Glossary
A
- Adjustable Rate Mortgage (ARM)
- The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.
- Amortization Schedule
- A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.
- Annual Percentage Rate (APR)
- The cost of credit as a yearly rate.
- Application Fee
- A fee charged by the lender (bank) to cover the cost of processing the application.
- Appreciation
- An increase in the value of a property due to changes in market conditions or other causes.
- Appraisal
- A written estimation of the current value of a home.
- Assessment
- The value placed on real estate for tax purposes.
- Assumable Mortgage
- A mortgage that can be taken over (assumed.) by the buyer when a home is sold.
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C
- Caps
- Safeguards built into an adjustable rate loan to protect buyers against dramatic increase in the rate of Interest, and therefore, monthly payments.
- Commitment Letter
- A formal offer by a lender stating the terms under which it agrees to lend money to the home buyer.
- Contingency
- A condition that must be met before a contract is legally binding.
- 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."
- Closing Costs
- Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."
- Credit Report
- A report of an individual's credit history prepared by a credit bureau and used by a tender In determining a loan applicant's creditworthiness.
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D
- Deed
- The legal document conveying title to a property.
- Deed of Trust
- The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower.
- Default
- The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage.
- Delinquency
- A loan in which a payment is overdue but not yet in default.
- Depreciation
- A decline in the value of the property.
- Down Payment
- Cash amount paid by a buyer from his/her own funds which is the difference between the purchase price and the amount to be covered by the mortgage loan.
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E
- Easement
- A right of way giving persons other that the owner access to or over a property.
- Escrow Account
- An account set aside to accumulate money during the year for annual home related expenses such as insurance and property taxes.
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F
- First Mortgage
- A mortgage that has first claim in the event of default.
- Fixed Rate Mortgage
- A mortgage loan at one stated interest rate over the life of the mortgage.
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H
- Homeowner’s Policy
- An insurance policy available to owners of private dwellings covering the dwelling and its contents in case of fire or wind damage, infestation, theft, liability for property damage and personal liability.
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I
- Inspection
- An examination of property to see if it is free of termites, etc., as well as to see if required repairs were made before the home is sold or if there are repairs required.
- Interest
- The fee charged for borrowing money.
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L
- Lien
- A legal claim against a property that must be paid off when the property is sold.
- Loan-to-Value (LTV) Ratio
- The percentage of the property value that is being financed through a loan.
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O
- Origination Fee
- A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.
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P
- Points
- A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.
- Pre-qualification
- The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.
- Principal, Interest, Taxes and Insurance (PITI)
- Used to indicate what is included in a monthly payment on real estate. Principal, interest, taxes and insurance are the four major items in a usual monthly mortgage loan payment.
- Private Mortgage Insurance (PMI)
- Insurance provided by non-government insurers that protect 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 percent.
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T
- Term
- The number of years before your loan is scheduled to be paid off.
- Title Insurance
- Insurance that protects the lender and/or purchaser against loss due to problem or defects in connection with the title.
- Title Search
- An examination of public records to reveal the past and current facts of ownership of real estate.
- Transfer Tax
- State or local tax payable when title passes from one owner to another.
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