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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
origination fee
A fee paid to a lender for processing a loan application. The origination fee is
stated in the form of points. One point is 1 percent of the mortgage amount.
Usually, one or two points.
owner financing
A property purchase transaction in which the property seller provides all or
part of the financing.
personal property
Any property that is not real property.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other
parcels owned in common or with reciprocal rights in one or more other parcels.
PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage
payment.
PITI reserves
A cash amount that a borrower must have on hand after making a down payment and
paying all closing costs for the purchase of a home. The principal, interest,
taxes, and insurance (PITI) reserves must equal the amount that the borrower
would have to pay for PITI for a predefined number of months.
Points
1 point is equal to 1% of the loan value, paid at closing. Points
can be loan origination fees or "discount points" which reduce the
interest rate of the loan (you are actually paying a finance charge up front).
When a lender, for example, quotes a rate of 8 1/2% with 1 + 1 points, 1 point
is for the origination fee and 1 point is for the discount fee.
power of attorney
A legal document that authorizes another person to act on one’s behalf. A
power of attorney can grant complete authority or can be limited to certain acts
and/or certain periods of time.
prearranged refinancing agreement
A formal or informal arrangement between a lender and a borrower wherein the
lender agrees to offer special terms (such as a reduction in the costs) for a
future refinancing of a mortgage being originated as an inducement for the
borrower to enter into the original mortgage transaction.
Prepaids
Paid for (in cash) at closing for such items as homeowners
insurance for one year and real estate taxes for several months.
prepayment penalty
A charge imposed by a mortgage lender on a borrower who wants to pay off part
(typically >20% of original balance within the first 5 years) or all of a
mortgage loan in advance of schedule.
Prequalification
The first stage of a mortgage application where the lender will run
a basic credit report and determine your debt to income ratio in order to see
how much mortgage you qualify for.
prime rate
The interest rate that banks charge to their preferred customers. Changes in the
prime rate influence changes in other rates, including mortgage interest rates.
principal
The amount borrowed or remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage.
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 amounts that are paid into an escrow account each month for property taxes
and mortgage and hazard insurance.
private mortgage insurance (PMI)
Required on virtually all conventional loans with less than 20% down payment.
Although the payments for PMI are included in your mortgage payment, it protects
the lender should you default on the loan. On FHA loans, you will pay a MIP
(Mortgage Insurance Premium) which accomplishes the same purpose.
promissory note
A written promise to repay a specified amount over a specified period of time.
Property Tax
An annual or semi-annual tax paid to one or more governmental
jurisdictions based on the amount of the property assessment. Generally paid as
part of the mortgage payment.
qualifying ratios
Calculations that are used in determining whether 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.
quitclaim deed
A deed that transfers without warranty whatever interest or title a grantor may
have at the time the conveyance is made.
rate cap
A limit on how much the interest rate can change, either at each adjustment
period or over the life of the loan.
rate lock
A commitment issued by a lender to a borrower or other mortgage originator
guaranteeing a specified interest rate for a specified period of time
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.
real property
Land and appurtenances, including anything of a permanent nature such as
structures, trees, minerals, and the interest, benefits, and inherent rights
thereof.
Realtor®
A real estate broker or an associate who holds active membership in a local real
estate board that is affiliated with the National Association of Realtors.
rebate
Compensation received from a wholesale lender which can be used to cover closing
costs. Loans with rebates often carry higher interest rates than loans with
points.
rescission
The cancellation or annulment of a transaction or contract by the operation of a
law or by mutual consent. Refinance
borrowers usually have the option to cancel a transaction within three business
days after it has closed.
Recording
The act of entering deed and/or mortgage information into public
record with your local government jurisdiction.
refinancing
The process of paying off one loan with the proceeds from a new loan using the
same property as security.
remaining term
The original amortization term minus the number of payments that have been
applied.
residential mortgage credit report (RMCR)
A report requested by your lender that utilizes information from at least two of
the three
revolving debt
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. The
borrower is billed for the amount that is actually borrowed plus any interest
due.
right of first refusal
A provision in an agreement that requires the owner of a property to give
another party the first opportunity to purchase or lease the property before he
or she offers it for sale or lease to others.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased
joint tenant.
sale-leaseback
A technique in which a seller deeds property to a buyer for a consideration, and
the buyer simultaneously leases the property back to the seller.
second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
secondary mortgage market
The buying and selling of existing mortgages.
secured loan
A loan that is backed by collateral.
security
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 assumed mortgage.
servicer
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.
servicing
The collection of mortgage payments from borrowers and related responsibilities
of a loan servicer.
special deposit account
An account that is established for rehabilitation mortgages to hold the funds
needed for the rehabilitation work so they can be disbursed from time to time as
particular portions of the work are completed.
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.
subdivision
A housing development that is created by dividing a tract of land into
individual lots for sale or lease.
subordinate financing
Any mortgage or other lien that has a priority that is lower than that of the
first mortgage.
subsidized second mortgage
An alternative financing option known as the Community Seconds® mortgage for
low- and moderate-income households. An investor purchases a first mortgage that
has a subsidized second mortgage behind it. The second mortgage may be issued by
a state, county, or local housing agency, foundation, or nonprofit corporation.
Payment on the second mortgage is often deferred and carries a very low interest
rate (or no interest rate). Part of the debt may be forgiven incrementally for
each year the buyer remains in the home.
survey
A print showing the measurements of the boundaries of a parcel of land, together
with the location of all improvements on the land and sometimes its area and
topography.
sweat equity
Contribution to the construction or rehabilitation of a property in the form of
labor or services rather than cash.
tenants-in-common
An undivided interest in property taken by two or more persons. The interest
need not be equal. Upon death of one or more persons, there is no right of
survivorship.
third-party origination
A process by which 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. See mortgage broker.
title
A legal document evidencing a person's right to or ownership of a property.
title company
A company that specializes in examining and insuring titles to real estate.
Title Insurance
Protects your title--your ownership rights--from claims against it.
Paid at closing, title insurance may be the responsibility of the buyer, the
seller, or both, depending on what is traditional in your locality.
title search
An investigation into the history of ownership of a property to check for liens,
unpaid claims, restrictions or problems, to prove that the seller can transfer
free and clear ownership.
total debt ratio
Monthly debt and housing payments divided by gross monthly income. Also known as
Obligations-to-Income Ratio or Back-End Ratio.
trade equity
Equity that results from a property purchaser giving his or her existing
property (or an asset other than real estate) as trade as all or part of the
down payment for the property that is being purchased.
transfer tax
State or local tax payable when title passes from one owner to another.
Treasury index
An index that is used to determine interest rate changes for certain
adjustable-rate mortgage (ARM) plans. It is based on the results of auctions
that the U.S. Treasury holds for its Treasury bills and securities or is derived
from the U.S. Treasury's daily yield curve, which is based on the closing market
bid yields on actively traded Treasury securities in the over-the-counter
market. .
Truth-in-Lending Act
A federal law requiring a disclosure of credit terms using a standard format.
This is intended to facilitate comparisons between the lending terms of
different financial institutions. This
act was designed with the good intent of protecting the public, but criticized
by some for it’s lack of clarity (especially in the definition for calculating
APR).
trustee
A fiduciary who holds or controls property for the benefit of another.
underwriting
The process of evaluating a loan application to determine the risk involved for
the lender. Underwriting involves an analysis of the borrower's creditworthiness
and the quality of the property itself.
unsecured loan
A loan that is not backed by collateral.
VA mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also
known as a government mortgage.
vested
Having the right to use a portion of a fund such as an individual retirement
fund. For example, individuals who are 100 percent vested can withdraw all of
the funds that are set aside for them in a retirement fund. However, taxes may
be due on any funds that are actually withdrawn.
Veterans Administration (VA)
A government agency guaranteeing mortgage loans with no down payment to
qualified veterans.
Warranty
Covers either most of the house in a new home, or selected items
(for example the heating and air conditioning system or the water heater) in a
used home. Warranties can vary widely and are optional in used homes (paid for
by either the buyer or the seller).
wraparound mortgage
A mortgage that includes the remaining balance on an existing first mortgage
plus an additional amount requested by the mortgagor. Full payments on both
mortgages are made to the wraparound mortgagee, who then forwards the payments
on the first mortgage to the first mortgagee.
Zoning
Laws that govern specifically how a zoned area can be used. For
example, an area may be zoned for single family residential, condominiums,
commercial or retail, or a mix of two or more uses.
# 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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