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# 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
hazard insurance
Insurance coverage that compensates for physical damage to a property from fire,
wind, vandalism, or other hazards.
Home Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to convert the equity
they have in their homes into cash, using a variety of payment options to
address their specific financial needs. Unlike traditional home equity loans, a
borrower does not qualify on the basis of income but on the value of his or her
home. In addition, the loan does not have to be repaid until the borrower no
longer occupies the property. Sometimes called a reverse mortgage or reverse
annuity mortgage (RAM).
home equity line of credit
A mortgage loan, which is usually in a subordinate position, that allows the
borrower to obtain multiple advances of the loan proceeds at his or her own
discretion, up to an amount that represents a specified percentage of the
borrower's equity in a property.
home inspection
A thorough inspection that evaluates the structural and mechanical condition of
a property. A satisfactory home inspection is often included as a contingency by
the purchaser. Contrast with appraisal.
homeowners' association (HOA)
A nonprofit association that manages the common areas of a planned unit
development (PUD) or condominium project. In a condominium project, it has no
ownership interest in the common elements. In a PUD project, it holds title to
the common elements.
homeowner's insurance
An insurance policy that combines personal liability insurance and hazard
insurance coverage for a dwelling and its contents.
homeowner's warranty
A type of insurance that covers repairs to specified parts of a house for a
specific period of time. It is provided by the builder or property seller as a
condition of the sale.
housing ratio
The ratio of the monthly housing payment in total (PITI - Principal, Interest,
Taxes, and Insurance) divided by the gross monthly income. This ratio is
sometimes referred to as the top ratio or front end 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. The blank form for the statement is
published by the Department of Housing and Urban Development (HUD). The HUD-1
statement is also known as the "closing statement" or "settlement
sheet."
HUD
The U.S. Department of Housing and Urban Development.
income property
Real estate developed or improved to produce income.
index
A number used to compute the interest rate for an adjustable-rate mortgage
(ARM). A published interest rate or number to which the interest rate on an
Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1
Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
in-file credit report
An objective account, normally computer-generated, of credit and legal
information obtained from a credit repository.
inflation
An increase in the amount of money or credit available in relation to the amount
of goods or services available, which causes an increase in the general price
level of goods and services. Over time, inflation reduces the purchasing power
of a dollar, making it worth less.
initial interest rate
The original interest rate of the mortgage at the time of closing. This rate
changes for an adjustable-rate mortgage (ARM). Sometimes known as "start
rate" or "teaser."
Inspection
See home inspection.
installment
The regular periodic payment that a borrower agrees to make to a lender.
installment loan
Borrowed money that is repaid in equal payments, known as installments. A
furniture loan is often paid for as an installment loan.
insurable title
A property title that a title insurance company agrees to insure against defects
and disputes.
insurance
A contract that provides compensation for specific losses in exchange for a
periodic payment. An individual contract is known as an insurance policy, and
the periodic payment is known as an insurance premium.
insurance binder
A document that states that insurance is temporarily in effect. Because the
coverage will expire by a specified date, a permanent policy must be obtained
before the expiration date.
insured mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by
private mortgage insurance (MI). If the borrower defaults on the loan, the
insurer must pay the lender the lesser of the loss incurred or the insured
amount.
Interest
That portion of a mortgage payment that is the "charge"
for using the lender's funds.
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 payments, although it is not used
for an adjustable-rate mortgage (ARM) with payment change limitations.
interest rate
The rate of interest in effect for the monthly payment due.
interest rate buydown plan
An arrangement wherein the property seller (or any other party) deposits money
to an account so that it can be released each month to reduce the mortgagor's
monthly payments during the early years of a mortgage. During the specified
period, the mortgagor's effective interest rate is "bought down" below
the actual interest rate.
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.
investment property
A property that is not occupied by the owner.
IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions
to a personal retirement fund. Individuals can place IRA funds in bank accounts
or in other forms of investment such as stocks, bonds, or mutual funds.
joint tenancy
A form of co-ownership that gives each tenant equal interest and equal rights in
the property, including the right of survivorship.
judgment
A decision made by a court of law. In judgments that require the repayment of a
debt, the court may place a lien against the debtor's real property as
collateral for the judgment's creditor.
judgment lien
A lien on the property of a debtor resulting from the decree of a court.
judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil
lawsuit and conducted entirely under the auspices of a court.
jumbo loan
A loan that exceeds Fannie Mae’s mortgage amount limits. Also called a
nonconforming loan
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
A written agreement between the property owner and a tenant that stipulates the
conditions under which the tenant may possess the real estate for a specified
period of time and rent.
leasehold estate
A way of holding title to a property wherein the mortgagor does not actually own
the property but rather has a recorded long-term lease on it.
legal description
A property description, recognized by law, that is sufficient to locate and
identify the property without oral testimony.
liabilities
A person's financial obligations. Liabilities include long-term and short-term
debt, as well as any other amounts that are owed to others.
Lien
A legal claim against a piece of property that can prevent it from
being sold unless the lien is satisfied (paid off). Liens can be filed by unpaid
contractors or other debtors in a legal process so that they will be paid when a
property is sold.
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 mortgage. See cap.
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.
line of credit
An agreement by a commercial bank or other financial institution to extend
credit up to a certain amount for a certain time to a specified borrower. See
home equity line of credit.
liquid asset
A cash asset or an asset that is easily converted into cash.
Listing
A property for sale by a Real Estate Brokerage and Agent.
loan
A sum of borrowed money (principal) that is generally repaid with interest.
loan origination
The process by which a mortgage lender brings into existence a mortgage secured
by real property.
loan to value ratio (LTV)
The ratio of the amount of your loan to the appraised value of the home. The LTV
will affect programs available to the borrower and generally, the lower the LTV
the more favorable the terms of the programs offered by lenders.
Lock-in
An agreement by the lender at the time of mortgage application or
shortly thereafter, to write the mortgage at a specific interest rate, whether
rates rise or fall up to the date of closing. Obviously a good move if rates are
rising, not so good if they are falling. Lock-ins have specific expiration
dates, such as 30, 60 or 90 days in the future.
lock-in period
The time period during which the lender has guaranteed an interest rate to a
borrower. See lock-in.
margin
For an adjustable-rate mortgage (ARM), the amount that is added to the index to
establish the interest rate on each adjustment date, subject to any limitations
on the interest rate change. A
representative margin would be 2.75%.
maturity
The date on which the principal balance of a loan, bond, or other financial
instrument becomes due and payable.
merged credit report
A credit report that contains information from three credit repositories. When
the report is created, the information is compared for duplicate entries. Any
duplicates are combined to provide a summary of a your credit.
MLS (Multiple Listing Service)--A listing (almost always
computerized) of all the properties for sale by Real Estate Brokerages in a
given geographical area.
mortgage
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 brings borrowers and lenders together for the
purpose of loan origination. Mortgage brokers typically require a fee or a
commission for their services.
mortgage disability insurance
A disability insurance policy which will pay the monthly mortgage payment in the
event of a covered disability of an insured borrower for a specified period of
time.
mortgage insurance (MI)
Insurance written by an independent mortgage insurance company protecting the
mortgage lender against loss incurred by a mortgage default. Usually required
for loans with an LTV of 80.01% or higher.
mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government
agency such as the Federal Housing Administration (FHA) or to a private mortgage
insurance (MI) company.
mortgage life insurance
A type of term life insurance often bought by mortgagors. The amount of coverage
decreases as the principal balance declines. In the event that the borrower dies
while the policy is in force, the debt is automatically satisfied by insurance
proceeds.
mortgagee
The person or company who receives the mortgage as a pledge for repayment of the
loan. The mortgage lender.
mortgagor
The mortgage borrower who gives the mortgage as a pledge to repay.
negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not
large enough to cover the entire principal and interest due. The amount of the
shortfall is added to the remaining balance to create "negative"
amortization.
net cash flow
The income that remains for an investment property after the monthly operating
income is reduced by the monthly housing expense, which includes principal,
interest, taxes, and insurance (PITI) for the mortgage, homeowners' association
dues, leasehold payments, and subordinate financing payments.
net worth
The value of all of a person's assets, including cash, minus all liabilities.
no cash-out refinance
A refinance transaction in which the new mortgage amount is limited to the sum
of the remaining balance of the existing first mortgage, closing costs
(including prepaid items), points, the amount required to satisfy any mortgage
liens that are more than one year old (if the borrower chooses to satisfy them),
and other funds for the borrower's use (as long as the amount does not exceed 1
percent of the principal amount of the new mortgage).
non-conforming loan
Also called a jumbo loan. Conventional home mortgages not eligible for sale and
delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various
reasons, including loan amount, loan characteristics or underwriting guidelines.
Non-conforming loans usually incur a rate and origination fee premium. The
current non-conforming loan limit is $252,700 and above.
non-liquid asset
An asset that cannot easily be converted into cash.
note
A legal document that obligates a borrower to repay a mortgage loan at a stated
interest rate during a specified period of time.
note rate
The interest rate stated on a mortgage note.
notice of default
A formal written notice to a borrower that a default has occurred and that legal
action may be taken.
# 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
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