Acceleration Clause
A clause that allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered.
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)
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.
Apartment House
A building that contains apartments.
Apartment
An individual unit of rooms in an apartment house.
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.
Appreciation
A property's increase in value due to inflation or economic factors.
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.
Assessment
Charges levied against a property for tax purposes or to pay for municipal or association improvements such as curbs, sewers, or grounds maintenance.
Assessor
A government official who is responsible for determining the value of a property for the purpose of taxation.
Assignment
The transfer of a contract or a right to buy property at given rates and terms from a mortgagee to another person.
Assumable Mortgage
When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.
Assumption
An agreement between a buyer and a seller, requiring lender approval, where the buyer takes over the payments for a mortgage and accepts the liability. Assuming a loan can be advantageous for a buyer because there are no closing costs and the loan's interest rate may be lower than current market rates. Depending on what is in the mortgage or deed of trust, the lender may raise the interest rate, require the buyer to qualify for the mortgage, or not permit the buyer to assume the loan at all.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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B
Balloon payment
This is the very large payment that is due at the end of some loans. A balloon payment means that the borrower's monthly payments are used to pay the interest on the loan and that little of the payment is used to pay back the amount that was borrowed. Unless you know how you will make this payment, these loans can be risky.
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.
Bid
A written estimate of what your home improvement project will cost.
Bridge Loan
A loan to "bridge" the gap between the termination of one mortgage and the beginning of another, such as when a borrower purchases a new home before receiving cash proceeds from the sale of a prior home. Also known as a swing loan.
Bi-weekly Mortgage
A loan requiring payments of principal and interest at two-week intervals. This type of loan amortizes much faster than monthly payment loans. The payment for a biweekly mortgage is half what a monthly payment would be.
Bonds
Loans that investors make to corporations or governments. It is a type of investment where the issuer (the corporation or government) pays a specified amount of interest on a regular basis, plus the full value of the loan when it matures.
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.
Broker
An intermediary between the borrower and the lender. The broker may represent several lending sources and charges a fee or commission for services.
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.
Buydown
With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period in an ARM. The seller may increase the sales price to cover the cost of the buydown. Buydowns can occur in all types of mortgages, not just ARMs.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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C
Cap
A limit in how much an adjustable rate mortgage's monthly payment or interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of-loan cap or an annual cap. A payment cap is a limit on the monthly payment. An interest cap is a limit on the amount of the interest rate. A life-of-loan cap restricts the amount the interest rate can increase over the entire term of the loan. An annual cap limits the amount the interest rate can increase over a twelve-month period.
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.
Cashier’s Check
Sometimes called a "bank check," it guarantees that a check is good because it is written against the bank’s own account.
Certificates of Deposit
Sometimes called a CD. You purchase a CD from a financial institution. After a certain time, the institution pays you back with interest. A CD is one kind of investment.
Certified Check
A personal check that your bank guarantees it will honor.
Certificate of Reasonable Value (CRV)
A Veterans Administration appraisal that establishes the maximum VA mortgage loan amount for a specified property.
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.
Closed-End Mortgage
A mortgage principal amount that is fixed and cannot be increased during the life of the loan. Costs payable by both seller and buyer at the time of settlement, when the purchase of a property is finalized. These costs can be up to ten percent of the mortgage amount.
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.
Cloud
A claim to the title of a property that, if valid, would prevent a purchaser from obtaining a clear title.
Collateral
Property you pledge to guarantee somebody you'll pay back money that you borrow. If you don't pay back the money, the lender can take your collateral property.
Co-Mortgagor
One who is individually and jointly obligated to repay a mortgage loan and shares ownership of the property with one or more borrowers.
Compound Interest
Interest paid both on the principal and on accumulated unpaid interest.
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.
Commitment Fee
A fee charged when a) an agreement is reached between a lender and a borrower for a loan at a specific rate and points and b) the lender guarantees to lock in that rate.
Community Reinvestment Act
The Community Reinvestment Act requires federal agencies to encourage depository financial institutions to help meet the credit needs of their communities, including low- and moderate- income neighborhoods. The regulatory agencies assess the institutions' records of meeting those credit needs by preparing a written evaluation of the institutions and assigning a rating with facts supporting the conclusions. Such ratings shall be disclosed to the public for examinations beginning July 1, 1990. The Act also requires regulatory agencies to consider an institution's record of helping to meet community credit needs when evaluating certain corporate applications, such as permission to establish a branch, to relocate a branch or home office, or to merge.
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.
Conforming Loan
A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
Construction Loan
A short-term loan financing improvements to real estate, such as the building of a new home. The lender advances funds to the borrower as needed while construction progresses. Upon completion of the construction the borrower must obtain permanent financing or repay the construction loan in full.
Consumer Handbook on Adjustable Rate Mortgages (C.H.A.R.M.)
A disclosure required by the federal government to be given to any borrower applying for an adjustable rate mortgage (ARM).
Consumer Leasing Act
The Consumer Leasing Act requires disclosure of information that helps consumers compare the cost and terms of various leases and the cost and terms of buying on credit versus cash. The Act does not apply to real estate leases or to leases of four months or less.
Consumer Price Index
A number to show the price of a imaginary basket of goods that tells if the price of things we buy is getting more expensive (inflation) or getting less expensive (deflation).
Contract
A legally binding agreement between two or more parties. A document stating the terms of a contract.
Conventional Loans
Conventional loans are mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).
Conversion Clause
A provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. The conversion feature may be available at extra cost.
Convertible Mortgage
An adjustable rate mortgage (ARM) that allows a borrower to switch to a fixed-rate mortgage at a specified point in the loan term.
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.
Co-Signer
A person who is obligated to repay a mortgage loan should the borrower default but who does not share ownership in the property.
Counterfeit
To create fake money, or to copy money, in order to deceive.
Covenants
Rules and restrictions governing the use of property.
Credit History
History of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit Insurance
An insurance policy (such as life, disability, or unemployment) that pays the lender the balance of the loan if something happens to the borrower before the loan is paid off. Sometimes the lender adds the entire price of the policy to the amount you are borrowing and this is very expensive because you pay interest on that amount.
Credit Practices Rule
The Credit Practices Rule prohibits lenders from using certain remedies, such as confessions of judgment; wage assignments; and nonpossessory, nonpurchase money, security interests in household goods. The rule also prohibits lenders from misrepresenting a cosigner's liability and requires that lenders provide cosigners with a notice explaining their credit obligation as a cosigner. It also prohibits the pyramiding of late charges.
Credit Report
Credit bureaus collect information about your credit history-where you owe money, how much you owe, your credit cards, and your payment history. Lenders determine whether to give you a loan and how much to charge you based on information in your credit report.
Credit Score
Your credit score is a number that is used by lenders to decide whether to give you credit and at what cost. It is based on information in your credit report.
Curtailments
The borrower's privilege to make payments on a loan's principal before they are due. Paying off a mortgage before it is due may incur a penalty if so specified in the mortgage's prepayment clause.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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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.
Deflation
A decrease in the level of price, or an increase in the value of money.
Delinquency
Failure of a borrower to make timely mortgage payments under a loan agreement.
Detached Housing
A housing unit that is not attached to another housing unit. An apartment building, for example, is not detached housing. A house is detached housing.
Discount
In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.
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.
Discretionary Income
Money left over after all your expenses are paid. Also called expendable income.
Down Payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.
Due-on-Sale
A clause in a mortgage or deed of trust allowing a lender to require immediate payment of the balance of the loan if the property is sold (subject to the terms of the security instrument).
Duplex
A dwelling with two attached living units.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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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.
Easement
The right one party has in regard to the property of another, such as the right of a public utility company to lay lines.
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
Electronic Fund Transfer Act
The Electronic Fund Transfer Act provides consumer protection for all transactions using a debit card or electronic means to debit or credit an account. It also limits a consumer's liability for unauthorized electronic fund transfers.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act prohibits discrimination against an applicant for credit because of age, sex, marital status, religion, race, color, national origin, or receipt of public assistance. It also prohibits discrimination because of a good faith exercise of any rights under the federal consumer credit laws. If a consumer has been denied credit, the law requires notification of the denial in writing. The consumer may request, within 60 days, that the reason for denial be provided in writing.
Equity
An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.
Escape Clause
A provision allowing one party or more to cancel all or part of the contract if certain events fail to happen, such as the ability of the buyer to obtain financing within a specified period.
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.
Exchange Rate
The rate at which one country's currency can be converted to another.
Expedited Funds Availability Act
The Expedited Funds Availability Act requires all banks, savings and loan associations, savings banks, and credit unions to make funds deposited into checking, share draft and NOW accounts available according to specified time schedules and to disclose their funds availability policies to their customers. The law does not require an institution to delay the customer's use of deposited funds but instead limits how long any delay may last. The regulation also establishes rules designed to speed the return of unpaid checks.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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F
Fair Credit and Charge Card Disclosure Act
The Fair Credit and Charge Card Disclosure Act requires new disclosures on credit and charge cards, whether issued by financial institutions, retail stores or private companies. Information such as APRs, annual fees and grace periods must be provided in tabular form along with applications and preapproved solicitations for cards. The regulations also require card issuers that impose an annual fee to provide disclosures before annual renewal. Card issuers that offer credit insurance must inform customers of any increase in rate or substantial decrease in coverage should the issuer decide to change insurance providers.
Fair Credit Billing Act
The Fair Credit Billing Act establishes procedures for the prompt correction of errors on open-end credit accounts. It also protects a consumer's credit rating while the consumer is settling a dispute.
Fair Credit Reporting Act
The Fair Credit Reporting Act establishes procedures for correcting mistakes on a person's credit record and requires that a consumer's record only be provided for legitimate business needs. It also requires that the record be kept confidential. A credit record may be retained seven years for judgments, liens, suits, and other adverse information except for bankruptcies, which may be retained ten years. If a consumer has been denied credit, a cost-free credit report may be requested within 30 days of denial.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act is designed to eliminate abusive, deceptive and unfair debt collection practices. It applies to third party debt collectors or those who use a name other than their own in collecting consumer debts. Very few commercial banks, savings banks, savings and loan associations, or credit unions are covered by this Act, since they usually collect only their own debts. Complaints concerning debt collection practices should generally be filed with the Federal Trade Commission.
Fair Housing Act
The Fair Housing Act prohibits discrimination on the basis of race, color, sex, religion, handicap, familial status or national origin in the financing, sale or rental of housing.
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.
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A quasi-governmental, federally-sponsored organization that acts as a secondary market investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.
Federal Housing Administration (FHA)
An agency within the Department of Housing and Urban Development that sets underwriting standards and insures residential mortgage loans made by private lenders. One of FHA's objectives is to help make affordable mortgages available to homeowners with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.
Federal National Mortgage Association (FNMA or Fannie Mae)
A private corporation that acts as a secondary market investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.
Federal Trade Commission Act
The Federal Trade Commission Act requires federal financial regulatory agencies to maintain a consumer affairs division to assist in resolving consumer complaints against institutions they supervise. This assistance is given to help get necessary information to consumers about problems they are having in order to address complaints concerning acts or practices which may be unfair or deceptive.
Fifteen-Year Mortgage
A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.
Finance Charge
A fee charged for a service, usually related to credit cards or loans.
Fixed-rate loans
Fixed-rate loans generally have repayment terms of 15, 20, or 30 years. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.
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.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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G
Gift
A sum of money, including amounts from a relative or a grant from the borrower's employer, a municipality, non-profit religious organization, or non-profit community organization that does not have to be repaid.
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
Transaction, settlement, or closing costs may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys’ fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.
Graduated Payment Mortgage (GPM)
A fixed-interest loan with lower payments in the early years than in the later years. The amount of the payment gradually increases over a period of time and then levels off at a payment sufficient to pay off the loan over the remaining amortization period.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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H
Hazard Insurance
A form of insurance that protects the owner of the insured property against losses from physical damage such as fire and tornadoes. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal at least to the amount of the mortgage loan.
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 Equity Loan Consumer Protection Act
The Home Equity Loan Consumer Protection Act requires lenders to disclose terms, rates and conditions (APRs, miscellaneous charges, payment terms, and information about variable rate features) for home equity lines of credit with the applications and before the first transaction under the home equity plan. If the disclosed terms change, the consumer can refuse to open the plan and is entitled to a refund of fees paid in connection with the application. The Act also limits the circumstances under which creditors may terminate or change the terms of a home equity plan after it is opened.
Home Inspection
A thorough review of the physical aspects and condition of a home by a professional home inspector. This inspection should be completed prior to closing so that any repairs or changes can be completed before the transfer of the home is completed.
Home Mortgage Disclosure Act Aggregation Project
Using loan data collected from each covered institution, the Federal Financial Institutions Examination Council (FFIEC) prepares disclosure statements and various reports for individual institutions in each MSA, showing lending patterns by location, age of housing stock, income level, sex and racial characteristics. The disclosure statements and reports are made available to the public at central depositories located in each MSA. Requests for the list of central depositories should be forwarded to the FFIEC.
Home Mortgage Disclosure Act (HMDA)
The Home Mortgage Disclosure Act (HMDA) requires certain lending institutions to report annually on their originations and purchases of home purchase and home improvement loans as well as applications for such loans. The type of loan, location of the property, race or national origin, sex and income of the applicant or borrower is reported. Institutions are required to make information regarding their lending available to the public and must post a notice of availability in their public lobby. Disclosure statements are also available at central depositories in metropolitan areas. This information can help the public determine how well institutions are serving the housing credit needs of their neighborhoods and communities.
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.
Homeowners Insurance
A form of insurance that protects the owner of the insured property against loss from theft, liability and most common disasters.
Housing Affordability Index
An index that indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.
Housing counselor
Counselors can help you explore your options, find a loan, and explain loan documents. They also offer help with foreclosure problems. The Department of Housing and Urban Development (HUD) certifies housing counselors.
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.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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I
Index
The index is the measure of interest rate changes that the lender uses to decide how much the interest rate on an ARM will change over time. No one can be sure when an index rate will go up or down. To help you get an idea of how to compare different indexes, the following chart shows a few common indexes over a ten-year period (1977-87). As you can see, some index rates tend to be higher than others, and some more volatile. (But if a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile.) You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.
Income Approach to Value
A method used by real estate appraisers to predict a property's anticipated future income. Income property includes shopping centers, hotels, motels, restaurants, apartment buildings, office space, etc.
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.
Installment Payments
Partial payments made to home improvement contractors as the work is being done.
Interest
The percentage rate lenders charge you for using their money. The higher the percentage, the more you pay.
Interest Rate
The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Insurance
A contract by which someone guarantees for a fee to pay someone else for the value of property if it is lost or damaged (as through theft or fire); the amount for which something is insured.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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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.
Jumbo Loan
A nonconforming loan that is larger than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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K
Key Lot
Real estate deemed highly valuable because of its location.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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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
Line of Credit
A pre-approved amount that you can borrow. You only borrow what you need, when you need it.
Liquidity
The ease with which an asset can be converted into cash.
Loan
Money borrowed with an agreement to pay it back, with interest, over a specific length of time.
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 Origination Fees
Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.
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
Lock-in refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.
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.
For more information on home mortgages, home loans and help choosing the best home loan program for you, contact United Mortgage and Associates LTD. of Ocala, Florida today!
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M
Maintenance Costs
The cost of the upkeep of the house. These costs may be minor in cost and nature (replacing washers in the faucets) or major in cost and nature (new heating system or a new roof) and can apply to either the interior or exterior of the house.
Margin
An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Modification
A change in the terms of the mortgage note, such as a reduction in the interest rate or a change in maturity date.
Mortgage
A lien on the property that secures the Promise to repay a loan.
Mortgage-Backed Securities
Securities issued based on the cash flow from the principal and interest provided by a pool of mortgages.
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 Interest
The interest rate charge for borrowing the money for the mortgage. It is used to calculate the interest payment on the mortgage each month.
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.
Mortgage Term
The length of time that a mortgage is scheduled to exist. Example a 30-year mortgage term is for 30 years.
Multi-Family Home
A building that has separate units for more than one family.
Mutual Fund
An investment where your money is pooled with other investor’s money and used to make investments by a professional manager.
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N
National Flood Insurance Act
National Flood Insurance is available to any property holder whose local community participates in the national program by adopting and enforcing flood plain management. Federally regulated lenders are required to compel borrowers to purchase flood insurance in certain designated areas. Lenders also must disclose to borrowers if their structure is located in a flood hazard area.
Negative Amortization
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.
Non-Assumption Clause
In a mortgage contract, a statement that prohibits a new buyer from assuming a mortgage loan without the approval of the lender.
Non-Conforming Loan
A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Jumbo loans are nonconforming.
Note
A written promise to pay, such as a mortgage.
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O
Offer
Indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.
Open-End Mortgage
A mortgage allowing the borrower to receive advances of principal from the lender during the life of the loan. See also closed-end mortgage.
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.
Overages
Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.
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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.
P&I
Abbreviation for principal and interest.
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.
PITIO
Abbreviation for principal, interest, taxes, insurance and other monthly non-housing costs.
Points
Points are fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs. A point is equal to one percent of the principal amount of your mortgage. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.
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.
Predatory Lenders
Lenders who take advantage of borrowers and make loans that the borrowers cannot afford. They may charge very high interest rates or fees, hide costs, or lie about loan terms.
Premium
An amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Prepayment Penalty
Extra fees that may be due if you pay off the loan early by refinancing your home. These fees may make it too expensive to get out of the loan. If your loan includes a prepayment penalty, be aware of the penalty you would have to pay. Ask the lender if you can get a loan without a prepayment penalty, and what that loan would cost.
Prime Rate
The interest rate commercial banks charge their most creditworthy customers.
Principal
The amount borrowed from a lender; doesn't include interest or additional fees.
Private mortgage insurance (PMI)
Private mortgage insurance (PMI) protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.
Property Tax
The amount which the state and/or locality assesses as a tax on a piece of property.
Prorate
To proportionally divide amounts owed by the buyer and the seller at closing.
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Q
Qualifying
To prove suitable for a task. When you get a mortgage, you have to qualify for it by showing that you can and will pay back the money you borrow.
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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.
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act requires that a consumer be given advance information about the services and costs involved in the closing of a residential mortgage. It also limits the amount that can be collected for mortgage escrow.
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.
Rights to Financial Privacy Act
The Right to Financial Privacy Act provides that customers of financial institutions have a right to expect that their financial activities will have a reasonable amount of privacy from federal government scrutiny. The Act establishes specific procedures and exemptions concerning the release of the financial records of customers and imposes limitations on and requirements of financial institutions prior to the release of such information to the federal government.
Rural
Related to a sparsely-populated area of the country.
Rural Housing Service (RHS)
RHS is managed by the US Department of Agriculture (USDA) and provides a wide variety of services to encourage rural development, including direct loans, grants, and loan guaranties.
Right of First Refusal
The right to purchase a property under conditions and terms made by another buyer and accepted by the seller.
Right of Rescission
The right to back out of a transaction, given automatically by law to the borrower in a real estate purchase transaction. When a borrower's principal dwelling is going to secure a loan, the borrower has three business days following signing of the loan documents to rescind or cancel the transaction. Any and all money paid by the borrower must be refunded upon rescission. The right to rescind does not apply to loans to purchase real estate or to refinance a loan under the same terms and conditions where no additional funds will be added to the existing loan.
Rollover
The process by which a construction loan becomes a mortgage. At the end of the construction loan period, the borrower's file is delivered to Bank One Mortgage Loan Servicing Dept. Prior to delivery, CLD contacts the borrower and obtains funds for the tax and insurance escrows, a final title policy and homeowner's policy. This process is called a rollover.
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S
Savings and Time Deposits
Savings and time deposits are covered by regulations that prohibit inaccurate or misleading advertising.
Second Mortgage
A loan that is junior to a primary or first mortgage and often has a higher interest rate and a shorter term.
Servicing
The responsibility of collecting monthly mortgage payments and properly crediting them to the principal, taxes and insurance, as well as keeping the borrower informed of any changes in the status of the loan.
Settlement
Another name for closing.
Simple Interest
Interest figured only on the original amount (the principal) of a loan.
Single-Family Home
A dwelling, usually a house, in which only one family lives.
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
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T
Tax deed
A written document conveying title to property repossessed by the government due to default on tax payments.
Tax savings
The deduction a taxpayer can take on their tax form for interest paid on a home mortgage. The amount of money that the homeowner is not required to pay the government in taxes because he or she owns a home.
Taxes
As a part of PITI, the amount of the monthly mortgage payment which does not include the principal, interest, and insurance.
Thrift institution
Thrift institution is a general term for savings banks and savings and loan associations.
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.
Total Amount to Repay
This is the total amount of fees, points, and all monthly and balloon payments that you will pay over the life of the loan.
Triplex
A building with three housing units.
Truth in Lending Act
The Truth in Lending Act requires disclosure of the "finance charge" and the "annual percentage rate"--and certain other costs and terms of credit--so that a consumer can compare the prices of credit from different sources. It also limits liability on lost or stolen credit cards.
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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.
Uniform Settlement Statement
A standard document prescribed by the Real Estate Settlement Procedures Act containing information for closing which must be supplied to both buyer and seller.
US Department of Agriculture (USDA)
USDA is a Federal agency established to enhance the quality of life for the American people by supporting the production of agriculture.
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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.
Veteran
A former member of the armed forces -- for example, the Army, Air Force, Navy, or Marines.
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W
Walk-Through
An inspection of a property by the prospective buyer prior to closing on a mortgage.
Warranty Deed
A document protecting a homebuyer against any and all claims to the property.
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X
No terms available
Y
Yield
The rate at which money you invest grows over time. Yield is usually expressed in terms of how much interest your investment earns in a year.
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Z
Zoning
The ability of local governments to specify the use of private property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc.
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