| Adjustable Rate Mortgage (ARM):
The interest rate on this type of mortgage loan varies during
life time of the loan. |
|
Adjustment Period: The time interval
between interest rate changes on an ARM loan. For example, a
loan with an adjustment period of one year is called a 1 year
ARM, and the interest rate can change once a year. |
|
Amortization: Loan repayment in
equal installments of interest and principle amount. |
|
Annual Percentage Rate (APR): The
total finance charge including interest, loan fees, points
expressed as percentage of the loan amount. |
|
"As-Is Condition": Acceptance by a
buyer of all the existing conditions at the time of the sale,
including all physical defects. |
|
Assumption of Mortgage: An agreement
to assume the liability by a buyer under an existing note that
is secured by a mortgage or deed of trust. |
| The buyer must be approved by the
lender in order to assume the loan. |
|
Buydown: A payment to the lender
from the seller, buyer, or third party to reduce the interest |
|
rate during the early years of a loan
(typically for the first 1 to 5years of the loan). |
|
Cap: Cap limits the amount an
interest rate can change either at each adjustment or over the
life of the loan. |
|
CC&R's: Covenants, Conditions and
Restrictions. A document that regulates the use, requirements,
and restrictions of a property. |
|
Closing Costs: Costs to finalize the
sale. These costs include loan fees, title fees, appraisal fees,
etc. |
|
Closing Statement: The financial
disclosure statement that accounts for all of the funds received
and expected at the closing including deposits for taxes, hazard
insurance and mortgage insurance. |
|
CLTA Homeowner's Policy: A title
insurance policy that offers an extensive title insurance
coverage for homeowners. |
|
Contingency Clause: A requirement to
be met before a contract is binding. For example, the sale of a
house is contingent upon obtaining of a mortgage loan by a
buyer. |
|
Conversion Provision: Certain ARM
loans may be converted to a fixed interest rate loan, usually
after the first adjustment period. |
|
Deed: A legal document which
transfers title. |
|
Due On Sale Clause: An clause
requiring a full payment of a mortgage or deed of trust upon
transfer of property ownership. |
|
Earnest Money: A portion of the down
payment given to the seller or escrow agency by the buyer with a
written offer as evidence of good faith. |
|
Escrow: A process in which an
independent third party mediates a property sale among a buyer,
seller, and lender. An escrow agency handles all of the
paperwork and distributes finds. |
|
Fair Market Value: Price that is
likely to be negotiated between a buyer and seller. |
|
Often determined by comparing the values of
other similar properties sold in the area. |
|
Federal National Mortgage Association
(FNMA): A Congress created association which buys and sells
residential mortgages insured by FHA or sponsored by VA. |
|
FHA Loan: A loan which is insured by
the Federal Housing Administration (FHA) guaranteeing loan |
|
repayment in case of default by the loan
borrower. |
|
Flood Insurance: Insurance against
flood damage. This insurance is required by lenders in certain
areas which are deemed to be potential flood areas. |
|
Graduated Payment Mortgage: A
mortgage with monthly payments that gradually increase a set
rate. |
|
Grant Deed: A type of deed used to
transfer real property. Contains warranties against prior |
|
conveyances or encumbrances. |
|
Grantee: A person to whom a grant is
made (usually the buyer). |
|
Grantor: A person who grants
property rights. |
|
Hazard Insurance: Insurance against
damage caused by fire, certain natural causes, vandalism, |
|
and other additional causes (based on the
insurance policy). |
|
Home Inspection Report: A report on
the condition of a property made by a professional inspector. |
|
Home Owner's Association: An
association consisting of the people who own homes, such as
condominiums or planned developments, in a given area. |
|
Home Warranty Plan: Warranty
against malfunction of mechanical systems of the property,
including plumbing, electrical, heating systems and installed
appliances. |
|
HUD 1: The form on which the closing
statement is written. |
|
Index: Determination of interest
rate variability used to determine the changes in an ARM loan
interest rate over the term of the loan. |
|
Lien: A legal claim placed on a
property as security for a debt or charge. |
|
Loan To Value Ratio: The ratio of
the amount of the loan to the amount of the appraised value of
the property, and expressed as a percentage. |
|
Lock or Lock-in: A guaranteed loan
interest rate for a determined period of time. |
|
Margin: The number of percentage
points added to the index rate to determine the ARM interest
rate at each adjustment. |
|
Origination Fee: A fee charged to
start a new loan. |
|
PI: Principal and interest. Indicate
the charges included in a monthly payment. May include property
taxes and hazard insurance in addition to principle and
interest. |
|
PITI: Monthly payment which includes
principal, interest, taxes, and insurance. |
|
Preliminary Title Report: A report
of the condition of title prior to a sale or loan transaction. |
|
Prepayment Penalty: A penalty fee
charged to a borrower if he/she repays a loan prior to its due
date. |
|
Private Mortgage Insurance (PMI):
Insurance provided by a private company to the lender and
protecting against loss if the borrower fails to make payments
on the loan. |
|
Realtor: A real estate broker or
associate working with a local real estate board affiliated with
the National Association of Realtors. |
|
Regulation Z: The Truth in Lending
Act (TILA), Title I of the Consumer Credit Protection Act, aimed
at promoting the informed use of consumer credit by requiring
disclosures about its terms and costs. |
|
Statement of Information: Also known
as a Statement of Identity. Information submitted by buyer and
seller and used by the title company to determine any liens that
may exist against buyer or seller. |
|
Title Insurance Policy: There are
two types of title insurance: Lenders title insurance, also
called a Loan Policy, and Owner's
title insurance. Owner’s title insurance policy protects
homeowners |
| from
unforeseen claims made against title to real property, which
were not discovered during the title/land record search. |
|
VA Loan: A loan administered by a
private lender and guaranteed by the Veteran's Administration. |
|
|
