| Abstract: |
A
written history of public records on a specific property. |
| Adjustable
Rate Mortgage (ARM): |
These
loans have an interest rate which changes periodically according
to a specified financial index. |
| Amortization: |
Repayment
of a loan through scheduled installment payments. |
| Appraisal: |
A report
made by a qualified person indicating the value of a property
at a given date. |
| Application
Fee: |
The
amount paid to a lender to process your application. (First
State Bank of Red Bud does not charge an application fee) |
| Assumable
Mortgage: |
The
buyer takes over the seller's mortgage, and the buyer then accepts
the responsibility for the payments. |
| Balloon
Mortgage: |
A
mortgage with periodic installments of principal and interest
that do not fully amortize the loan. The balance of the mortgage
is due in a lump sum at a specified date, usually at the end
of the term. |
| Binder: |
A
commitment from an insurance agent to insure a building or a
commitment for title insurance. |
| Blanket
Mortgage: |
A single
mortgage that covers two or more properties. |
| Buy-down: |
Money
advanced by an individual (e.g. builder, seller, buyer, developer)
to lower mortgage payments for a few years or for the whole
term. |
| Cap
(Interest Rate): |
The
maximum interest rate increase allowable on an adjustable rate
mortgage. |
| Closing: |
The
actual legal transfer of property from seller to buyer. |
| Closing
Costs: |
Fees
paid at the time of closing. Costs vary by lender. |
| Conventional
Mortgage: |
A
loan that is not insured or guaranteed by the government. |
| Debt-To-Income
Ratio: |
The
relationship (percentage) between an individual's monthly debt
expense and monthly gross income. Often used as a loan qualification
assessment by lenders. |
| Deed: |
The
written transfer of property ownership. |
| Default: |
Failure
to meet an obligation when due. See your promissory note for
items that can be considered default. |
| Easement: |
The
legal right for limited use of another's land. |
| Encumbrance: |
A
claim, lien, or liability that has been attached to the title
of a property. May affect the value of the property. A valid
claim against property. |
| Equity: |
The
difference between the fair market value (appraised value) of
your home and the outstanding mortgage balance, i.e. the portion
of property you own. |
| Escrow: |
Deposits
made to a special account until the terms of a contract are
fulfilled. |
| FHA
Loan: |
Federal
Housing Authority insures mortgages on residential property
with a low down payment. |
| Fixed
Rate Mortgage (FRM): |
The
interest rate always remains the same on this loan. |
| Foreclosure: |
The procedure where the lender reacquires property after Default. |
| Freddie
Mac (FHLMC)/Federal Home Loan Mortgage Corporation: |
Quasi-government
agency that pools mortgages and sells participation agreements. |
| Grantee: |
Buyer
of property. |
| Grantor: |
Seller
of property. |
| Index: |
The
guide for rate changes which lenders use to decide how much
the annual percentage rate will change over time. |
| Interest
Rate: |
The
periodic charge, expressed as a percentage, for use of credit. |
| Lien: |
A
legal claim on property used as security for a debt. |
| Loan-To-Value
Ratio: |
The
relationship (percentage), between a property's mortgage and
value. For example, if you owe $50,000 on a $100,000 home, the
ratio is 50%. |
| Margin: |
On
an adjustable mortgage, the number of percentage points the
lender adds to the index rate to determine the adjusted rate.
|
| Mortgage: |
A
legal document where the owner uses property as security to
guarantee repayment of the loan. The mortgagee is also known
as the lender. The mortgagor is known as the borrower. |
| Negative
Amortization: |
The
loan balance increasing over time (often due to monthly payments
being less than the interest owed). |
| PITI: |
An
acronym for payments to a lender that cover principal, interest,
taxes and insurance on a property. |
| PMI
(Private Mortgage Insurance): |
Protects
lender in case borrower defaults. Typically required on loans
in excess of 90% of the value of the property. |
| Points: |
Up-front
charge for making the loan (1 point = 1% of loan amount) |
| Prepayment
Penalty: |
A
fee paid by the borrower if loan is paid off early. |
| Principal: |
The
balance still owed or the amount of money borrowed on a loan. |
| Promissory
Note: |
Document
signed and given to the lender by the borrower. It explains
what is owed and how it will be paid. |
| Purchase
Offer: |
A preliminary
agreement to purchase, often secured by the payment of money
in earnest. |
| Rate
Cap: |
A
limit on how much the variable-interest rate can increase during
the life of the loan. |
| Refinancing: |
This
process involves getting a new mortgage, usually with a better
(lower) rate to pay off the existing loan. |
| Reverse
Mortgage: |
The
lender makes payments to the borrower (a form of negative amortization). |
| Secondary
Market: |
The
buying and selling of mortgages after closing. |
| Title: |
A
document showing ownership of property. |
| Title
Insurance: |
Insurance
against defects in title. |
| Title
Search: |
Report checks all records of a specific piece of real estate
to guarantee there are no liens, encumbrances, ownership concerns,
etc. |
| Transfer
Tax: |
In
some areas, city, county, or state taxes imposed when property
passes from one person to another. |
| VA
Mortgage: |
Veteran's
Administration insures loans for those involved in the armed
services (servicepersons/veterans). |
| Variable
Rate Mortgage: |
A
mortgage loan in which the interest rate may increase or decrease
at specified intervals within certain limits, based upon an
economic indicator. |
|
