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Acceleration Clause
It is a provision in a mortgage that gives the lender the right
to demand repayment of the entire principal balance upon the default
of the borrower.
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Adjustable Rate Mortgage
A mortgage, which allows the lender to adjust the mortgage’s interest
rate periodically on the basis of changes in a specified index. Interest
rates may move up or down, as market conditions change. The change
in interest rate will result in a change in the periodic payments
due under the mortgage.
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Agent
A person authorized to act for and under the direction of another
person when dealing with third parties.
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Alternative Financing
Mortgage financing, usually provided by an institutional lender,
other than a 30-year Fixed Rate Mortgage.
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Amortization
Reducing the principle and interest on a loan with a payment plan
that allows for equal payments to be made to the creditor at consistent
intervals over the life of the loan (the amortization period).
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Amortization Schedule
The time table of the payments to be made on an amortized loan showing
the following information: the date and amount of each payment, the
amount of each payment which will be applied to interest and to principal
and the balance of principal still outstanding on the loan after the
payment is made.
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Annual Percentage Rate
A rate designed to allow for the comparison of one type of loan
to another. The APR reflects the cost of your mortgage loan as a yearly
rate. It will often be higher than the interest rate designated on
the note because it includes such items as interest, mortgage insurance,
and loan origination fee (points).
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Application
A printed form used by a mortgage lender to record required information
concerning a prospective mortgage.
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Application Fee
The fees the lender charges the applicant. May include costs of
a property appraisal and a credit report on the applicant.
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Appraisal
A written analysis made by a qualified person setting forth an estimation
of the value of a property, usually after an inspection of the property.
The appraisal usually determines the amount of money that a lender
will loan on that property.
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Assessed Valuation
The value assigned to a property by a public tax assessor for purposes
of taxation. This valuation does not necessarily correspond to the
market valuation.
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Assessment
The process of placing a value on property for purposes of taxation.
This may take the form of a levy against property for a special purpose,
such as a sewer assessment where the property owner pays a share of
the cost according to the valuation of the property.
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Assets
Assets refer to the value of the entire property and resources of
a person or corporation. A fund’s assets generally include the securities
in its portfolio plus any cash.
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Assumption
A mortgage obligation that can be taken over by the buyer when a
home is sold. The new owner assumes the mortgage obligations and assumes
title to the property.
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Assumption Fee
The fee paid to a lender (usually by the purchaser of real property)
which results from the assumption of an existing mortgage.
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Balloon Mortgages
Usually a short-term fixed-rate loan that involves small payments
for a certain period of time with the balance due in a single, large
payment at a time specified in the contract.
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Balloon Payment
When the final installment payment on a note is greater than the
preceding installment payments that extinguishes the debt.
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Basis Point
One basis point equals 1/100 of 1% in interest. Basis points are
used by Lenders to measure interest rates in yield calculations.
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Binder
A preliminary agreement, which is written in evidence of insurance
coverage for a limited time. It is usually secured by the payment
of an earnest money deposit and is replaced later with a permanent
policy.
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Blanket Mortgage
A mortgage that covers two or more pieces of real estate for security
on a single loan.
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Borrower
A person or company (also know as Mortgagor) who receives funds
in the form of a loan in exchange for a written promise to repay principal
with interest.
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Bridge Loan
A loan used to fill a gap in financing. It is usually a temporary
mortgage to help a borrower obtain the necessary cash funds to purchase
another home, prior to the sale of their currently owned home.
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Buydown
The payment of extra money on a loan now so as to provide a lower
interest rate over either a given period or over the life of the loan.
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Cash Flow
The amount of cash derived over a given period of time from an income
producing property, such as a rental house, after all expenses of
holding and carrying the property are paid. Theoretically, the cash
flow should be large enough to pay all property expenses including
mortgages, taxes, etc.
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Cash Out
The refinancing of a mortgage in which the money received from the
new loan exceeds the amount due on the old loan. This refinance transaction
results in additional cash for the homeowner that can be used for
any purpose.
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Cash To Close
Liquid assets that are accessible to be used to pay the closing
cost in a mortgage transaction.
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Closing
The culmination of a real estate transaction in which documents
are signed and recorded, funds are exchanged and the property is transferred.
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Closing Costs
Expenses (over and above the price of the property) incurred by
buyers and sellers in connection with the closing of a mortgage loan.
This usually involves an origination fee, discount points, appraisal,
credit report, title insurance, attorney’s fees, survey, and prepaid
items such as taxes and insurance escrow payments.
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Closing Statement
A document that details an account of the funds between a buyer
and seller received and paid at the closing.
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Co-Borrower
An additional individual who is both obligated on the loan and whose
name appears on all documents with equal legal obligations.
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Collateral
Additional security for a debt, such as the real estate pledged
as security for a mortgage. The lender has the right, if the debt
is not paid, to slll the collateral to recoup the outstanding principal
and interest on the loan.
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Commitment Fee (Loan)
An up-front fee paid by a potential borrower to a lender for the
lender’s promise to lend money at a specified rate and within a give
time.
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Condominium
A development where individuals have title to their own dwelling
units in a multi-family structure with joint ownership of common areas
of structure and the land.
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Conforming Loan
Conventional home mortgages, first mortgages up to loan amounts
mandated by Congressional directive, which meets the qualifications
for sale or delivery to either the Federal National Mortgage Association
(FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).
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Construction Loan
A structured, short-term loan to provide funds necessary to begin
construction on buildings or homes.
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Contingency
A condition that must occur before a contract is legally binding.
For example: The sale of a house is contingent upon the buyer obtaining
financing.
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Conventional Mortgage
A mortgage loan made by an institutional lender without the inclusion
of government guarantees such as VA or FHA loans.
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Conversation Option
The right for the borrower for a fee to convert an Adjustable Rate
Mortgage into a Fixed Rate Mortgage within a specific time frame.
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Convertible ARM
The convertible ARM is a combination of both fixed-rate and adjustable
rate mortgages, allowing the best of both options in one package.
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Co-Op
Short for Cooperative, a structure of two or more units, owned by
a corporation that gives each resident the right to occupy a specific
apartment or unit. It is a mode of land ownership where the occupiers
of individual units in a building own an interest in the Cooperative
Corporation that owns the whole property.
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Creative Financing
When institutional financing of the purchase of a property does
not meet the purchaser’s need, another party may provide additional
financing. Creative financing is outside the normal practice of residential
financing because the lender does not have to follow the same stringent
rules governing the institutional lenders.
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Current Index
The current value of a recognized index as calculated
and published nationally or regionally. It is used in calculating
the new note at each adjustment period as periodically, the current
index changes.
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