ADJUSTABLE RATE MORTGAGE (ARM)
Is a mortgage in which
the interest rate is adjusted periodically based on a pre-selected
index. Also known as the re-negotiable rate mortgage, or the variable
rate mortgage.
AMORTIZATION
A repayment method in which the amount you borrow
is repaid gradually through regular monthly payments of principal
and interest. During the first few years, most of each payment is
applied toward the interest owed. During the final years of the
loan, payment amounts are applied almost exclusively to the remaining
principal.
APPLICATION
An initial statement of personal and financial information
which is required to approve your loan.
APPRAISAL
A written report by a licensed appraiser containing
an opinion as to the value of a property and the reasoning leading
to that opinion. Required by most lenders to obtain a loan.
BALLOON PAYMENT
Usually a short term fixed-rate loan which involves
small payments for a certain period of time and one large payment
for the remaining amount of the principal at a time specified in
the contract.
BROKER
An individual in the business of assisting in arranging
funding or negotiating contracts for a client but who does not loan
the money himself. Brokers usually charge a fee or receive a commission
for their services.
CASH OUT
Receiving money back when refinancing your current mortgage.
CLOSING
The meeting between the buyer, seller, and lender or
their agents where the property and funds legally change hands.
Also called "settlement".
CLOSING COSTS
Any fees paid by the borrowers or sellers during
the closing of the mortgage loan. This normally includes an origination
fee, discount points, attorney's fees, title insurance, survey,
and any items which must be prepaid, such as taxes and insurance.
CREDIT REPORT
A report documenting the credit history and current
status of a borrower's credit standing.
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EARNEST MONEY
Good faith
money provided to seller by the potential buyer to show he is serious
about purchasing the home. This amount may be applied to the down
payment, but if the deal does not go through it may be forfeited,
although in some cases it's returned.
EQUITY
The difference between the fair market value (appraised
value) of your home and your outstanding mortgage balance.
FIXED RATE
An interest rate which is fixed for the term of the
loan. Payments are also fixed at one amount.
IMPOUND
That portion of a borrower's monthly payments held by
the lender or servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due. Also
known as reserves.
MORTGAGE NOTE
A legal document obligating a borrower to repay
a loan at a stated interest rate during a specified period of time;
the arrangement is secured by a mortgage.
PRE-PAYMENT PENALTY
A penalty found in a Promissory Note imposed
by the lender when the loan is paid before it is due.
PRINCIPAL
The amount of debt, not counting interest, left on
a loan.
PITI (Principal, Interest, Taxes and Insurance)
This is the abbreviated
term used to encompass an entire mortgage payment that includes
any impounds collected.
PURCHASE AGREEMENT
A written contract signed by the buyer and
seller stating the terms and conditions under which a property will
be sold.
SECOND MORTGAGE
A mortgage made subsequent to another mortgage
and subordinate to the first one.
TITLE
The written evidence that proves the right of ownership
of a specific pieces of property.
UNDERWRITING
The process of reviewing and verifying data and
approving a loan. |
