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This glossary is
an extensive listing of real estate and mortgage terms that
you can use as needed when doing business with Flagstar. To
get started, click on the appropriate letter above for a listing
of all the terms that begin with that letter. Then, locate
the word you are looking for. |
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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 |
| Acceleration
Clause |
A provision in a
mortgage that gives the lender the right to demand payment
of the entire principal balance if a monthly payment is missed. |
| Acceptance |
An offeree's consent
to enter into a contract and be bound by the terms of the
offer. |
| Additional
Principal Payment |
A payment by a borrower
of more than the scheduled principal amount due in order to
reduce the remaining balance on the loan. |
| Adjustable-Rate
Mortgage (ARM) |
A mortgage that
permits the lender to adjust the mortgage's interest rate
periodically on the basis of changes in a specified index.
Interest rates may move up or down, as market conditions change.
|
| Adjustment
Basis |
The original cost
of a property plus the value of any capital expenditures for
improvements to the property minus any depreciation taken. |
| Adjustment
Date |
The date on which
the interest rate changes for an adjustable-rate mortgage
(ARM). |
| Adjustment
Period |
The period that
elapses between the adjustment dates for an adjustable-rate
mortgage (ARM). |
| Administrator |
A person appointed
by a probate court to administer the estate of a person who
died in te state. |
| Affordability
Analysis |
A detailed analysis
of your ability to afford the purchase of a home. An affordability
analysis takes into consideration your income, liabilities,
and available funds, along with the type of mortgage you plan
to use, the area where you want to purchase a home, and the
closing costs that you might expect to pay. |
| Amenity |
A feature of real
property that enhances its attractiveness and increases the
occupant's or user's satisfaction although the feature is
not essential to the property's use. Natural amenities include
a pleasant or desirable location near water, scenic views
of the surrounding area, etc. Human-made amenities include
swimming pools, tennis courts, community buildings, and other
recreational facilities. |
| Amortization |
The gradual repayment
of a mortgage loan by installments. |
| Amortization
Schedule |
A timetable for
payment of a mortgage loan. An amortization schedule shows
the amount of each payment applied to interest and principal
and shows the remaining balance after each payment is made.
|
| Amortization
Term |
The amount of time
required to amortize the mortgage loan. The amortization term
is expressed as a number of months. For example, for a 30-year
fixed-rate mortgage, the amortization term is 360 months.
|
| Amortize |
To repay a mortgage
with regular payments that cover both principal and interest.
|
| Annual
Mortgagor Statement |
A report sent to
the mortgagor (the borrower) each year. The report shows how
much was paid in taxes and interest during the year, as well
as the remaining mortgage loan balance at the end of the year.
|
| Annual
Percentage Rate (APR) |
The cost of a mortgage
stated as a yearly rate; includes such items as interest,
mortgage insurance, and loan origination fee (points). |
| Annuity |
An amount paid yearly
or at other regular intervals, often on a guaranteed dollar
basis. |
| Application |
A form used to apply
for a mortgage loan and to record pertinent information concerning
a prospective mortgagor and the proposed security. Lenders
use the information on the loan application to evaluate whether
or not they can give the loan, and if so, the amount of money
they can lend. |
| Appraisal |
A form used to apply
for a mortgage loan and to record pertinent information concerning
a prospective mortgagor and the proposed security. Lenders
use the information on the loan application to evaluate whether
or not they can give the loan, and if so, the amount of money
they can lend. |
| Appraised
Value |
An opinion of a
property's fair market value, based on an appraiser's knowledge,
experience, and analysis of the property. |
| Appraiser |
A person qualified
by education, training, and experience to estimate the value
of real property and personal property. |
| Appreciation |
An increase in the
value of a property due to changes in market conditions or
other causes. The opposite of depreciation. |
| Assessed
Value |
The valuation placed
on property by a public tax assessor for purposes of taxation.
|
| Assessment |
The process of placing
a value on property for the strict purpose of taxation. May
also refer to a levy against property for a special purpose,
such as a sewer assessment. |
| Assessment
Rolls |
The public record
of taxable property. |
| Assessor |
A public official
who establishes the value of a property for taxation purposes.
|
| Asset |
Anything of monetary
value that is owned by a person. Assets include real property,
personal property, and enforceable claims against others (including
bank accounts, stocks, mutual funds, and so on). |
| Assignment |
The transfer of
a mortgage from one person to another. |
| Assumable
Mortgage |
A mortgage that
can be taken over ("assumed") by the buyer when
a home is sold. |
| Assumption |
The transfer of
the seller's existing mortgage to the buyer. See assumable
mortgage. |
| Assumption
Clause |
A provision in an
assumable mortgage that allows a buyer to assume responsibility
for the mortgage from the seller. The loan does not need to
be paid in full by the original borrower upon sale or transfer
of the property. |
| Assumption
Fee |
The fee paid to
a lender (usually by the purchaser of real property) resulting
from the assumption of an existing mortgage. |
| Attorney-in-fact |
One who holds a
power of attorney from another to execute documents on behalf
of the grantor of the power. |
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| Balance
Sheet |
A financial statement
that shows assets, liabilities, and net worth as of a specific
date. |
| Balloon
Mortgage |
A mortgage that
has level monthly payments that will amortize it over a stated
term but that provides for a lump sum payment to be due at
the end of an earlier specified term. The principal and interest
on the loan are amortized over a longer period than the actual
term of the mortgage. |
| Balloon
Payment |
The final lump sum
payment that is made at the maturity date of a balloon mortgage. |
| Bankrupt |
A person, firm,
or corporation that, through a court proceeding, is relieved
from the payment of all debts after the surrender of all assets
to a court-appointed trustee. |
| Bankruptcy |
A proceeding in
a federal court in which a debtor who owes more than his or
her assets can relieve the debts by transferring his or her
assets to a trustee. |
| Before-tax
Income |
Income before taxes
are deducted. |
| Beneficiary |
The person designated
to receive the income from a trust, estate, or a deed of trust. |
| Bequeath |
To transfer personal
property through a will. |
| Betterment |
An improvement that
increases property value as distinguished from repairs or
replacements that simply maintain value. |
| Bill
of Sale |
A written document
that transfers title to personal property. |
| Binder |
A preliminary agreement,
secured by the payment of an earnest money deposit, under
which a buyer offers to purchase real estate. |
| Biweekly
Payment Mortgage |
A mortgage that
requires payments to reduce the debt every two weeks (instead
of the standard monthly payment schedule). The 26 (or possibly
27) biweekly payments are each equal to one-half of the monthly
payment that would be required if the loan were a standard
30-year fixed-rate mortgage, and they are usually drafted
from the borrower's bank account. The result for the borrower
is a substantial savings in interest. |
| Blanket
Mortgage |
The mortgage that
is secured by a cooperative project, as opposed to the share
loans on individual units within the project. |
| Bona
Fide |
In good faith, without
fraud. |
| Bond |
An interest-bearing
certificate of debt with a maturity date. An obligation of
a government or business corporation. A real estate bond is
a written obligation usually secured by a mortgage or a deed
of trust. |
| Breach |
A violation of any
legal obligation. |
| Bridge
Loan |
A form of second
trust that is collateralized by the borrower's present home
(which is usually for sale) in a manner that allows the proceeds
to be used for closing on a new house before the present home
is sold. Also known as "swing loan." |
| Broker |
A person who, for
a commission or a fee, brings parties together and assists
in negotiating contracts between them. |
| Budget |
|
| Budget
Category |
A category of income
or expense data that you can use in a budget. You can also
define your own budget categories and add them to some or
all of the budgets you create. "Rent" is an example
of an expense category. "Salary" is a typical income
category. |
| Building
Code |
Local regulations
that control design, construction, and materials used in construction.
Building codes are based on safety and health standards. |
| Buydown
Account |
An account in which
funds are held so that they can be applied as part of the
monthly mortgage payment as each payment comes due during
the period that an interest rate buydown plan is in effect.
|
| Buydown
Mortgage |
A temporary buydown
is a mortgage on which an initial lump sum payment is made
by any party to reduce a borrower's monthly payments during
the first few years
of a mortgage. A permanent buydown reduces the interest rate
over the entire life of a mortgage. |
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| Call
Option |
A provision in the
mortgage that gives the mortgagee the right to call the mortgage
due and payable at the end of a specified period for whatever
reason. |
| Cap |
A provision of an
adjustable-rate mortgage (ARM) that limits how much the interest
rate or mortgage payments may increase or decrease. See lifetime
payment cap, lifetime rate cap, periodic payment cap, and
periodic rate cap. |
| Capital |
(1) Money used to
create income, either as an investment in a business or an
income property. (2) The money or property comprising the
wealth owned or used by a person or business enterprise. (3)
The accumulated wealth of a person or business. (4) The net
worth of a business represented by the amount by which its
assets exceed liabilities. |
| Capital
Expenditure |
The cost of an improvement
made to extend the useful life of a property or to add to
its value. |
| Capital
Improvement |
Any structure or
component erected as a permanent improvement to real property
that adds to its value and useful life. |
| Cash-out
Refinance |
A refinance transaction
in which the amount of money received from the new loan exceeds
the total of the money needed to repay the existing first
mortgage, closing costs, points, and the amount required to
satisfy any outstanding subordinate mortgage liens. In other
words, a refinance transaction in which the borrower receives
additional cash that can be used for any purpose. |
| Certificate
of Deposit |
A document written
by a bank or other financial institution that is evidence
of a deposit, with the issuer's promise to return the deposit
plus earnings at a specified interest rate within a specified
time period. See adjustable rate mortgage (ARM). |
| Certificate
of Deposit Index |
An index that is
used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weekly average of
secondary market interest rates on six-month negotiable certificates
of deposit. See adjustable-rate mortgage. |
| Certificate
of Eligibility |
A document issued
by the federal government certifying a veteran's eligibility
for a Department of Veterans Affairs (VA) mortgage. |
| Certificate
of Reasonable Value (ARV) |
A document issued
by the Department of Veterans Affairs (VA) that establishes
the maximum value and loan amount for a VA mortgage. |
| Certificate
of Title |
A statement provided
by an abstract company, title company, or attorney stating
that the title to real estate is legally held by the current
owner. |
| Chain
of Title |
The history of all
of the documents that transfer title to a parcel of real property,
starting with the earliest existing document and ending with
the most recent. |
| Change
Frequency |
The frequency (in
months) of payment and/or interest rate changes in an adjustable-rate
mortgage (ARM) |
| Chattel |
Another name for
personal property. |
| Clear
Title |
A title that is
free of liens or legal questions as to ownership of the property. |
| Closing |
A meeting at which
a sale of a property is finalized by the buyer signing the
mortgage documents and paying closing costs. Also called "settlement."
At this meeting, ownership of the property is transferred
from the seller to the buyer. |
| Closing
Cost Item |
A fee or amount
that a home buyer must pay at closing for a single service,
tax, or product. Closing costs are made up of individual closing
cost items such as origination fees and attorney's fees. Many
closing cost items are included as numbered items on the HUD-1
statement. |
| Closing
Costs |
Expenses (over and
above the price of the property) incurred by buyers and sellers
in transferring ownership of a property. Closing costs normally
include an origination fee, an attorney's fee, taxes, an amount
placed in escrow, and charges for obtaining title insurance
and a survey. Closing costs percentage will vary according
to the area of the country; lenders or RealtorsŪ often provide
estimates of closing costs to prospective homebuyers. |
| Closing
Statement |
See HUD-1 statement. |
| Cloud
on Title |
Any conditions revealed
by a title search that adversely affect the title to real
estate. Usually clouds on title cannot be removed except by
a quitclaim deed, release, or court action. |
| Coinsurance |
A sharing of insurance
risk between the insurer and the insured. Coinsurance depends
on the relationship between the amount of the policy and a
specified percentage of the actual value of the property insured
at the time of the loss. |
| Coinsurance
Clause |
A provision in a
hazard insurance policy that states the amount of coverage
that must be maintained -- as a percentage of the total value
of the property -- for the insured to collect the full amount
of a loss. |
| Collateral |
An asset (such as
a car or a home) that guarantees the repayment of a loan.
The borrower risks losing the asset if the loan is not repaid
according to the terms of the loan contract. |
| Collection |
The efforts used
to bring a delinquent mortgage current and to file the necessary
notices to proceed with foreclosure when necessary. |
| Co-maker |
A person who signs
a promissory note along with the borrower. A Co-maker's signature
guarantees that the loan will be repaid, because the borrower
and the CO-maker are equally responsible for the repayment.
See endorser. |
| Commission |
The fee charged
by a broker or agent for negotiating a real estate or loan
transaction. A commission is generally a percentage of the
price of the property or loan. |
| Commitment
Letter |
A formal offer by
a lender stating the terms under which it agrees to lend money
to a home buyer. Also known as a "loan commitment." |
| Common
Area Assessments |
Levies against individual
unit owners in a condominium or planned unit development (PUD)
project for additional capital to defray homeowners' association
costs and expenses and to repair, replace, maintain, improve,
or operate the common areas of the project. |
| Common
Areas |
Those portions of
a building, land, and amenities owned (or managed) by a planned
unit development (PUD) or condominium project's homeowners'
association (or a cooperative project's cooperative corporation)
that are used by all of the unit owners, who share in the
common expenses of their operation and maintenance. Common
areas include swimming pools, tennis courts, and other recreational
facilities, as well as common corridors of buildings, parking
areas, means of ingress and egress, etc. |
| Common
Law |
An unwritten body
of law based on general custom in England
and used to an extent in the United States.
|
| Community
Land Trust Mortgage Option |
An alternative financing
option that enables low- and moderate-income home buyers to
purchase housing that has been improved by a nonprofit Community
Land Trust and to lease the land on which the property stands.
|
| Community
Property |
In some western
and southwestern states, a form of ownership under which property
acquired during a marriage is presumed to be owned jointly
unless acquired as separate property of either spouse. |
| Community
SecondsŪ |
An alternative financing
option for low- and moderate-income households under which
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 organization. Payment on the second mortgage is
often deferred and carries a very low interest rate (or no
interest rate at all). Part of the debt may be forgiven incrementally
for each year the buyer remains in the home. |
| Comparable |
An abbreviation
for "comparable properties"; used for comparative
purposes in the appraisal process. Comparables are properties
like the property under consideration; they have reasonably
the same size, location, and amenities and have recently been
sold. Comparables help the appraiser determine the approximate
fair market value of the subject property. |
| Compound
Interest |
Interest paid on
the original principal balance and on the accrued and unpaid
interest. |
| Condemnation |
The determination
that a building is not fit for use or is dangerous and must
be destroyed; the taking of private property for a public
purpose through an exercise of the right of eminent domain.
|
| Condominium |
A real estate project
in which each unit owner has title to a unit in a building,
an undivided interest in the common areas of the project,
and sometimes the exclusive use of certain limited common
areas. |
| Condominium
Conversion |
Changing the ownership
of an existing building (usually a rental project) to the
condominium form of ownership. |
| Condominium
Hotel |
A condominium project
that has rental or registration desks, short-term occupancy,
food and telephone services, and daily cleaning services and
that is operated as a commercial hotel even though the units
are individually owned. |
| Construction
Loan |
A short-term, interim
loan for financing the cost of construction. The lender makes
payments to the builder at periodic intervals as the work
progresses. |
| Contingency |
A condition that
must be met before a contract is legally binding. For example,
home purchasers often include a contingency that specifies
that the contract is not binding until the purchaser obtains
a satisfactory home inspection report from a qualified home
inspector. |
| Contract |
An oral or written
agreement to do or not to do a certain thing. |
| Conventional
Mortgage |
A mortgage that
is not insured or guaranteed by the federal government. |
| Convertibility
Clause |
A provision in some
adjustable-rate mortgages (ARMs) that allows the borrower
to change the ARM to a fixed-rate mortgage at specified timeframes
after loan origination. |
| Convertible
ARM |
An adjustable-rate
mortgage (ARM) that can be converted to a fixed-rate mortgage
under specified conditions. |
| Cooperative
(co-op) |
A type of multiple
ownership in which the residents of a multiunit housing complex
own shares in the cooperative corporation that owns the property,
giving each resident the right to occupy a specific apartment
or unit. |
| Cooperative
Corporation |
A business trust
entity that holds title to a cooperative project and grants
occupancy rights to particular apartments or units to shareholders
through proprietary leases or similar arrangements. |
| Cooperative
Mortgages |
Mortgages related
to a cooperative project. This usually refers to the multifamily
mortgage covering the entire project but occasionally describes
the share loans on the individual units. |
| Cooperative
Project |
A residential or
mixed-use building wherein a corporation or trust holds title
to the property and sells shares of stock representing the
value of a single apartment unit to individuals who, in turn,
receive a proprietary lease as evidence of title. |
| Corporate
Relocation |
Arrangements under
which an employer moves an employee to another area as part
of the employer's normal course of business or under which
it transfers a substantial part or all of its operations and
employees to another area because it is relocating its headquarters
or expanding its office capacity. |
| Cost
of Funds Index (COFI) |
An index that is
used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weighted-average cost
of savings, borrowings, and advances of the 11th District
members of the Federal Home Loan Bank of San Francisco. See
adjustable-rate mortgage (ARM). |
| Covenant |
A clause in a mortgage
that obligates or restricts the borrower and that, if violated,
can result in foreclosure. |
| Credit |
An agreement in
which a borrower receives something of value in exchange for
a promise to repay the lender at a later date. |
| Credit
History |
A record of an individual's
open and fully repaid debts. A credit history helps a lender
to determine whether a potential borrower has a history of
repaying debts in a timely manner. |
| Credit
Life Insurance |
A type of insurance
often bought by mortgagors because it will pay off the mortgage
debt if the mortgagor dies while the policy is in force. |
| Creditor |
A person to whom
money is owed. |
| Credit
Report |
A report of an individual's
credit history prepared by a credit bureau and used by a lender
in determining a loan applicant's creditworthiness. |
| Credit
Reporting Agency (or bureau) |
An organization
that prepares reports that are used by lenders to determine
a potential borrower's credit history. The agency obtains
data for these reports from a credit repository as well as
from other sources. |
| Credit
Repository |
An organization
that gathers, records, updates, and stores financial and public
records information about the payment records of individuals
who are being considered for credit. |
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| Debt |
An amount owed to
another. See installment loan and revolving liability. |
| Deed |
The legal document
conveying title to a property. |
| Deed-in-lieu |
A deed given by
a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. |
| Deed
of Trust |
The document used
in some states instead of a mortgage; title is conveyed to
a trustee. |
| Default |
Failure to make
mortgage payments on a timely basis or to comply with other
requirements of a mortgage. |
| Delinquency |
Failure to make
mortgage payments when mortgage payments are due. |
| Deposit |
A sum of money given
to bind the sale of real estate, or a sum of money given to
ensure payment or an advance of funds in the processing of
a loan. |
| Depreciation |
A decline in the
value of property; the opposite of appreciation. |
| Discount
Points |
See point. |
| Dower |
The rights of a
widow in the property of her husband at his death. |
| Down
Payment |
The part of the
purchase price of a property that the buyer pays in cash and
does not finance with a mortgage. |
| Due-on-sale
Provision |
A provision in a
mortgage that allows the lender to demand repayment in full
if the borrower sells the property that serves as security
for the mortgage. |
| Due-on-transfer
Provision |
This terminology
is usually used for second mortgages. See due-on-sale provision. |
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| Earnest
Money Deposit |
A deposit made by
the potential home buyer to show that he or she is serious
about buying the house. |
| Easement |
A right of way giving
persons other than the owner access to or over a property. |
| Effective
Age |
An appraiser's estimate
of the physical condition of a building. The actual age of
a building may be shorter or longer than its effective age. |
| Effective
Gross Income |
Normal annual income
including overtime that is regular or guaranteed. The income
may be from more than one source. Salary is generally the
principal source, but other income may qualify if it is significant
and stable. |
| Eminent
Domain |
The right of a government
to take private property for public use upon payment of its
fair market value. Eminent domain is the basis for condemnation
proceedings. |
| Employer-assisted
Housing |
A special housing
initiative that offers several different ways for employers
to work with local lenders to develop plans to assist their
employees in purchasing homes. |
| Encroachment |
An improvement that
intrudes illegally on another's property. |
| Encumbrance |
Anything that affects
or limits the fee simple title to a property, such as mortgages,
leases, easements, or restrictions. |
| Endorser |
A person who signs
ownership interest over to another party. Contrast with CO-maker |
| Equal
Credit Opportunity Act (ECOA) |
A federal law that
requires lenders and other creditors to make credit equally
available without discrimination based on race, color, religion,
national origin, age, sex, marital status, or receipt of income
from public assistance programs. |
| Equity |
A homeowner's financial
interest in a property. Equity is the difference between the
fair market value of the property and the amount still owed
on its mortgage. |
| Escrow |
An item of value,
money, or documents deposited with a third party to be delivered
upon the fulfillment of a condition. For example, the deposit
by a borrower with the lender of funds to pay taxes and insurance
premiums when they become due, or the deposit of funds or
documents with an attorney or escrow agent to be disbursed
upon the closing of a sale of real estate. |
| Escrow
Account |
The account in which
a mortgage servicer holds the borrower's escrow payments prior
to paying property expenses. |
| Escrow
Analysis |
The periodic examination
of escrow accounts to determine if current monthly deposits
will provide sufficient funds to pay taxes, insurance, and
other bills when due. |
| Escrow
Collections |
Funds collected
by the servicer and set aside in an escrow account to pay
the borrower's property taxes, mortgage insurance, and hazard
insurance. |
| Escrow
Disbursements |
The use of escrow
funds to pay real estate taxes, hazard insurance, mortgage
insurance, and other property expenses as they become due. |
| Escrow
Payment |
The portion of a
mortgagor's monthly payment that is held by the servicer to
pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Known as "impounds"
or "reserves" in some states. |
| Estate |
The ownership interest
of an individual in real property. The sum total of all the
real property and personal property owned by an individual
at time of death. |
| Eviction |
The lawful expulsion
of an occupant from real property. |
| Examination
of Title |
The report on the
title of a property from the public records or an abstract
of the title. |
| Exclusive
Listing |
A written contract
that gives a licensed real estate agent the exclusive right
to sell a property for a specified time, but reserving the
owner's right to sell the property alone without the payment
of a commission. |
| Executor |
A person named in
a will to administer an estate. The court will appoint an
administrator if no executor is named. "Executrix"
is the feminine form. |
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| Fair
Credit Reporting Act |
A consumer protection
law that regulates the disclosure of consumer credit reports
by consumer/credit reporting agencies and establishes procedures
for correcting mistakes on one's credit record. |
| Fair
market value |
The highest price
that a buyer, willing but not compelled to buy, would pay,
and the lowest a seller, willing but not compelled to sell,
would accept. |
| Fannie
Mae |
A congressionally
chartered, shareholder-owned company that is the nation's
largest supplier of home mortgage funds. |
| Fannie
Mae Properties |
Fannie Mae owns,
manages, and has available for sale, single-family detached
homes, two- to four-unit properties, condominiums, and townhouses
in a variety of neighborhoods. The number, type, and sales
price may vary substantially. The homes vary in age and may
require repairs. Fannie Mae homes are sold through local real
estate brokers whose contact information is provided in the
Fannie Mae Properties for Sale search results on homepath.com.
|
| Fannie
Mae's Community Home Buyer's Program |
An income-based
community lending model, under which mortgage insurers and
Fannie Mae offer flexible underwriting guidelines to increase
a low- or moderate-income family's buying power and to decrease
the total amount of cash needed to purchase a home. Borrowers
who participate in this model are required to attend pre-purchase
home-buyer education sessions. |
| Fannie
97Ū |
A financing option
for a fixed-rate mortgage that offers home buyers a 3 percent
down payment loan with a term between 15 and 30 years. The
mortgage features a loan-to-value (LTV) percentage of 97 percent,
and is designed to expand homeownership opportunities for
people with modest incomes. Borrowers must take a pre-purchase
home buyer education session to qualify for a Fannie 97 mortgage.
|
| Federal
Housing Administration (FHA) |
An agency of the
U.S. Department of Housing and Urban Development (HUD). Its
main activity is the insuring of residential mortgage loans
made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct
housing. |
| Fee
Simple |
The greatest possible
interest a person can have in real estate. |
| Fee
Simple Estate |
An unconditional,
unlimited estate of inheritance that represents the greatest
estate and most extensive interest in land that can be enjoyed.
It is of perpetual duration. When the real estate is in a
condominium project, the unit owner is the exclusive owner
only of the air space within his or her portion of the building
(the unit) and is an owner in common with respect to the land
and other common portions of the property. |
| FHA
Censored Mortgage |
A mortgage (under
FHA Section 244) for which the Federal Housing Administration
(FHA) and the originating lender share the risk of loss in
the event of the mortgagor's default. |
| FHA
Mortgage |
A mortgage that
is insured by the Federal Housing Administration (FHA). Also
known as a government mortgage. |
| Finder's
Fee |
A fee or commission
paid to a mortgage broker for finding a mortgage loan for
a prospective borrower. |
| Firm
Commitment |
A lender's agreement
to make a loan to a specific borrower on a specific property.
|
| First
Mortgage |
A mortgage that
is the primary lien against a property. |
| Fixed
Installment |
The monthly payment
due on a mortgage loan. The fixed installment includes payment
of both principal and interest. |
| Fixed-Rate
Mortgage (FRM) |
A mortgage in which
the interest rate does not change during the entire term of
the loan. |
| Fixture |
Personal property
that becomes real property when attached in a permanent manner
to real estate. |
| Flood
Insurance |
Insurance that compensates
for physical property damage resulting from flooding. It is
required for properties located in federally designated flood
areas. |
| Foreclosure |
The legal process
by which a borrower in default under a mortgage is deprived
of his or her interest in the mortgaged property. This usually
involves a forced sale of the property at public auction with
the proceeds of the sale being applied to the mortgage debt. |
| Forfeiture |
|
| 401(K)/403(B) |
An employer-sponsored
investment plan that allows individuals to set aside tax-deferred
income for retirement or emergency purposes. 401(k) plans
are provided by employers that are private corporations. 403(b)
plans are provided by employers that are not for profit organizations.
|
| 401(K)/403(B)
Loan |
Some administrators
of 401(k)/403(b) plans allow for loans against the monies
you have accumulated in these plans -- monies must be repaid
to avoid serious penalty charges. |
| Fully
Amortized ARM |
An adjustable-rate
mortgage (ARM) with a monthly payment that is sufficient to
amortize the remaining balance, at the interest accrual rate,
over the amortization term. |
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| Government
Mortgage |
A mortgage that
is insured by the Federal Housing Administration (FHA) or
guaranteed by the Department of Veterans Affairs (VA) or the
Rural Housing Service (RHS). Contrast with conventional mortgage. |
| Government
National Mortgage Association |
A government-owned
corporation within the US Department of Housing and Urban
Development (HUD). Created by Congress on September 1, 1968,
GNMA assumed responsibility for the special assistance loan
program formerly administered by Fannie Mae. Popularly known
as Ginnie Mae. |
| Grantee |
The person to whom
an interest in real property is conveyed. |
| Grantor |
The person conveying
an interest in real property. |
| Ground
Rent |
The amount of money
that is paid for the use of land when title to a property
is held as a leasehold estate rather than as a fee simple
estate. |
| Group
Home |
A single-family
residential structure designed or adapted for occupancy by
unrelated developmentally disabled persons. The structure
provides long-term housing and support services that are residential
in nature. |
| Growing-Equity
Mortgage (GEM) |
A fixed-rate mortgage
that provides scheduled payment increases over an established
period of time, with the increased amount of the monthly payment
applied directly toward reducing the remaining balance of
the mortgage. |
| Guarantee
Mortgage |
A mortgage that
is guaranteed by a third party. |
| Guaranteed
Loan |
Also known as a
government mortgage. |
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| Hazard
Insurance |
Insurance protecting
against loss to real estate caused by fire, some natural causes,
vandalism, etc., depending upon the terms of the policy. |
| 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. |
| Home
Equity Line of Credit |
A credit line that
is secured by a second deed of trust on a house. Equity lines
of credit are revolving accounts that work like a credit card,
which can be paid down or charged up for the term of the loan.
The minimum payment due each month is interest only. |
| 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.
|
| Homekeeper
sm |
Fannie Mae's adjustable-rate
conventional reverse mortgage, which allows older homeowners
to borrow against the value of their homes and receive the
proceeds according to the payment option they select. The
amount available is based on the number of borrowers and their
ages and the adjusted property value. Anyone 62 years or older
who either owns his or her own home free and clear or has
very low mortgage debt is eligible. |
| Homeowners'
Association |
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. |
| Homeowners'
Insurance |
An insurance policy
that combines personal liability insurance and hazard insurance
coverage for a dwelling and its contents. |
| Homeowners'
Warranty (HOW) |
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. |
| HomestyleŪ
Mortgage Loan |
A mortgage that
enables eligible borrowers to obtain financing to remodel,
repair, and upgrade their existing homes or homes that they
are purchasing. See also HomeStyle Standard Mortgage, HomeStyle
Remodeler, HomeStyle Community Mortgage and HomeStyle Consumer
Energy Loan. |
| Housing
Expense Ratio |
The percentage of
gross monthly income that goes toward paying housing expenses.
|
| HUD
Median Income |
Median family income
for a particular county or metropolitan statistical area (MSA),
as estimated by the Department of Housing and Urban Development
(HUD). |
| 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."
|
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| 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). The index is generally a published number or percentage,
such as the average interest rate or yield on Treasury bills.
A margin is added to the index to determine the interest rate
that will be charged on the ARM. This interest rate is subject
to any caps that are associated with the mortgage. |
| 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." |
| 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. |
| Instanced
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 |
The fee charged
for borrowing money. |
| Interest
Accural 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. |
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| 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. |
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| 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. |
| Lease-purchase
Mortgage Loan |
An alternative financing
option that allows low- and moderate-income home buyers to
lease a home from a nonprofit organization with an option
to buy. Each month's rent payment consists of principal, interest,
taxes and insurance (PITI) payments on the first mortgage
plus an extra amount that is earmarked for deposit to a savings
account in which money for a down payment will accumulate.
|
| 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.
|
| Liability
Insurance |
Insurance coverage
that offers protection against claims alleging that a property
owner's negligence or inappropriate action resulted in bodily
injury or property damage to another party. |
| Lien |
An encumbrance against
property for money due, either voluntary or involuntary. |
| 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,
interest rate ceiling and interest rate floor. |
| 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. |
| Loan |
A sum of borrowed
money (principal) that is generally repaid with interest.
|
| Loan
Commitment |
See commitment letter.
|
| Loan
Origination |
The process by which
a mortgage lender brings into existence a mortgage secured
by real property. |
| Loan
to value ratio (LTV) |
The unpaid principal
balance of the mortgage on a property divided by the property's
appraised value. 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 |
A written agreement
guaranteeing the home buyer a specified interest rate provided
the loan is closed within a set period of time. The lock-in
also usually specifies the number of points to be paid at
closing. |
| Lock-in
Period |
The amount of time
that a lender will guarantee a loan's interest rate. Once
you've locked in the interest rate on a loan, the lender will
guarantee that rate for a certain period of time, usually
for 30, 45 or 60 days. |
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| Margin |
The number of percentage
points a lender adds to the index value to calculate the ARM
interest rate at each adjustment period. |
| Master
Association |
A homeowners' association
in a large condominium or planned unit development (PUD) project
that is made up of representatives from associations covering
specific areas within the project. In effect, it is a "second-level"
association that handles matters affecting the entire development,
while the "first-level" associations handle matters
affecting their particular portions of the project. |
| Maturity |
The date on which
the principal balance of a loan, bond, or other financial
instrument becomes due and payable. |
| Maximum
Financing |
A mortgage amount
that is within 5 percent of the highest loan-to-value (LTV)
percentage allowed for a specific product. Thus, maximum financing
on a fixed-rate mortgage would be 90 percent or higher, because
95 percent is the maximum allowable LTV percentage for that
product. |
| 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. |
| Modification |
The act of changing
any of the terms of the mortgage. |
| Money
Market Account |
A savings account
that provides bank depositors with many of the advantages
of a money market fund. Certain regulatory restrictions apply
to the withdrawal of funds from a money market account |
| Money
Market Fund |
A mutual fund that
allows individuals to participate in managed investments in
short-term debt securities, such as certificates of deposit
and Treasury bills. |
| Monthly
Fixed Installment |
That portion of
the total monthly payment that is applied toward principal
and interest. When a mortgage negatively amortizes, the monthly
fixed installment does not include any amount for principal
reduction. |
| Monthly
Payment Mortgage |
A mortgage that
requires payments to reduce the debt once a month. |
| 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. |
| Mortgagee |
The lender in a
mortgage agreement. |
| Mortgage
Insurance |
A contract that
insures the lender against loss caused by a mortgagor's default
on a government mortgage or conventional mortgage. Mortgage
insurance can be issued by a private company or by a government
agency such as the Federal Housing Administration (FHA). Depending
on the type of mortgage insurance, the insurance may cover
a percentage of or virtually all of the mortgage loan. See
private mortgage insurance. |
| 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. |
| Mortgagor |
The mortgage borrower
who gives the mortgage as a pledge to repay.
No income verification (return to top)See "stated income". |
| Multiwelling
Units |
Properties that
provide separate housing units for more than one family, although
they secure only a single mortgage. |
| Multi-family
Mortgage |
A residential mortgage
on a dwelling that is designed to house more than four families,
such as a high-rise apartment complex. |
| Multifamily
Properties |
Fannie Mae provides
financing for multifamily (buildings with five or more units)
rental properties through a nationwide network of mortgage
lenders. |
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| 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-liquid
Asset |
An asset that cannot
easily be converted into cash. |
| Note |
A written agreement
containing a promise of the signer to pay to a named person,
or order, or bearer, a definite sum of money at a specified
date or on demand. |
| 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. |
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| Original
Principal Balance |
The total amount
of principal owed on a mortgage before any payments are made.
|
| 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. |
| Owner
Financing |
A property purchase
transaction in which the property seller provides all or part
of the financing. |
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| Partial
Payment |
A payment that is
not sufficient to cover the scheduled monthly payment on a
mortgage loan. |
| Payment
Change Date |
The date when a
new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment adjustable-rate mortgage
(GPARM). Generally, the payment change date occurs in the
month immediately after the adjustment date. |
| Periodic
Payment Cap |
For an adjustable-rate
mortgage (ARM), a limit on the amount that payments can increase
or decrease during any one adjustment period. |
| Periodic
Rate Cap |
For an adjustable-rate
mortgage (ARM), a limit on the amount that the interest rate
can increase or decrease during any one adjustment period,
regardless of how high or low the index might be. |
| Personal
Property |
Any property that
is not real property. |
| PITI |
See principal, interest,
taxes and insurance (PITI) below. |
| 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. |
| 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. |
| Point |
Charges levied by
the mortgage lender and usually payable at closing. One point
represents 1% of the face value of the mortgage loan. |
| 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. |
| Pre-foreclosure
Sale |
A procedure in which
the investor allows a mortgagor to avoid foreclosure by selling
the property for less than the amount that is owed to the
investor. |
| Prepayemnts |
Any amount paid
to reduce the principal balance of a loan before the due date.
Payment in full on a mortgage that may result from a sale
of the property, the owner's decision to pay off the loan
in full, or a foreclosure. In each case, prepayment means
payment occurs before the loan has been fully amortized. |
| Prepayment
Penalty |
A charge imposed
by a mortgage lender on a borrower who wants to pay off part
or all of a mortgage loan in advance of schedule. |
| Pre-qualification |
The process of determining
how much money a prospective home buyer will be eligible to
borrow before he or she applies for a loan. |
| 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 |
Amount of debt,
not including interest. The face value of a note or mortgage. |
| Principal
Balance |
The outstanding
balance of principal on a mortgage. The principal balance
does not include interest or any other charges. See remaining
balance. |
| 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) |
Insurance provided
by non-government insurers that protects lenders against loss
if a borrower defaults. Fannie Mae generally requires private
mortgage insurance for loans with loan-to-value (LTV) percentages
greater than 80%. |
| Promissory
Note |
A written promise
to repay a specified amount over a specified period of time.
|
| Public
Auction |
A meeting in an
announced public location to sell property to repay a mortgage
that is in default. |
| PUD
(Planned Unit Development) |
Development) A project
or subdivision that includes common property that is owned
and maintained by a homeowners' association for the benefit
and use of the individual PUD unit owners. |
| Purchase
and Sale Agreement |
A written contract
signed by the buyer and seller stating the terms and conditions
under which a property will be sold. |
| Purchase
Money Transaction |
The acquisition
of property through the payment of money or its equivalent.
|
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| Qualifying
Ratios |
The ratio of your
fixed monthly expenses to your gross monthly income, used
to determine how much you can afford to borrow. The fixed
monthly expenses would include PITI along with other obligations
such as student loans, car loans, or credit card payments.
|
| Quitclaim
Deed |
A deed that transfers
without warranty whatever interest or title a grantor may
have at the time the conveyance is made. |
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| Radon |
A radioactive gas
found in some homes that in sufficient concentrations can
cause health problems. |
| Rate-Improvement
Mortgage |
A fixed-rate mortgage
that includes a provision that gives the borrower a one-time
option to reduce the interest rate (without refinancing) during
the early years of the mortgage term. |
| 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.
See lock-in. |
| Real
Estate Agent |
|
| 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. |
| RealtorŪ
|
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. |
| Recission
|
The cancellation
or annulment of a transaction or contract by the operation
of a law or by mutual consent. Borrowers usually have the
option to cancel a refinance transaction within three business
days after it has closed. |
| Recorder
|
The public official
who keeps records of transactions that affect real property
in the area. Sometimes known as a "Registrar of Deeds"
or "County Clerk." |
| Recording
|
The noting in the
registrar's office of the details of a properly executed legal
document, such as a deed, a mortgage note, a satisfaction
of mortgage, or an extension of mortgage, thereby making it
a part of the public record. |
| Refinance
Transaction |
The process of paying
off one loan with the proceeds from a new loan using the same
property as security. |
| Rehabilitation
Mortgage |
A mortgage created
to cover the costs of repairing, improving, and sometimes
acquiring an existing property. |
| Remaining
Balance |
The amount of principal
that has not yet been repaid. See principal balance. |
| Remaining
Term |
The original amortization
term minus the number of payments that have been applied.
|
| Rent
Loss Insurance |
Insurance that protects
a landlord against loss of rent or rental value due to fire
or other casualty that renders the leased premises unavailable
for use and as a result of which the tenant is excused from
paying rent. |
| Rent
With Option to Buy |
See lease-purchase
mortgage loan. |
| Repayment
Plan |
An arrangement made
to repay delinquent installments or advances. Lenders' formal
repayment plans are called "relief provisions."
|
| Replacement
Reserve Fund |
A fund set aside
for replacement of common property in a condominium, PUD,
or cooperative project -- particularly that which has a short
life expectancy, such as carpeting, furniture, etc. |
| Revolving
Liability |
A credit arrangement,
such as a credit card, that allows a customer to borrow against
a pre-approved 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 Ingress or Egress |
The right to enter
or leave designated premises. |
| Right
of Survivorship |
In joint tenancy,
the right of survivors to acquire the interest of a deceased
joint tenant. |
| Rural
Housing Service (RHS) |
An agency within
the Department of Agriculture, which operates principally
under the Consolidated Farm and Rural Development Act of 1921
and Title V of the Housing Act of 1949. This agency provides
financing to farmers and other qualified borrowers buying
property in rural areas who are unable to obtain loans elsewhere.
Funds are borrowed from the U.S. Treasury. |
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| 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
Take-back |
An agreement in
which the owner of a property provides financing, often in
combination with an assumable mortgage. See owner financing.
|
| 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. |
| Settlement |
See closing. |
| Settlement
Sheet |
See HUD-1 statement.
|
| Single-Family
Properties |
One- to four-unit
properties including detached homes, townhouses, condominiums,
and cooperatives. |
| 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 SecondsŪ 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. |
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| Tenancy
by the Entirety |
A type of joint
tenancy of property that provides right of survivorship and
is available only to a husband and wife. Contrast with tenancy
in common. |
| Tenants
in Common |
A type of joint
tenancy in a property without right of survivorship. Contrast
with tenancy by the entirety and with joint tenancy. |
| Tenant-Stockholder |
The obligee for
a cooperative share loan, who is both a stockholder in a cooperative
corporation and a tenant of the unit under a proprietary lease
or occupancy agreement. |
| 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 |
Insurance that protects
the lender (lender's policy) or the buyer (owner's policy)
against loss arising from disputes over ownership of a property.
|
| Title
Search |
A check of the title
records to ensure that the seller is the legal owner of the
property and that there are no liens or other claims outstanding.
|
| Total
Expense Ratio |
Total obligations
as a percentage of gross monthly income. The total expense
ratio includes monthly housing expenses plus other monthly
debts. |
| 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
of Ownership |
Any means by which
the ownership of a property changes hands. Lenders consider
all of the following situations to be a transfer of ownership:
the purchase of a property "subject to" the mortgage,
the assumption of the mortgage debt by the property purchaser,
and any exchange of possession of the property under a land
sales contract or any other land trust device. In cases in
which an inter vivos revocable trust is the borrower, lenders
also consider any transfer of a beneficial interest in the
trust to be a transfer of ownership. |
| 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.
See adjustable-rate mortgage (ARM). |
| 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. |
| Two-Step
Mortgage |
An adjustable-rate
mortgage (ARM) that has one interest rate for the first five
or seven years of its mortgage term and a different interest
rate for the remainder of the amortization term. |
| Two-to-Four-Family
Property |
A property that
consists of a structure that provides living space (dwelling
units) for two to four families, although ownership of the
structure is evidenced by a single deed. |
| Trustee |
A fiduciary who
holds or controls property for the benefit of another. |
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| 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. |
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| 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. |
| Department
of Veterans Affairs (VA) |
An agency of the
federal government that guarantees residential mortgages made
to eligible veterans of the military services. The guarantee
protects the lender against loss and thus encourages lenders
to make mortgages to veterans. |
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| What-If
Analysis |
An affordability
analysis that is based on a what-if scenario. A what-if analysis
is useful if you do not have complete data or if you want
to explore the effect of various changes to your income, liabilities,
or available funds or to the qualifying ratios or down payment
expenses that are used in the analysis. |
| What-If
Scenario |
A change in the
amounts that is used as the basis of an affordability analysis.
A what-if scenario can include changes to monthly income,
debts, or down payment funds or to the qualifying ratios or
down payment expenses that are used in the analysis. You can
use a what-if scenario to explore different ways to improve
your ability to afford a house. |
| 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. |
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