|
Click on a letter or scroll down to a term below
to view its definition.
A | B
| C | D
| E | F
| G | H
| I | J
| L | M
| O | P
| R | S
| T | U
| V
203(b): FHA program which
provides mortgage insurance to protect
lenders from default; used to finance
the purchase of new or existing one- to
four family housing; characterized by
low down payment, flexible qualifying
guidelines, limited fees, and a limit
on maximum loan amount.
203(k): this FHA mortgage
insurance program enables homebuyers to
finance both the purchase of a house and
the cost of its rehabilitation through
a single mortgage loan.
A
Amenity: a feature of
the home or property that serves as a
benefit to the buyer but that is not necessary
to its use; may be natural (like location,
Woods, water) or man-made (like a swimming
pool or garden).
Amortization: repayment
of a mortgage loan through monthly installments
of principal and interest; the monthly
payment amount is based on a schedule
that will allow you to own your home at
the end of a specific time period (for
example, 15 or 30 years)
Annual Percentage Rate (APR):
calculated by using a standard formula,
the APR shows the cost of a loan; expressed
as a yearly interest rate, it includes
the interest, points, mortgage insurance,
and other fees associated with the loan.
Application: the first
step in the official loan approval process;
this form is used to record important
information about the potential borrower
necessary to the underwriting process.
Appraisal: a document
that gives an estimate of a property's
fair market value; an appraisal is generally
required by a lender before loan approval
to ensure that the mortgage loan amount
is not more than the value of the property.
Appraiser: a qualified
individual who uses his or her experience
and knowledge to prepare the appraisal
estimate.
ARM: Adjustable Rate
Mortgage; a mortgage loan subject to changes
in interest rates; when rates change,
ARM monthly payments increase or decrease
at intervals determined by the lender;
the Change in monthly -payment amount,
however, is usually subject to a Cap.
Assessor: a government
official who is responsible for determining
the value of a property for the purpose
of taxation.
Assumable mortgage:
a mortgage that can be transferred from
a seller to a buyer; once the loan is
assumed by the buyer the seller is no
longer responsible for repaying it; there
may be a fee and/or a credit package involved
in the transfer of an assumable mortgage.
B
Balloon Mortgage: a
mortgage that typically offers low rates
for an initial period of time (usually
5, 7, or 10) years; after that time period
elapses, the balance is due or is refinanced
by the borrower.
Bankruptcy: a federal
law Whereby a person's assets are turned
over to a trustee and used to pay off
outstanding debts; this usually occurs
when someone owes more than they have
the ability to repay.
Borrower: a person
who has been approved to receive a loan
and is then obligated to repay it and
any additional fees according to the loan
terms.
Building code: based
on agreed upon safety standards within
a specific area, a building code is a
regulation that determines the design,
construction, and materials used in building.
Budget: a detailed
record of all income earned and spent
during a specific period of time.
C
Cap: a limit, such
as that placed on an adjustable rate mortgage,
on how much a monthly payment or interest
rate can increase or decrease.
Cash reserves: a cash
amount sometimes required to be held in
reserve in addition to the down payment
and closing costs; the amount is determined
by the lender.
Certificate of title:
a document provided by a qualified source
(such as a title company) that shows the
property legally belongs to the current
owner; before the title is transferred
at closing, it should be clear and free
of all liens or other claims.
Closing: also known
as settlement, this is the time at which
the property is formally sold and transferred
from the seller to the buyer; it is at
this time that the borrower takes on the
loan obligation, pays all closing costs,
and receives title from the seller.
Closing costs: customary
costs above and beyond the sale price
of the property that must be paid to cover
the transfer of ownership at closing;
these costs generally vary by geographic
location and are typically detailed to
the borrower after submission of a loan
application.
Commission: an amount,
usually a percentage of the property sales
price, that is collected by a real estate
professional as a fee for negotiating
the transaction..
Condominium: a form
of ownership in which individuals purchase
and own a unit of housing in a multi-unit
complex; the owner also shares financial
responsibility for common areas.
Conventional loan: a
private sector loan, one that is not guaranteed
or insured by the U.S. government.
Cooperative (Co-op):
residents purchase stock in a cooperative
corporation that owns a structure; each
stockholder is then entitled to live in
a specific unit of the structure and is
responsible for paying a portion of the
loan.
Credit history: history
of an individual's debt payment; lenders
use this information to gouge a potential
borrower's ability to repay a loan.
Credit report: a record
that lists all past and present debts
and the timeliness of their repayment;
it documents an individual's credit history.
Credit bureau score:
a number representing the possibility
a borrower may default; it is based upon
credit history and is used to determine
ability to qualify for a mortgage loan.
D
Debt-to-income ratio:
a comparison of gross income to housing
and non-housing expenses; With the FHA,
the-monthly mortgage payment should be
no more than 29% of monthly gross income
(before taxes) and the mortgage payment
combined with non-housing debts should
not exceed 41% of income.
Deed: the document
that transfers ownership of a property.
Deed-in-lieu: to avoid
foreclosure ("in lieu" of foreclosure),
a deed is given to the lender to fulfill
the obligation to repay the debt; this
process doesn't allow the borrower to
remain in the house but helps avoid the
costs, time, and effort associated with
foreclosure.
Default: the inability
to pay monthly mortgage payments in a
timely manner or to otherwise meet the
mortgage terms.
Delinquency: failure
of a borrower to make timely mortgage
payments under a loan agreement.
Discount point: normally
paid at closing and generally calculated
to be equivalent to 1% of the total loan
amount, discount points are paid to reduce
the interest rate on a loan.
Down payment: the portion
of a home's purchase price that is paid
in cash and is not part of the mortgage
loan.
E
Earnest money: money
put down by a potential buyer to show
that he or she is serious about purchasing
the home; it becomes part of the down
payment if the offer is accepted, is returned
if the offer is rejected, or is forfeited
if the buyer pulls out of the deal.
EEM: Energy Efficient
Mortgage; an FHA program that helps homebuyers
save money on utility bills by enabling
them to finance the cost of adding energy
efficiency features to a new or existing
home as part of the home purchase
Equity: an owner's financial
interest in a property; calculated by
subtracting the amount still owed on the
mortgage loon(s)from the fair market value
of the property.
Escrow account: a separate
account into which the lender puts a portion
of each monthly mortgage payment; an escrow
account provides the funds needed for
such expenses as property taxes, homeowners
insurance, mortgage insurance, etc.
F
Fair Housing Act: a
law that prohibits discrimination in all
facets of the homebuying process on the
basis of race, color, national origin,
religion, sex, familial status, or disability.
Fair market value:
the hypothetical price that a willing
buyer and seller will agree upon when
they are acting freely, carefully, and
with complete knowledge of the situation.
Fannie Mae: Federal
National Mortgage Association (FNMA);
a federally-chartered enterprise owned
by private stockholders that purchases
residential mortgages and converts them
into securities for sale to investors;
by purchasing mortgages, Fannie Mae supplies
funds that lenders may loan to potential
homebuyers.
FHA: Federal Housing
Administration; established in 1934 to
advance homeownership opportunities for
all Americans; assists homebuyers by providing
mortgage insurance to lenders to cover
most losses that may occur when a borrower
defaults; this encourages lenders to make
loans to borrowers who might not qualify
for conventional mortgages.
Fixed-rate mortgage:
a mortgage with payments that remain the
same throughout the life of the loan because
the interest rate and other terms are
fixed and do not change.
Flood insurance: insurance
that protects homeowners against losses
from a flood; if a home is located in
a flood plain, the lender will require
flood insurance before approving a loan.
Foreclosure: a legal
process in which mortgaged property is
sold to pay the loan of the defaulting
borrower.
Freddie Mac: Federal
Home Loan Mortgage Corporation (FHLM);
a federally-chartered corporation that
purchases residential mortgages, securitizes
them, and sells them to investors; this
provides lenders With funds for new homebuyers.
G
Ginnie Mae: Government
National Mortgage Association (GNMA);
a government-owned corporation overseen
by the U.S. Department of Housing and
Urban Development, Ginnie Mae pools FHA-insured
and VA-guaranteed loans to back securities
for private investment; as With Fannie
Mae and Freddie Mac, the investment income
provides funding that may then be lent
to eligible borrowers by lenders.
Good faith estimate:
an estimate of all closing fees including
pre-paid and escrow items as well as lender
charges; must be given to the borrower
within three days after submission of
a loan application.
H
HELP: Homebuyer Education
Learning Program; an educational program
from the FHA that counsels people about
the homebuying process; HELP covers topics
like budgeting, finding a home, getting
a loan, and home maintenance; in most
cases, completion of the program may entitle
the homebuyer to a reduced initial FHA
mortgage insurance premium-from 2.25%
to 1.75% of the home purchase price.
Home inspection: an
examination of the structure and mechanical
systems to determine a home's safety;
makes the potential homebuyer aware of
any repairs that may be needed.
Home warranty: offers
protection for mechanical systems and
attached appliances against unexpected
repairs not covered by homeowner's insurance;
,overage extends over a specific time
period and does not cover the home's structure.
Homeowner's insurance:
an insurance policy that .combines protection
against damage to a dwelling and Is contents
with protection against claims of negligence
)r inappropriate action that result in
someone's injury or )property damage.
Housing counseling agency:
provides counseling and assistance to
individuals on a variety of issues, including
loan default, fair housing, and homebuying.
HUD: the U.S. Department
of Housing and Urban Development; established
in 1965, HUD works to create a decent
home and suitable living environment for
all Americans; it does this by addressing
housing needs, improving and developing
American communities, and enforcing fair
housing laws.
HUD1 Statement: also
known as the "settlement sheet,"
it itemizes all closing costs; must be
given to the borrower at or before closing.
HVAC: Heating, Ventilation
and Air Conditioning; a home's heating
and cooling system.
I
Index: a measurement
used by lenders to determine changes to
the Interest rate charged on an adjustable
rate mortgage.
Inflation: the number
of dollars in circulation exceeds the
amount of goods and services available
for purchase; inflation results in a decrease
in the dollar's value.
Interest: a fee charged
for the use of money .
Interest rate: the amount
of interest charged on a monthly loan
payment; usually expressed as a percentage.
Insurance: protection
against a specific loss over a period
of time that is secured by the payment
of a regularly scheduled premium.
J
Judgment: a legal decision;
when requiring debt repayment, a judgment
may include a property lien that secures
the creditor's claim by providing a collateral
source.
L
Lease purchase: assists
low- to moderate-income homebuyers in
purchasing a home by allowing them to
lease a home with an option to buy; the
rent payment is made up of the monthly
rental payment plus an additional amount
that is credited to an account for use
as a down payment.
Lien: a legal claim
against property that must be satisfied
when the property is sold
Loan: money borrowed
that is usually repaid with interest.
Loan fraud: purposely
giving incorrect information on a loan
application in order to better qualify
for a loan; may result in civil liability
or criminal penalties.
Loan-to-value (LTV) ratio:
a percentage calculated by dividing the
amount borrowed by the price or appraised
value of the home to be purchased; the
higher the LTV, the less cash a borrower
is required to pay as down payment.
Lock-in: since interest
rates can change frequently, many lenders
offer an interest rate lock-in that guarantees
a specific interest rate if the loan is
closed within a specific time.
Loss mitigation: a process
to avoid foreclosure; the lender tries
to help a borrower who has been unable
to make loan payments and is in danger
of defaulting on his or her loan.
M
Margin: an amount the
lender adds to an index to determine the
interest rate on an adjustable rate mortgage.
Mortgage: a lien on
the property that secures the Promise
to repay a loan.
Mortgage banker: a
company that originates loans and resells
them to secondary mortgage lenders like
:Fannie Mae or Freddie Mac.
Mortgage broker: a firm
that originates and processes loans for
a number of lenders.
Mortgage insurance:
a policy that protects lenders against
some or most of the losses that can occur
when a borrower defaults on a mortgage
loan; mortgage insurance is required primarily
for borrowers with a down payment of less
than 20% of the home's purchase price.
Mortgage insurance premium (MIP):
a monthly payment - usually part of the
mortgage payment - paid by a borrower
for mortgage insurance.
Mortgage Modification:
a loss mitigation option that allows a
borrower to refinance and/or extend the
term of the mortgage loan and thus reduce
the monthly payments.
O
Offer: indication by
a potential buyer of a willingness to
purchase a home at a specific price; generally
put forth in writing.
Origination: the process
of preparing, submitting, and evaluating
a loan application; generally includes
a credit check, verification of employment,
and a property appraisal.
Origination fee: the
charge for originating a loan; is usually
calculated in the form of points and paid
at closing.
P
Partial Claim: a loss
mitigation option offered by the FHA that
allows a borrower, with help from a lender,
to get an interest-free loan from HUD
to bring their mortgage payments up to
date.
PITI: Principal, Interest,
Taxes, and Insurance - the four elements
of a monthly mortgage payment; payments
of principal and interest go directly
towards repaying the loan while the portion
that covers taxes and insurance (homeowner's
and mortgage, if applicable) goes into
an escrow account to cover the fees when
they are due.
PMI: Private Mortgage
Insurance; privately-owned companies that
offer standard and special affordable
mortgage insurance programs for qualified
borrowers with down payments of less than
20% of a purchase price.
Pre-approve: lender
commits to lend to a potential borrower;
commitment remains as long as the borrower
still meets the qualification requirements
at the time of purchase.
Pre-foreclosure sale:
allows a defaulting borrower to sell the
mortgaged property to satisfy the loan
and avoid foreclosure.
Pre-qualify: a lender
informally determines the maximum amount
an individual is eligible to borrow.
Premium: an amount paid
on a regular schedule by a policyholder
that maintains insurance coverage.
Prepayment: payment
of the mortgage loan before the scheduled
due date; may be Subject to a prepayment
penalty.
Principal: the amount
borrowed from a lender; doesn't include
interest or additional fees.
R
Radon: a radioactive
gas found in some homes that, if occurring
in strong enough concentrations, can cause
health problems.
Real estate agent:
an individual who is licensed to negotiate
and arrange real estate sales; works for
a real estate broker.
REALTOR: a real estate
agent or broker who is a member of the
NATIONAL ASSOCIATION OF REALTORS, and
its local and state associations.
Refinancing: paying
off one loan by obtaining another; refinancing
is generally done to secure better loan
terms (like a lower interest rate).
Rehabilitation mortgage: a
mortgage that covers the costs of rehabilitating
(repairing or Improving) a property; some
rehabilitation mortgages - like the FHA's
203(k) - allow a borrower to roll the
costs of rehabilitation and home purchase
into one mortgage loan.
RESPA: Real Estate
Settlement Procedures Act; a law protecting
consumers from abuses during the residential
real estate purchase and loan process
by requiring lenders to disclose all settlement
costs, practices, and relationships.
S
Settlement: another
name for closing.
Special Forbearance:
a loss mitigation option where the lender
arranges a revised repayment plan for
the borrower that may include a temporary
reduction or suspension of monthly loan
payments.
Subordinate: to place
in a rank of lesser importance or to make
one claim secondary to another.
Survey: a property diagram
that indicates legal boundaries, easements,
encroachments, rights of way, improvement
locations, etc.
Sweat equity: using
labor to build or improve a property as
part of the down payment.
T
Title 1: an FHA-insured
loan that allows a borrower to make non-luxury
improvements (like renovations or repairs)
to their home; Title I loans less than
$7,500 don't require a property lien.
Title insurance: insurance
that protects the lender against any claims
that arise from arguments about ownership
of the property; also available for homebuyers.
Title search: a check
of public records to be sure that the
seller is the recognized owner of the
real estate and that there are no unsettled
liens or other claims against the property.
Truth-in-Lending: a
federal law obligating a lender to give
fuII written disclosure of aII fees, terms,
and conditions associated with the loan
initial period and then adjusts to another
rate that lasts for the term of the loan.
U
Underwriting: the process
of analyzing a loan application to determine
the amount of risk involved in making
the loan; it includes a review of the
potential borrower's credit history and
a judgment of the property value.
V
VA: Department of Veterans
Affairs: a federal agency which guarantees loans
made to veterans; similar to mortgage insurance,
a loan guarantee protects lenders against loss
that may result from a borrower default.
|
