Payment Adjustment Period
This is the time frame between payment adjustments made on Adjustable
Rate Mortgages and a usual time frame is one, three, or five years.
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Payment Cap
A cap placed on the borrower’s payment rather than his interest
rate. The level to which the monthly payment may rise is limited to
a certain dollar figure. A typical payment cap used today would be
7.5% of the payment (Roughly equivalent to one percent in interest).
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Payment Rate
The effective rate of interest the buyer is paying at a certain
time, regardless of the overall interest rate of the note.
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Permanent Buydown
An amount of money a lender is paid to permanently reduce a borrower’s
interest rate and payments.
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Permanent Loan
A long-term mortgage of ten years or more, often registered after
construction is complete. Often referred to as an "end loan".
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P.I.T.I.
This stands for principal, interest, taxes and insurance. It is
representative of the borrower’s actual monthly mortgage-related expenses.
Most residential mortgage payments are referred to as P.I.T.I .
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Pledged Account Buydown
This refers to a principle amount paid plus interest earned on the
principal to reduce a borrower’s interest rate and payment.
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Points
A one – time fee you pay the bank for originating a loan. A charge
equal to 1% of the loan amount which increases or equalizes the lender’s
yield or rate of return. Lenders offer various rate/point combinations.
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Prepayment Penalty
A penalty that a lender may impose on a borrower who pays off a
loan before it is due.
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Prepayment Privilege
The right of a borrower to pay off all or part of the outstanding
principal before the maturity date, without incurring a penalty.
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Principal
It is the amount of the mortgage debt that is presently owed and
remains unpaid. The principal is the part of the monthly payment that
reduces the remaining balance of a mortgage.
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Private Mortgage Insurance
Private mortgage insurance is to protect lenders against foreclosure
losses provides mortgage insurance. Similar to the FHA’s mortgage
insurance premium, it is provided to lenders making conventional loans
with less than 20% down. It protects lenders against foreclosure losses.
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Prorate
The seller and buyer allocate their proportionate share of an obligation
paid or due. For example, real property taxes, fire insurance or condominium
fees may be prorated.
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Quit Claim Deed
A document that releases the deeding or giving up of one’s interest
in a property to another party.
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Rapid Payoff Mortgage (RPM)
Another name for a short term mortgage.
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Realtor
A professional real estate broke or associate who is an active member
in a local real estate board that is affiliated with the National
Association of Realtors. Not every broker is a Realtor
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Real Estate Mortgage Investment Conduits
(REMICs)
Mortgage securities may be pooled to create collateral for a more
complex type of mortgage security known as a Real Estate Mortgage
Investment Conduit. They are a complex type of mortgage securities
that may be pooled to allow cash flows to be split so that different
classes of securities may be created.
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Real Estate Professional
Any real estate broker, sales person, or attorney who holds a real
estate license.
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Refinance
To obtain or replace an existing mortgage with a new mortgage loan
on property already owned. New mortgage may have different terms than
the old one.
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Release of Liability
A release from financial obligations from a mortgage due to another
individual becoming responsible for the obligation. Both the VA and
FHA allow releases of liability on their mortgages.
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Renegotiable Rate Mortgage (RRM)
Similar to an Adjustable Rate Mortgage, this type of mortgage allows
the interest rates and payments to be adjusted periodically according
to an index.
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REO (Real Estate Owned)
Defined as a term for properties taken back by lenders in foreclosures.
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Residual Income
Residual income is determined by subtracting all known obligations
from the borrower’s gross monthly income to see how much is left to
support the family. This amount replaces the Income Ratio on VA loans.
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Restriction
A provision in a deed which limits in some way the right to use
land or convey it’s title. Examples are building setback lines and
limitations to residential uses.
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Reverse Annuity Mortgage (RAM)
A type of mortgage where the property’s equity serves as security
for periodic payments made by the lender to the borrower. Mortgage
is generally paid out upon the sale of the property.
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Rollover Mortgage (ROM)
A mortgage where the payments are only guaranteed for three, four,
or five years. The borrower is allowed to refinance at the end of
the term at the interest rate then applicable.
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Savings and Loans
The traditional lenders for conventional home loans.
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Second Mortgage
A mortgage loan that is registered on title after a first mortgage
is already recorded. It is behind the first mortgage in priority.
In the event of default and sale of the property, the second mortgagee
will only be paid if there are funds left after the payment of the
first mortgagee.
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Secondary Mortgage Market
A market where the primary lenders can sell packaged home loans
to obtain more funds to make additional loans.
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Shared Appreciation Mortgage (SAM)
It is a loan arrangement where two or more parties participate in
the purchase of real estate and share the appreciation and tax deduction.
Similar to shared equity mortgages.
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Shopping Center
A group of stores catering to a trade area, which offer a variety
of goods and/or service and on-site parking.
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Strip Commercial
It refers to a string of stores in a commercial area with no central
leasing, management or theme.
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Sweat Equity
When a purchaser contributes to the construction or rehabilitation
of a property in the form of labor or services rather than cash.
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Swing Loan
See Bridge Loan
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Telecommuting
Working at a remote location instead of traveling to the primary
workplace.
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Title
A legal document evidencing proof of ownership.
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Title Company
A corporation which is in the business of selling policies of insurance
guaranteeing the ownership, quality of title to land and also to perform
escrow functions.
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Title Insurance
Protection for the lender (lender’s policy) against the consequences
of a pre-existing lien or the buyer (owner’s policy) against
encumbrance on a property that is discovered after change of ownership.
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Usury
Extremely high interest charged, in excess of the legal rate established
by law.
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Vesting
Conveying ownership or control of through legal action.
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Veterans’ Administration
Loans
Mortgage loans to veterans by banks, savings and loans, or other
lenders that are guaranteed by the Veterans’ Administration, enabling
veterans to buy a residence with little or no money down.
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Walk-Up Apartments
Three to five story buildings, without an elevator. They may be
mixed single and multi-family; usually only two or three different
types of units.
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Warehouse/Distribution
Typically warehouse and distribution facilities are often located
in the lowest-priced land in older parts of town or as well as suburban
fringes. Frequently, like light industrial/assembly property, office
use is limited to management tasks for distribution or warehouse facility,
or about 15 percent of total space.
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Warehouse Fee
Charged as an offset to cover a loss, many mortgage firms borrow
funds on a short-term basis in order to originate loans that will
later be sold in the secondary mortgage market. When the rate of interest
is higher on short-term loans than on long term mortgage loans, the
lender has an economic loss.
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Wraparound Mortgage
A secondary financing option in which a new larger mortgage is created
to encompass the first mortgage. This large second mortgage is used
to preserve the low interest rate on the first mortgage for a potential
buyer.
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Yield
A profit obtained on an investment, which includes the interest
rate charged, discount points paid and any other charges collected.
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