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Adjustable Rate Mortgage (ARM)
A loan in which the interest
rate is adjusted periodically based on changes in a pre-selected
index. Based on the index fluctuations, the rate and payments
on an ARM loan rise and fall with the market.
Repayment of a loan with incremental
payments of both principal and interest calculated to payoff
the loan at the end of a fixed period of time.
Annual Percentage Rate (APR)
A
calculation that expresses the total cost of a mortgage
loan as a yearly rate. The Annual Percentage Rate (APR)
includes both your interest and any additional costs or
prepaid finance charges you might pay such as prepaid
interest, private mortgage insurance, closing fees, points
and certain fees paid at origination. It generally results
in a rate slightly higher than the stated interest rate
on the loan.
A written
estimate of a property’s
current market value, based on recent sales information
for similar properties, the condition of the property and
the neighborhood’s impact on future property value.
It is required to purchase or refinance your new home
or property.
Appraisal Fee
A
fee charged by a licensed, certified appraiser to provide
an appraisal.
APR (Annual Percentage Rate)
A calculation that expresses
the total cost of a mortgage loan as a yearly rate. The
Annual Percentage Rate (APR) includes both your interest
and any additional costs or prepaid finance charges you
might pay such as prepaid interest, private mortgage insurance,
closing fees, points and certain fees paid at origination.
It generally results in a rate slightly higher than the
stated interest rate on the loan.
ARM (Adjustable Rate Mortgage)
A loan in which the interest
rate is adjusted periodically based on changes in a pre-selected
index. Based on the index fluctuations, the rate and payments
on an ARM loan rise and fall with the market.
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A short-term, fixed-rate loan
with fixed monthly payments for a set number of years and
a large final balloon payment of the remainder of the principal.
An individual who applies
for and receives a loan in the form of a mortgage with the
intention of repaying the loan in full under the terms of
the loan.
An individual who brings buyers
and sellers together and assists in arranging funding or
negotiating contracts for a client but does not loan money
himself
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A refinance
for more than the remaining balance of the current mortgage.
The excess money taken out reduces the borrower’s
equity they have already built up in the house.
The closing is the conclusion
of your real estate transaction and includes a meeting between
the buyer, seller and lender or their agents at which property
and funds legally change hands.
Fees incurred in a real estate
or mortgage transaction paid by borrower and/or seller at
the closing of the transaction. Examples include title fees,
recording fees, appraisal fee, credit report fee, attorney's
fees, taxes, and surveying fees.
Conforming Loan
A
mortgage loan that meets all the requirements to be eligible
for purchase by the two Federally sponsored housing agencies,
Fannie Mae and Freddie Mac.
Conventional Loan
A
mortgage not insured by the FHA or guaranteed by the VA.
An ARM loan with the option
of conversion to a fixed loan during a given time period
A report
detailing the credit history of a prospective borrower
that’s used by lenders
to help determine creditworthiness.
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Legal document by which title
to a property is transferred from one owner to another.
The deed contains a description of the property and is signed,
witnessed, and delivered to the buyer at closing.
Failure to meet legal obligations
in a contract, including failure to make payments on a loan.
Failure to make required payments
on time as agreed in the loan agreement.
Points are fees added on to
a loan and are paid when the loan closes. One point equals
one percent of the loan amount. There is an inverse relationship
between the interest rate and the number of points paid.
In other words, you can lower your monthly mortgage payments
by paying more money up front through points.
Down Payment
In a
home purchase, the up front cash amount you must pay that
equals the difference between the purchase price and the
mortgage amount.
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The difference between the
current market value of a property and the outstanding mortgage
balance.
An account held by the lender
to which the borrower pays monthly installments, collected
as part of the monthly mortgage payment, for annual expenses
such as taxes and insurance.
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This agency buys and sells
residential loans that are underwritten to its specific
guidelines.
Federal Housing Administration (FHA)
Government agency, division
of the Department of Housing and Urban Development, which
insures residential mortgage loans made by private lenders
and sets standards for underwriting mortgage loans.
FHA (Federal Housing Administration)
Government
agency, division of the Department of Housing and Urban
Development, which insures residential mortgage loans made
by private lenders and sets standards for underwriting mortgage
loans.
A credit evaluation score
developed by Fair, Isaac, and Co., used by lenders as one
factor in making a loan decision.
A finance charge is the total
all interest a borrower would pay over the entire life of
the loan.
An interest rate that is fixed
for the term of the loan.
A mortgage whose interest
rate and resulting monthly payments do not change for the
life of the loan.
Foreclosure (or Repossession)
Legal process by which the
lender forces the sale of a property when the borrower has
not met the mortgage terms.
An agency that purchases conventional
mortgages that are underwritten to its specific guidelines.
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Total income before taxes
or expenses are deducted.
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Required by all lenders to
protect their investment, and must be obtained before closing
equal to the loan balance or the value of the home.
Housing and Urban Development (HUD)
A U.S. government agency established
to implement federal housing and community development programs;
oversees the Federal Housing Administration.
HUD (Housing and Urban Development
A U.S. government agency established
to implement federal housing and community development programs;
oversees the Federal Housing Administration.
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The rate charged during the
first interval of an adjustable rate mortgage.
Charge paid for borrowing
money.
The annual rate of interest
on the loan, expressed as a percentage of the outstanding
balance.
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A mortgage with a principal
balance that exceeds the amount eligible for purchase by
Fannie Mae and Freddie Mac. Jumbo loans generally carry
a higher interest rate. Currently the limit is set at $322,700
for single unit properties.
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The bank, mortgage company,
or mortgage broker offering the loan.
LIBOR (London Interbank Offered Rate)
The interest rate charged
among banks for short-term foreign market loans, and a common
index for adjustable rate mortgages.
Lien
A legal claim
against a property that must be paid when the property
is sold.
Loan Application
Document
required by lenders prior to loan approval containing
detailed information about the borrower and property.
Loan Term
The period
of time between the closing date and the date of your
last payment is paid of your loan.
Loan to Value Ratio (LTV)
The percentage of loan amount
to the actual appraised value of the property.
A lender's guarantee of an
interest rate and related points for a set period of time,
usually between loan application and loan closing. Protects
borrower against rate increases during that time.
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Document creating a lien on
a property as security for the payment of a debt.
An individual or company that
arranges financing for borrowers.
Insurance
purchased by a buyer to cover the lender’s risk
of loss. Mortgage Insurance is generally required by
lenders when the down payment is less than 20% of the
purchase price.
Mortgagee
The lender in
a mortgage loan transaction.
Mortgagor
The borrower
in a mortgage loan transaction.
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Legal document stating the
terms of a debt and a promise to repay it.
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Fee charged by a lender to
cover administrative costs of processing a loan.
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The process of determining
how much money a prospective homebuyer or refinancer will
be eligible to borrow prior to application for a loan. A
pre-approval includes a preliminary screening of a borrower's
credit history. Information submitted during pre-approval
is subject to verification at application.
The amount of debt, not counting
interest, left on a loan.
A government tax based on
the market value of a property.
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Money paid to a government
agent for entering the sale of a property into the public
records.
The process of paying off
one loan with the proceeds from a new loan secured by the
same property.
Real Estate Settlement Procedures Act
(RESPA)
Law requiring lenders to give
borrowers advance notice of closing costs.
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This refers to the address
of the property being pledged as security for your loan.
The closing is the conclusion
of your real estate transaction and includes a meeting between
the buyer, seller and lender or their agents at which property
and funds legally change hands.
Settlement Costs (or Closing Costs)
Fees incurred in a real estate
or mortgage transaction paid by borrower and/or seller at
the closing of the transaction. Examples include title fees,
recording fees, appraisal fee, credit report fee, attorney's
fees, taxes, and surveying fees.
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Claim against a property for
unpaid taxes.
Term
The number of years
it will take to pay off a loan.
Fees paid to a third party
for services requested by the lender on your behalf.
Document which gives evidence
of ownership of a property and the rights of ownership and
possession of that property.
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The process of verifying data
and evaluating a loan for approval.
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Fixed-rate loans guaranteed
by the U.S. Department of Veterans Affairs. They are designed
to make housing affordable for eligible U.S. veteran.
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