Adjustable Rate
(ARM) |
The interest rate is tied to a financial index, and the
monthly payment can go up or down over time. |
| APR |
Annual percentage fee (interest and fees you’ll be
charged). |
| Appraisal |
A report made by a qualified person setting forth an opinion
or estimate of property value. (appraisal
also refers to the process through which a conclusion on property value is
derived.) |
| Balloon |
A
long-term mortgage that has a large payment due at maturity. |
| Closing |
The final meeting, usually with your real estate agent,
sellers and a closing agent or attorney (although the sellers may complete
paperwork separately) where you sign the necessary paperwork, make the
monetary transaction and take possession of the house immediately, or in a
designated time period shortly thereafter. |
| Closing Costs |
The fees associated with processing the paperwork necessary
to complete the transaction. |
| Comparables |
Homes with similar square footage that recently sold in the
area |
| Contingencies |
Conditions which must be met for the purchase contract to be
executed. |
| Counteroffer |
The counteroffer is the seller’s response to your offer. |
| Credit Report |
A document completed by a credit-reporting agency providing
information about the buyer’s credit cards, previous mortgage history,
bank loans and public records dealing with financial matters. |
Debt to Income
Ratio |
Compares
the amount of monthly income to the amount the borrower will owe each
month in house payment (PITI) plus other debts. The
other debts may include but are not limited to car payment, credit cards,
alimony, child support, and personal loans.
This ratio is commonly used to see if the borrower has the capacity
to repay the debt |
| Deed of Trust |
A legal document that conveys title to real estate to a
disinterested third party (trustee) who holds the title until the owner of
the property has repaid the debt. In
states where it is used, a Deed of Trust accomplishes essentially the same
purpose as a Mortgage. |
| Down Payment |
A percentage of the cost of the home that is paid up front. |
| Earnest Money |
The deposit you make on the home when you submit the offer.
This money is intended to show the seller that you are serious
about wanting to purchase the property.
Earnest money goes into an escrow account, and if the offer is
accepted, the earnest money amount will be applied to either the down
payment or closing costs. If
the offer is not accepted, you will get the money back. |
| Escrow |
An
account where money is held, either for earnest money or by the lender for
fees due for taxes or insurance |
| Equity |
The
difference in what you owe on the home and its fair market value. |
| FHA |
Mortgages that are extended by private lenders, but insured
by the Federal Housing Administration, often requiring a significantly
lower down payment and lower incomes to qualify. |
| Fixed Rate |
The interest rate stays the same for the mortgage term. |
| Foreclosure |
The legal process by which an owner’s right to a property
is terminated, usually due to default.
Typically involves a forced sale of the property at public auction,
with the proceeds being applied to the mortgage debt. |
| Hybrid |
A loan that starts with a fixed rate period and then
converts to an adjustable rate. |
| HUD |
U.S. Department of Housing and Urban Development |
| Interest |
The payment you make to the lender for the money you borrow. |
| Interest-Only |
A loan in which the borrower pays only the interest on the
principal balance for a set period. |
| Mortgage |
The written instrument used to pledge a title to real estate
as security for repayment of a Promissory Note. |
| Mortgage Insurance |
Insurance written in connection with a mortgage loan that
indemnifies the lender in the event of borrower default.
In connection with conventional loan transactions, this insurance
is commonly referred to as Private Mortgage Insurance (PMI) |
| Mortgage Note |
A
written promise to pay a sum of money at a stated interest rate during a
specified term. It is
typically secured by a mortgage. |
| Net Income |
The difference between effective gross income and expense
including taxes and insurance. The
term is qualified as net income before depreciation and debt. |
| PMI |
Private
Mortgage Insurance – may be required for first-time buyers |
| Pre-Approval |
A process in which a customer provides appropriate
information on income, debts and assets that will be used to make a credit
only loan decision. The
customer typically ha not identified a property to be purchased, however,
a specific sales price and loan amount are used to make a loan decision.
(The sales price and loan amount are based on customer assumptions.) |
| Pre-Qualification |
A process designed to assist a customer in determining a
maximum sales price, loan amount and PITI payment they are qualified for.
A pre-qualification is not considered a loan approval.
A customer would provide basic information (income, debts, assets)
to be used to determine the maximum sales price, etc. |
| Principal |
The
amount of your loan that you actually borrow. |
| REO |
Real estate owned properties |
| Short Sale |
When the seller’s lender accepts less than the amount owed
to release the mortgage. |
| Title |
The
evidence to the right to or ownership in property.
In the case of real estate, the documentary evidence of ownership
is the title deed, which specifies in whom the legal state is vested and
the history of ownership and transfers.
Title may be acquired through purchase, inheritance, devise, gift
or through the foreclosure of a mortgage. |
| Underwriting |
The process of evaluating a loan application to determine
the risk involved for the lender. It
involves an analysis of the borrower’s creditworthiness and the quality
of the property itself. |
| VA |
Loans administered by the Department of Veteran Affairs for
Americans who have served in the armed forces. |
|
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