ARM: Adjustable rate mortgage where the interest rate periodically is adjusted either up or down depending on current rates. The amounts and time of adjustments are stated in the original loan terms and documents.
AMORITIZAION: Repayment of a loan in equal installments of principal and interest over a stated period of time.
APR: Annual percentage rate, the total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount. The A.P.R. is a disclosure requirement of the federal Truth in Lending.
ASSUMPTION: An agreement of a buyer to assume the liability under an existing note that is secured by a mortgage or deed of trust. Most notes require the lender approval an assumption of a loan.
BUYDOWN: A payment (up-front) to the lender from the seller, buyer, third party or any combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buy-down is usually for the first 1-5 years of a loan.
CAP: The limit of how much an interest rate or monthly payment can change, either at each adjustment or over the life of a loan.
CC&R'S: Covenants, Conditions and Restrictions are documents which control the use, requirements and restrictions of a property. CC&R'S are recorded against the property. Typical of a Homeowner's Association.
CLOSING COSTS: Expenses incurred in the sale or purchase of real estate. Examples could include, loan fees, title fees, appraisal, credit report, document recording fees, etc.
CLOSING STATEMENT-SETTLEMENT STATEMENT: The financial disclosure statement that accounts for all the money received and expected at the closing. The form used for the closing is the HUD-1.
CONTINGENCY CLAUSE (S): The dependence upon a stated event which must occur before a contract is binding. Examples could include an appraisal contingency, loan contingency, inspection contingency, a sale of another property......and on and on.
CURB APPEAL: A term used by Realtors to identify a buyers first impression of a home.
DEED: A written document which delivers (changes) title from one person to another.
DUE-ON-SALE CLAUSE: The acceleration (or speed up) clause that requires full payment of a mortgage or loan when the secured property changes ownership.
EARNEST MONEY: The deposit or a portion of the down-payment delivered to the seller or escrow agent from the buyer with a written offer. An evidence of a buyers good faith.
ESCROW: A neutral third party who takes instructions from both buyers and sellers. A procedure for handling paperwork and distribution of funds. Escrow holders do NOT make the buyer/seller decisions.
FAIR MARKET VALUE: The price negotiated between willing buyers and willing sellers. The value usually arrived at by using comparable market data of comparable homes in the same area.
FNMA: Federal National Mortgage Association, commonly known as Fannie Mae. A privately held corporation created by Congress to support the mortgage market. Fannie Mae buys and sells mortgages in the secondary market. A loan can be sold several times after the origination. The terms of the loan remain the same as with the original lender.
FHA LOAN: A loan that is insured (buyer's pay the insurance cost, added to monthly payment)by HUD (a government agency) which in-turn guarantees repayment to the lender in case of a default by the owner. FHA loans originally began in the late 1920's to help buyers with a minimal down payment.
FICO-SCORES: Confusing three-digit credit rating scores which can have a major impact on a buyer's loan. Lenders say it's a score combining many factors. Bottom line, most feel it's a rating of your likelihood of re-payment of a loan. (See more on this website as FICO SCORES)
FLOOD INSURANCE: Insurance indemnifying against a loss by flood damage. An insurance policy required by lenders in areas identified (federally) as designated areas of potential flooding.
GRANT DEED: One of several (the most commonly used) types of deeds used to transfer title to real property.
GRANTEE: One who receives the grant, usually the buyer.
GRANTOR: One who grants property or in some cases property rights.
HAZARD INSURANCE: Real estate insurance which protects against loss caused by and event, most commonly caused by fire.
HOME INSPECTION REPORT: Usually a written report by a qualified inspector to identify the overall condition of a property. An evaluation of the structure, mechanical components and systems. NOT to be confused with the appraisal inspection/report.
HOMEOWNER'S ASSOCIATION: An association of people who own homes in a given area. An organization formed for maintaining and/or improving the quality of an area. Typical in a condo association or a planned development. (See CC&R'S in this same glossary for more info).
HOME WARRANTY or HOME PROTECTION POLICY: A contract for protection against the failure of mechanical components within a property. Commonly includes plumbing, electrical, heating/cooling systems. Buyers usually pay a service call fee when using this policy. Contracts are customarily for a period of 12 months. Some companies allow for a renewal provision after 1 year.
HOMESTEAD: Some states grant an exemption protecting a home against the rights of most (however not all) creditors. Most states have a per-set amount of exempted protection for homeowners. Check with an attorney in your state. The amounts of exemptions can also vary depending on individuals V. a married couple.
IMPOUNT ACCOUNT-ESCROW ACCOUNT: An account held by a lender for payment potentially for taxes, insurance and possibly other items. Most commonly used with loans with a minimum down payment. Lenders require that these funds be collected monthly with the loan payment.
INDEX: A measure of interest rate changes used to determine the changes in an ARM (see glossary for explanation of ARM) interest rate over the term of a loan.
JOINT TENANCY: An undivided ownership of a property by two or more people. Commonly known as the "right of survivorship". Upon a death of any owner, the survivors acquire the decedent's interest in the property. *Note: This may also require filing other document (s) to verify/confirm the death of a joint tenant.
LIEN: A legal hold of claim of interest on a property. Examples can be a loan, a mortgage and/or a deed of trust, those that are "voluntary", meaning a promise-commitment by the owner. Other examples include "in-voluntary" liens which are unplanned and attached to a property based on an event...i.e. IRS liens, a mechanics lien (possibly construction work on a property, an over-due collection. Most are usually confirmed by a court.
LOAN COMMITMENT: The lenders written promise to make a loan for a specified amount on specific terms.
LOAN TO VALUE RATIO: The relationship between the amount value (usually the appraised value) of the property and the amount of the loan expressed as a percentage.
LOCK-IN OR RATE LOCK: A lender's guarantee of a specific interest rate for a set period of time.
MARGIN: The number of percentage points the lender will add to the index rate to calculate the ARM (adjustable) interest rate at each adjustment on the loan.
NEGATIVE AMORITZATION: Negative amortization happens when the monthly payment fails to cover the interest charged. The interest that isn't covered (the shortage) is added to the unpaid principal balance of the loan. This means the loan balance will increase equal to the amount of the shortage.
ORIGINATION FEE: A fee or charge for establishing a new loan. Usually figured as a percentage of the loan balance.
OWNER'S POLICY: Title insurance for the home owner, rather than the lender/lien-holder.
P. & I.: Principal and interest paid on a loan.
P.I.T.I.: Principal, interest, taxes and insurance paid on a loan.
POINT: An amount equal to 1% of the principal amount of the loan. One point equals 1% of the loan balance. Points can also be referred to as the loan origination fee. Origination fee of 1% is equal to saying a loan fee of 1 point.
PRELIMINARY TITLE REPORT: A written report showing the condition of the title before a sale or a loan transaction. At the closing a title insurance policy is issued.
PRE-PAYMENT PENALTY: A fee charged to a borrower for the early payment of a loan before the due date. Some loans have pre-payment fees which vary depending how early a loan is repaid. If you are in-doubt, check with your lender.
PMI-PRIVATE MORTGAGE INSURANCE: Insurance written to protect the lender against loss (default) of the buyer.
PURCHASE AGREEMENT: A written document (contract) where the purchaser agrees to buy real estate and the seller agrees to sell on the stated terms. Can also be called a deposit receipt.
REALTOR: A real estate licensee affiliated with a local association of Realtors that is also affiliated with the National Association of Realtors. Remember, not all agents are Realtors.
REG-Z: Regulation Z Federal Reserve regulation required as a result of the Truth in Lending Law. This requires the lender advise the borrower in writing of all costs connected with the credit portion of the purchase.
STATEMENT OF INFORMATION: A conditional form completed by the buyer and seller to help the title company ascertain if any liens are recorded against either individual. Also referred to as the S.I. meaning the Statement of Identity.
TDS: Transfer disclosure statement, a written disclosure from the homeseller to a buyer. This usually identifies defects of the property or disclosure requirements in the area, things which are known to the seller. Most states now require disclosure statement of some type. In some states disclosure provisions have the added importance of a rescission period, allowing the buyer a time period to withdraw from an accepted contract.
TENANCY IN COMMON: A type of joint ownership of a property by two or more persons without the right of survivorship. An ownership of this type may be left in a will.
TITLE INSURANCE POLICY: An insurance policy which protects the purchaser and lender (or other party) against specific losses as stated in the document.
VA Loan: A loan guaranteed by the the Department of Veteran's Affairs. A loan typically offering 100% financing to the veteran borrower.
