-rate
mortgage. The result for the borrower is a substantial savings
- Blanket Mortgage
- A mortgage covering at least two pieces of real estate as
security for the same mortgage.
- Borrower (Mortgagor)
- One who applies for and receives a loan in the form of a
mortgage with the intention of repaying the loan in full.
- Bridge Loan
- A second trust that is collateralized by the borrower's present
home allowing the proceeds to be used to close on a new house
before the present home is sold. Also known as "swing loan."
- An individual in the business of assisting in arranging funding
or negotiating contracts for a client but who does not loan
the money himself. Brokers usually charge a fee or receive a
commission for their services.
- When the lender and/or the home builder subsidized the mortgage
by lowering the interest rate during the first few years of
the loan. While the payments are initially low, they will increase
when the subsidy expires.
- Cash Flow
- The amount of cash derived over a certain period of time
from an income-producing property. The cash flow should be large
enough to pay the expenses of the income producing property
(mortgage payment, maintenance, utilities, etc.).
- Caps (interest)
- Consumer safeguards which limit the amount the interest rate
on an adjustable rate mortgage which may change per year and/or
the life of the loan.
- Caps (payment)
- Consumer safeguards which limit the amount monthly payments
on an adjustable rate mortgage may change.
- Certificate of Eligibility
- The document given to qualified veterans which entitles them
to VA guaranteed loans for homes, business and mobile homes.
Certificates of eligibility may be obtained by sending form
DD-214 (Separation Paper) to the local VA office with VA form
1880 (request for Certificate of Eligibility)
- Certificate of Reasonable Value (CRV)
- An appraisal issued by the Veterans Administration showing
the property's current market value
- Certificate of veteran status
- The document given to veterans or reservists who have served
90 days of continuous active duty (including training time)
It may be obtained by sending DD 214 to the local VA office
with form 26-8261a (request for certificate of veteran status.
This document enables veterans to obtain lower down payments
on certain FHA insured loans).
- Change Frequency
- The frequency (in months) of payment and/or interest rate
changes in an adjustable-rate mortgage (ARM).
- The meeting between the buyer, seller and lender or their
agents where the property and funds legally change hands, also
called settlement. Closing costs usually include an origination
fee, discount points, appraisal fee, title search and insurance,
survey, taxes, deed recording fee, credit report charge and
other costs assessed at settlement. The cost of closing usually
are about 3 percent to 6 percent of the mortgage amount.
- Closing Costs
- These are expenses - over and above the price of the property-
that are incurred by buyers and sellers when transferring ownership
of a property. Closing costs normally include an origination
fee, property taxes, charges for title insurance and escrow
costs, appraisal fees, etc. Closing costs will vary according
to the area country and the lenders used.
- Adjustable-rate mortgage with rate that adjusts based on
a cost-of-funds index, often the 11th District Cost of Funds.
- Construction loan
- A short term interim loan to pay for the construction of
buildings or homes. These are usually designed to provide periodic
disbursements to the builder as he or she progresses.
- Consumer Reporting Agency (or Bureau)
- An organization that handles the preparation of reports used
by lenders to determine a potential borrower's credit history.
The agency gets data for these reports from a credit repository
and from other sources.
- Contract sale or deed:
- A contract between purchaser and a seller of real estate
to convey title after certain conditions have been met. It is
a form of installment sale.
- Conventional loan
- A mortgage not insured by FHA or guaranteed by the VA.
- Conversion Clause
- A provision in an ARM allowing the loan to be converted to
a fixed-rate at some point during the term. Usually conversion
is allowed at the end of the first adjustment period. The conversion
feature may cost extra.
- Credit Report
- A report documenting the credit history and current status
of a borrower's credit standing.
- Credit Risk Score
- A credit risk score is a statistical summary of the information
contained in a consumer's credit report. The most well known
type of credit risk score is the Fair Isaac or FICO score. This
form of credit scoring is a mathematical summary calculation
that assigns numerical values to various pieces of information
in the credit report. The overall credit risk score is highly
relative in the credit underwriting process for a mortgage loan.
- Debt-to-Income Ratio
- The ratio, expressed as a percentage, which results when
a borrower's monthly payment obligation on long-term debts is
divided by his or her gross monthly income. See housing expenses-to-income
- Deed of trust
- In many states, this document is used in place of a mortgage
to secure the payment of a note.
- Failure to meet legal obligations in a contract, specifically,
failure to make the monthly payments on a mortgage.
- Deferred interest
- When a mortgage is written with a monthly payment that is
less than required to satisfy the note rate, the unpaid interest
is deferred by adding it to the loan balance. See negative
- Failure to make payments on time. This can lead to foreclosure.
- Department of Veterans Affairs (VA)
- An independent agency of the federal government which guarantees
long-term, low-or no-down payment mortgages to eligible veterans.
- Discount Point
- see point
- Down Payment
- Money paid to make up the difference between the purchase
price and the mortgage amount.
- A provision in a mortgage or deed of trust that allows the
lender to demand immediate payment of the balance of the mortgage
if the mortgage holder sells the home.
- Earnest Money
- Money given by a buyer to a seller as part of the purchase
price to bind a transaction or assure payment.
- The VA home loan benefit is called an entitlement (i.e. entitlement
for a VA guaranteed home loan). This is also known as eligibility.
- Equal Credit Opportunity Act (ECOA)
- Is 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.
- The difference between the fair market value and current
indebtedness, also referred to as the owner's interest. The
value an owner has in real estate over and above the obligation
against the property.
- An account held by the lender into which the home buyer pays
money for tax or insurance payments. Also earnest deposits held
pending loan closing.
- 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 part of a mortgagors 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.
- Fannie Mae
- see Federal National Mortgage Association.
- Farmers Home Administration (FmHA)
- Provides financing to farmers and other qualified borrowers
who are unable to obtain loans elsewhere.
- Federal Home Loan Bank Board (FHLBB)
- The former name for the regulatory and supervisory agency
for federally chartered savings institutions. Agency is now
called the Office of Thrift Supervision
- Federal Home Loan Mortgage Corporation(FHLMC)
also called "Freddie Mac"
- Is a quasi-governmental agency that purchases conventional
mortgage from insured depository institutions and HUD-approved
- Federal Housing Administration (FHA)
- A division of the Department of Housing and Urban Development.
Its main activity is the insuring of residential mortgage loans
made by private lenders. FHA also sets standards for underwriting
- Federal National Mortgage Association (FNMA)
also know as "Fannie Mae"
- A tax-paying corporation created by Congress that purchases
and sells conventional residential mortgages as well as those
insured by FHA or guaranteed by VA. This institution, which
provides funds for one in seven mortgages, makes mortgage money
more available and more affordable.
- FHA loan
- A loan insured by the Federal Housing Administration open
to all qualified home purchasers. While there are limits to
the size of FHA loans ($155,250 as of 1/1/96), they are generous
enough to handle moderately-priced homes almost anywhere in
- FHA mortgage insurance
- Requires a fee (up to 2.25 percent of the loan amount) paid
at closing to insure the loan with FHA. In addition, FHA mortgage
insurance requires an annual fee of up to 0.5 percent of the
current loan amount, paid in monthly installments. The lower
the down payment, the more years the fee must be paid.
- The Federal Home Loan Mortgage Corporation provides a secondary
market for savings and loans by purchasing their conventional
loans. Also known as "Freddie Mac."
- Firm Commitment
- A promise by FHA to insure a mortgage loan for a specified
property and borrower. A promise from a lender to make a mortgage
- First Mortgage
- The primary lien against a property.">
- Fixed Installment
- The monthly payment due on a mortgage loan including payment
of both principal and interest.
- Fixed Rate Mortgage
- The mortgage interest rate will remain the same on these
mortgages throughout the term of the mortgage for the original
- 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.
- The Federal National Mortgage Association is a secondary
mortgage institution which is the largest single holder of home
mortgages in the United States. FNMA buys VA, FHA, and conventional
mortgages from primary lenders. Also known as "Fannie Mae."
- A legal process by which the lender or the seller forces
a sale of a mortgaged property because the borrower has not
met the terms of the mortgage. Also known as a repossession
- Freddie Mac
- see Federal Home Loan Mortgage Corporation
- Ginnie Mae
- see Government National Mortgage Association.
- Government National Mortgage Association (GNMA)
- Also known as "Ginnie Mae," provides sources of
funds for residential mortgages, insured or guaranteed by FHA
- Graduated Payment Mortgage (GPM)
- A type of flexible-payment mortgage where the payments increase
for a specified period of time and then level off. This type
of mortgage has negative amortization built into it.
- Growing-Equity Mortgage (GEM)
- A fixed-rate mortgage that provides scheduled payment increases
over an established period of time. The increased amount of
the monthly payment is applied directly toward reducing the
remaining balance of the mortgage.
- A promise by one party to pay a debt or perform an obligation
contracted by another if the original party fails to pay or
perform according to a contract.
- Guarantee Mortgage
- A mortgage that is guaranteed by a third party.
- Hazard Insurance
- A form of insurance in which the insurance company protects
the insured from specified losses, such as fire, windstorm and
- Housing Expenses-to-Income Ratio
- The ratio, expressed as a percentage, which results when
a borrower's housing expenses are divided by his/her gross monthly
income. See debt-to-income ratio.
- 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.
- 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.
- A published interest rate against which lenders measure the
difference between the current interest rate on an adjustable
rate mortgage and that earned by other investments (such as
one- three-, and five-year U.S. Treasury security yields, the
monthly average interest rate on loans closed by savings and
loan institutions, and the monthly average costs-of-funds incurred
by savings and loans), which is then used to adjust the interest
rate on an adjustable mortgage up or down.
- Indexed rate
- The sum of the published index plus the margin. For example
if the index were 9% and the margin 2.75%, the indexed rate
would be 11.75%. Often, lenders charge less than the indexed
rate the first year of an adjustable-rate mortgage.
- Initial Interest Rate
- This refers to the original interest rate of the mortgage
at the time of closing. This rate changes for an adjustable-rate
mortgage (ARM). It's also known as "start rate" or
- The regular periodic payment that a borrower agrees to make
to a lender.
- Insured Mortgage
- A mortgage that is protected by the Federal Housing Administration
(FHA) or by private mortgage insurance (MI).
- 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
- Interest Rate Buydown Plan
- An arrangement that allows the property seller to deposit
money to an account. That money is then released each month
to reduce the mortgagor's monthly payments during the early
years of a mortgage.
- 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.
- Interim Financing
- A construction loan made during completion of a building
or a project. A permanent loan usually replaces this loan after
- A money source for a lender.
- Jumbo Loan
- A loan which is larger (more than $359,650 as of 1/1/05)
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.
- 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-Purchase Mortgage Loan
- An alternative financing option that allows low- and moderate-income
home buyers to lease a home 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
accumulates in a savings account for a down payment.
- A person's financial obligations. Liabilities include long-term
and short-term debt.
- A claim upon a piece of property for the payment or satisfaction
of a debt or obligation.
- 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
- 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.
- A sum of borrowed money (principal) that is generally repaid
- Loan-to-Value Ratio
- The relationship between the amount of the mortgage loan
and the appraised value of the property expressed as a percentage.
- Lender's guarantee that the mortgage rate quoted will be
good for a specific number of days from day of application.
- The amount a lender adds to the index on an adjustable rate
mortgage to establish the adjusted interest rate.
- Market Value
- The highest price that a buyer would pay and the lowest price
a seller would accept on a property. Market value may be different
from the price a property could actually be sold for at a given
- The date on which the principal balance of a loan becomes
due and payable.
- MIP (Mortgage Insurance Premium)
- It is insurance from FHA to the lender against incurring
a loss on account of the borrower's default.
- 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 and doesn't cover all of the interest. The
loan balance therefore increases instead of decreasing.
- 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 charges a service fee to bring
borrowers and lenders together for the purpose of loan origination.
- The lender.
- Mortgage Insurance
- Money paid to insure the mortgage when the down payment is
less than 20 percent. See private mortgage insurance, FHA
- Mortgage Life Insurance
- A type of term life insurance In the event that the borrower
dies while the policy is in force, the debt is automatically
paid by insurance proceeds.
- The borrower or homeowner.
- Negative Amortization
- Occurs when your monthly payments are not large enough to
pay all the interest due on the loan. This unpaid interest is
added to the unpaid balance of the loan. The danger of negative
amortization is that the home buyer ends up owing more than
the original amount of the loan.
- Net Effective Income
- The borrower's gross income minus federal income tax.
- Non Assumption Clause
- A statement in a mortgage contract forbidding the assumption
of the mortgage without the prior approval of the lender. Note:
The signed obligation to pay a debt, as a mortgage note.
- A legal document that obligates a borrower to repay a mortgage
loan at a stated interest rate during a specified period of
- Office of Thrift Supervision (OTS)
- The regulatory and supervisory agency for federally chartered
savings institutions. Formally known as Federal Home Loan
- One-year adjustable
- Mortgage whose annual rate changes yearly. The rate is usually
based on movements of a published index plus a specified margin,
chosen by the lender.
- Origination Fee
- The fee charged by a lender to prepare loan documents, make
credit checks, inspect and sometimes appraise a property; usually
computed as a percentage of the face value of the loan.
- Owner Financing
- A property purchase transaction in which the party selling
the property provides all or part of the financing.
- Payment Change Date
- The date when a new monthly payment amount takes effect on
an adjustable-rate mortgage (ARM) or a graduated-payment mortgage
(GPM). Generally, the payment change date occurs in the month
immediately after the adjustment date.
- Periodic Payment Cap
- A limit on the amount that payments can increase or decrease
during any one adjustment period.
- Periodic Rate Cap
- 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.
- Permanent Loan
- A long term mortgage, usually ten years or more. Also called
an "end loan."
- Principal, Interest, Taxes and Insurance. Also called monthly
- Pledged account Mortgage (PAM):
- Money is placed in a pledged savings account and this fund
plus earned interest is gradually used to reduce mortgage payments.
- Points (loan discount points)
- Prepaid interest assessed at closing by the lender. Each
point is equal to 1 percent of the loan amount (e.g., two points
on a $100,000 mortgage would cost $2,000).
- Power of Attorney
- A legal document authorizing one person to act on behalf
- The process of determining how much money you will be eligible
to borrow before you apply for a loan.
- Prepaid Expenses
- Necessary to create an escrow account or to adjust the seller's
existing escrow account. Can include taxes, hazard insurance,
private mortgage insurance and special assessments.
- A privilege in a mortgage permitting the borrower to make
payments in advance of their due date.
- Prepayment Penalty
- Money charged for an early repayment of debt. Prepayment
penalties are allowed in some form (but not necessarily imposed)
in many states.
- Primary Mortgage Market
- Lenders, such as savings and loan associations, commercial
banks, and mortgage companies, who make mortgage loans directly
to borrowers. These lenders sometimes sell their mortgages to
the secondary mortgage markets such as to FNMA or GNMA,
- The amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance of a mortgage.
- Principal Balance
- The outstanding balance of principal on a mortgage not including
interest or any other charges.
- 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 monthly cost of property
taxes and homeowners insurance, whether these amounts that are
paid into an escrow account each month or not.
- Private Mortgage Insurance (PMI)
- In the event that you do not have a 20 percent down payment,
lenders will allow a smaller down payment - as low as 3 percent
in some cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage insurance.
Private mortgage insurance will usually require an initial premium
payment and may require an additional monthly fee depending
on your loan's structure.
- Qualifying Ratios
- Calculations used to determine if 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.
- Rate Lock
- A commitment issued by a lender to a borrower or other mortgage
originator guaranteeing a specified interest rate and lender
costs for a specified period of time.
- A real estate broker or an associate holding active membership
in a local real estate board affiliated with the National Association
- 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.
- The cancellation of a contract. With respect to mortgage
refinancing, the law that gives the homeowner three days to
cancel a contract in some cases once it is signed if the transaction
uses equity in the home as security.
- Recording Fees
- Money paid to the lender for recording a home sale with the
local authorities, thereby making it part of the public records.
- Obtaining a new mortgage loan on a property already owned.
Often to replace existing loans on the property.
- Renegotiable Rate Mortgage
- A loan in which the interest rate is adjusted periodically.
See adjustable rate mortgage.
- Short for the Real Estate Settlement Procedures Act. RESPA
is a federal law that allows consumers to review information
on known or estimated settlement cost once after application
and once prior to or at a settlement. The law requires lenders
to furnish the information after application only.
- Reverse Annuity Mortgage (RAM)
- A form of mortgage in which the lender makes periodic payments
to the borrower using the borrower's equity in the home as collateral
for and repayment of the loan.
- 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.
- Satisfaction of Mortgage
- The document issued by the mortgagee when the mortgage loan
is paid in full. Also called a "release of mortgage."
- Second Mortgage
- A mortgage made subsequent to another mortgage and subordinate
to the first one.
- Secondary Mortgage Market
- The place where primary mortgage lenders sell the mortgages
they make to obtain more funds to originate more new loans.
It provides liquidity for the lenders.
- The property that will be pledged as collateral for a loan.
- Seller Carry-back
- An agreement in which the owner of a property provides financing,
often in combination with an assumable mortgage. See owner financing.
- 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.
- All the steps and operations a lender performs to keep a
loan in good standing, such as collection of payments, payment
of taxes, insurance, property inspections and the like.
- Settlement/Settlement Costs
- see closing/closing costs
- Shared Appreciation Mortgage (SAM)
- A mortgage in which a borrower receives a below-market interest
rate in return for which the lender (or another investor such
as a family member or other partner) receives a portion of the
future appreciation in the value of the property. May also apply
to mortgage where the borrowers shares the monthly principal
and interest payments with another party in exchange for part
of the appreciation.
- Simple Interest
- Interest which is computed only on the principle balance.
- 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.
- A measurement of land, prepared by a registered land surveyor,
showing the location of the land with reference to known points,
its dimensions, and the location and dimensions of any buildings.
- Sweat Equity
- Equity created by a purchaser performing work on a property
- Third-party Origination
- When 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.
- A document that gives evidence of an individual's ownership
- Title Insurance
- A policy, usually issued by a title insurance company, which
insures a home buyer against errors in the title search. The
cost of the policy is usually a function of the value of the
property, and is often borne by the purchaser and/or seller.
Policies are also available to protect the lender's interests.
- Title Search
- An examination of municipal records to determine the legal
ownership of property. Usually is performed by a title company.
- Total Expense Ratio
- Total obligations as a percentage of gross monthly income
including monthly housing expenses plus other monthly debts.
- A federal law requiring disclosure of the Annual Percentage
Rate to home buyers shortly after they apply for the loan. Also
known as Regulation Z.
- Two-Step Mortgage
- A mortgage in which the borrower receives a below-market
interest rate for a specified number of years (most often seven
or 10), and then receives a new interest rate adjusted (within
certain limits) to market conditions at that time. the lender
sometimes has the option to call the loan due with 30 days notice
at the end of seven or 10 years. also called "Super Seven"
or "Premier" mortgage.
- The decision whether to make a loan to a potential home buyer
based on credit, employment, assets, and other factors and the
matching of this risk to an appropriate rate and term or loan
- Interest charged in excess of the legal rate established
- VA Loan
- A long-term, low- or no-down payment loan guaranteed by the
Department of Veterans Affairs. Restricted to individuals qualified
by military service or other entitlements.
- VA Mortgage Funding Fee
- A premium of up to 1-7/8 percent (depending on the size of
the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate
mortgage with no down payment, this would amount to $1,406 either
paid at closing or added to the amount financed.
- Variable Rate Mortgage (VRM)
- see adjustable rate mortgage
- Verification of Deposit (VOD)
- A document signed by the borrower's financial institution
verifying the status and balance of his/her financial accounts.
- Verification of Employment (VOE)
- A document signed by the borrower's employer verifying his/her
position and salary.
- Warehouse Fee
- Many mortgage firms must borrow funds on a short term basis
in order to originate loans which are to be sold later in the
secondary mortgage market (or to investors). When the prime
rate of interest is higher on short term loans than on mortgage
loans, the mortgage firm has an economic loss which is offset
by charging a warehouse fee.
- Wraparound mortgage
- Results when an existing assumable loan is combined with
a new loan, resulting in an interest rate somewhere between
the old rate and the current market rate. The payments are made
to a second lender or the previous homeowner, who then forwards
the payments to the first lender after taking the additional
amount off the top.