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A
acceleration
clause
A provision in a mortgage that gives the lender the right to
demand payment of the entire principal balance if a monthly
payment is missed.
acceptance
An offeree’s consent to enter into a contract and be bound
by the terms of the offer.
additional
principal payment
A payment by a borrower of more than the scheduled principal
amount due in order to reduce the remaining balance on the loan.
adjustable-rate
mortgage (ARM)
A mortgage that permits the lender to adjust its interest rate
periodically on the basis of changes in a specified index.
adjusted
basis
The original cost of a property plus the value of any
capital expenditures for improvements to the property minus
any depreciation taken.
adjustment
date
The date on which the interest rate changes for an
adjustable-rate mortgage (ARM).
adjustment
period
The period that elapses between the adjustment dates
for an adjustable-rate mortgage (ARM).
administrator
A person appointed by a probate court to administer
the estate of a person who died intestate.
affordability
analysis
A detailed analysis of your ability to afford the purchase
of a home. An affordability analysis takes into consideration
your income, liabilities, and available funds, along with the
type of mortgage you plan to use, the area where you want to
purchase a home, and the closing costs that you might expect
to pay.
amenity
A feature of real property that enhances its attractiveness
and increases the occupant’s or user’s satisfaction
although the feature is not essential to the property’s
use. Natural amenities include a pleasant or desirable location
near water, scenic views of the surrounding area, etc. Human-made
amenities include swimming pools, tennis courts, community buildings,
and other recreational facilities.
amortization
The gradual repayment of a mortgage loan by installments.
amortization
schedule
A timetable for payment of a mortgage loan. An amortization
schedule shows the amount of each payment applied to interest
and principal and shows the remaining balance after each payment
is made.
amortization
term
The amount of time required to amortize the mortgage loan. The
amortization term is expressed as a number of months. For example,
for a 30-year fixed-rate mortgage, the amortization term is
360 months.
amortize
To repay a mortgage with regular payments that cover
both principal and interest.
annual
mortgagor statement
A report sent to the mortgagor each year. The report shows how
much was paid in taxes and interest during the year, as well
as the remaining mortgage loan balance at the end of the year.
annual
percentage rate (APR)
The cost of a mortgage stated as a yearly rate; includes such
items as interest, mortgage insurance, and loan origination
fee (points).
annuity
An amount paid yearly or at other regular intervals, often on
a guaranteed dollar basis.
application
A form used to apply for a mortgage loan and to record pertinent
information concerning a prospective mortgagor and the proposed
security.
appraisal
A written analysis of the estimated value of a property prepared
by a qualified appraiser. Contrast with home
inspection.
appraised
value
An opinion of a property's fair market value, based on an
appraiser's knowledge, experience, and analysis of the property.
appraiser
A person qualified by education, training, and experience
to estimate the value of real property and personal property.
appreciation
An increase in the value of a property due to changes in
market conditions or other causes. The opposite of depreciation.
assessed
value
The valuation placed on property by a public tax assessor
for purposes of taxation.
assessment
The process of placing a value on property for the strict
purpose of taxation. May also refer to a levy against property
for a special purpose, such as a sewer assessment.
assessment
rolls
The public record of taxable property.
assessor
A public official who establishes the value of a property
for taxation purposes.
asset
Anything of monetary value that is owned by a person. Assets
include real property, personal property, and enforceable claims
against others (including bank accounts, stocks, mutual funds,
and so on).
assignment
The transfer of a mortgage from one person to another.
assumable
mortgage
A mortgage that can be taken over ("assumed")
by the buyer when a home is sold.
assumption
The transfer of the seller’s existing mortgage
to the buyer. See assumable mortgage.
assumption
clause
A provision in an assumable mortgage that allows
a buyer to assume responsibility for the mortgage from the seller.
The loan does not need to be paid in full by the original borrower
upon sale or transfer of the property.
assumption
fee
The fee paid to a lender (usually by the purchaser of real property)
resulting from the assumption of an existing mortgage.
attorney-in-fact
One who holds a power of attorney from another to execute documents
on behalf of the grantor of the power.
balance
sheetbalance
sheet
A financial statement that shows assets, liabilities, and net
worth as of a specific date.
balloon
mortgage
A mortgage that has level monthly payments that will amortize
it over a stated term but that provides for a lump sum payment
to be due at the end of an earlier specified term.
balloon
payment
The final lump sum payment that is made at the maturity date
of a balloon mortgage.
bankrupt
A person, firm, or corporation that, through a court proceeding,
is relieved from the payment of all debts after the surrender
of all assets to a court-appointed trustee.
bankruptcy
A proceeding in a federal court in which a debtor who owes more
than his or her assets can relieve the debts by transferring
his or her assets to a trustee.
before-tax
income
Income before taxes are deducted.
beneficiary
The person designated to receive the income from a trust, estate,
or a deed of trust.
bequeath
To transfer personal property through a will.
betterment
An improvement that increases property value as distinguished
from repairs or replacements that simply maintain value.
bill
of sale
A written document that transfers title to personal property.
binder
A preliminary agreement, secured by the payment of an earnest
money deposit, under which a buyer offers to purchase real estate.
biweekly payment
mortgage
A mortgage that requires payments to reduce the debt every two
weeks (instead of the standard monthly payment schedule). The
26 (or possibly 27) biweekly payments are each equal to one-half
of the monthly payment that would be required if the loan were
a standard 30-year fixed-rate mortgage, and they are usually
drafted from the borrower’s bank account. The result for
the borrower is a substantial savings in interest.
blanket
insurance policy
A single policy that covers more than one piece of property
(or more than one person).
blanket
mortgage
The mortgage that is secured by a cooperative project, as opposed
to the share loans on individual units within the project.
bona
fide
In good faith, without fraud.
bond
An interest-bearing certificate of debt with a maturity date.
An obligation of a government or business corporation. A real
estate bond is a written obligation usually secured by a mortgage
or a deed of trust.
breach
A violation of any legal obligation.
bridge
loan
A form of second trust that is collateralized by the borrower's
present home (which is usually for sale) in a manner that allows
the proceeds to be used for closing on a new house before the
present home is sold. Also known as "swing loan."
broker
A person who, for a commission or a fee, brings parties together
and assists in negotiating contracts between them. See mortgage
broker.
budget
A detailed plan of income and expenses expected over a certain
period of time. A budget can provide guidelines for managing
future investments and expenses.
budget
category
A category of income or expense data that you can use in a budget.
You can also define your own budget categories and add them
to some or all of the budgets you create. "Rent" is
an example of an expense category. "Salary" is a typical
income category.
building
code
Local regulations that control design, construction, and materials
used in construction. Building codes are based on safety and
health standards.
buydown
account
An account in which funds are held so that they can be applied
as part of the monthly mortgage payment as each payment comes
due during the period that an interest rate buydown plan is
in effect.
buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum
payment is made by any party to reduce a borrower’s monthly
payments during the first few years of a mortgage. A permanent
buydown reduces the interest rate over the entire life of a
mortgage.
call optioncall
option
A provision in the mortgage that gives the mortgagee the right
to call the mortgage due and payable at the end of a specified
period for whatever reason.
cap
A provision of an adjustable-rate mortgage (ARM) that limits
how much the interest rate or mortgage payments may increase
or decrease. See lifetime payment
cap, lifetime rate cap, periodic
payment cap, and periodic rate
cap.
capital
(1) Money used to create income, either as an investment in
a business or an income property. (2) The money or property
comprising the wealth owned or used by a person or business
enterprise. (3) The accumulated wealth of a person or business.
(4) The net worth of a business represented by the amount by
which its assets exceed liabilities.
capital
expenditure
The cost of an improvement made to extend the useful life of
a property or to add to its value.
capital
improvement
Any structure or component erected as a permanent improvement
to real property that adds to its value and useful life.
cash-out
refinance
A refinance transaction in which the amount of money received
from the new loan exceeds the total of the money needed to repay
the existing first mortgage, closing costs, points, and the
amount required to satisfy any outstanding subordinate mortgage
liens. In other words, a refinance transaction in which the
borrower receives additional cash that can be used for any purpose.
certificate of deposit
A document written by a bank or other financial institution
that is evidence of a deposit, with the issuer’s promise
to return the deposit plus earnings at a specified interest
rate within a specified time period.
certificate
of deposit index
An index that is used to determine interest rate changes for
certain ARM plans. It represents the weekly average of secondary
market interest rates on six-month negotiable certificates of
deposit. See adjustable-rate
mortgage (ARM).
Certificate of Eligibility
A document issued by the federal government certifying a veteran’s
eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate
of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA)
that establishes the maximum value and loan amount for a VA
mortgage.
certificate
of title
A statement provided by an abstract company, title company,
or attorney stating that the title to real estate is legally
held by the current owner.
chain
of title
The history of all of the documents that transfer title to a
parcel of real property, starting with the earliest existing
document and ending with the most recent.
change
frequency
The frequency (in months) of payment and/or interest rate changes
in an adjustable-rate mortgage (ARM).
chattel
Another name for personal property.
clear
title
A title that is free of liens or legal questions as to ownership
of the property.
closing
A meeting at which a sale of a property is finalized by the
buyer signing the mortgage documents and paying closing costs.
Also called "settlement."
closing
cost item
A fee or amount that a home buyer must pay at closing for a
single service, tax, or product. Closing costs are made up of
individual closing cost items such as origination fees and attorney's
fees. Many closing cost items are included as numbered items
on the HUD-1 statement.
closing
costs
Expenses (over and above the price of the property) incurred
by buyers and sellers in transferring ownership of a property.
Closing costs normally include an origination fee, an attorney's
fee, taxes, an amount placed in escrow, and charges for obtaining
title insurance and a survey. Closing costs percentage will
vary according to the area of the country; lenders or realtors®
often provide estimates of closing costs to prospective homebuyers.
closing
statement
See HUD-1 statement.
cloud
on title
Any conditions revealed by a title search that adversely affect
the title to real estate. Usually clouds on title cannot be
removed except by a quitclaim deed, release, or court action.
coinsurance
A sharing of insurance risk between the insurer and the insured.
Coinsurance depends on the relationship between the amount of
the policy and a specified percentage of the actual value of
the property insured at the time of the loss.
coinsurance
clause
A provision in a hazard insurance policy that states the amount
of coverage that must be maintained -- as a percentage of the
total value of the property -- for the insured to collect the
full amount of a loss.
collateral
An asset (such as a car or a home) that guarantees the repayment
of a loan. The borrower risks losing the asset if the loan is
not repaid according to the terms of the loan contract.
collection
The efforts used to bring a delinquent mortgage current and
to file the necessary notices to proceed with foreclosure when
necessary.
co-maker
A person who signs a promissory note along with the borrower.
A co-maker's signature guarantees that the loan will be repaid,
because the borrower and the co-maker are equally responsible
for the repayment. See endorser.
commission
The fee charged by a broker or agent for negotiating a real
estate or loan transaction. A commission is generally a percentage
of the price of the property or loan.
commitment
letter
A formal offer by a lender stating the terms under which it
agrees to lend money to a home buyer. Also known as a "loan
commitment."
common
area assessments
Levies against individual unit owners in a condominium or planned
unit development (PUD) project for additional capital to defray
homeowners' association costs and expenses and to repair, replace,
maintain, improve, or operate the common areas of the project.
common
areas
Those portions of a building, land, and amenities owned (or
managed) by a planned unit development (PUD) or condominium
project's homeowners' association (or a cooperative project's
cooperative corporation) that are used by all of the unit owners,
who share in the common expenses of their operation and maintenance.
Common areas include swimming pools, tennis courts, and other
recreational facilities, as well as common corridors of buildings,
parking areas, means of ingress and egress, etc.
common
law
An unwritten body of law based on general custom in England
and used to an extent in the United States.
Community
Home Improvement Mortgage Loan®
An alternative financing option that allows low- and moderate-income
home buyers to obtain 95 percent financing for the purchase
and improvement of a home in need of modest repairs. The repair
work can account for as much as 30 percent of the appraised
value.
Community
Land Trust Mortgage Loan
An alternative financing option that enables low- and moderate-income
home buyers to purchase housing that has been improved by a
nonprofit Community Land Trust and to lease the land on which
the property stands.
community
property
In some western and southwestern states, a form of ownership
under which property acquired during a marriage is presumed
to be owned jointly unless acquired as separate property of
either spouse.
Community
Seconds®
An alternative financing option for low- and moderate-income
households under which an investor purchases a first mortgage
that has a subsidized second mortgage behind it. The second
mortgage may be issued by a state, county, or local housing
agency, foundation, or nonprofit organization. Payment on the
second mortgage is often deferred and carries a very low interest
rate (or no interest rate at all). Part of the debt may be forgiven
incrementally for each year the buyer remains in the home.
comparables
An abbreviation for "comparable properties"; used
for comparative purposes in the appraisal process. Comparables
are properties like the property under consideration; they have
reasonably the same size, location , and amenities and have
recently been sold. Comparables help the appraiser determine
the approximate fair market value of the subject property.
compound
interest
Interest paid on the original principal balance and on the accrued
and unpaid interest.
condemnation
The determination that a building is not fit for use or is dangerous
and must be destroyed; the taking of private property for a
public purpose through an exercise of the right of eminent domain.
condominium
A real estate project in which each unit owner has title to
a unit in a building, an undivided interest in the common areas
of the project, and sometimes the exclusive use of certain limited
common areas.
condominium
conversion
Changing the ownership of an existing building (usually a rental
project) to the condominium form of ownership.
condominium
hotel
A condominium project that has rental or registration desks,
short-term occupancy, food and telephone services, and daily
cleaning services and that is operated as a commercial hotel
even though the units are individually owned.
construction
loan
A short-term, interim loan for financing the cost of construction.
The lender makes payments to the builder at periodic intervals
as the work progresses.
consumer
reporting agency (or bureau)
An organization that prepares reports that are used by lenders
to determine a potential borrower's credit history. The agency
obtains data for these reports from a credit repository as well
as from other sources.
contingency
A condition that must be met before a contract is legally binding.
For example, home purchasers often include a contingency that
specifies that the contract is not binding until the purchaser
obtains a satisfactory home inspection report from a qualified
home inspector.
contract
An oral or written agreement to do or not to do a certain thing.
conventional
mortgage
A mortgage that is not insured or guaranteed by the federal
government. Contrast with government
mortgage.
convertibility
clause
A provision in some adjustable-rate mortgages (ARMs) that allows
the borrower to change the ARM to a fixed-rate mortgage at specified
timeframes after loan origination.
convertible
ARM
An adjustable-rate mortgage (ARM) that can be converted to a
fixed-rate mortgage under specified conditions.
cooperative
(co-op)
A type of multiple ownership in which the residents of a multiunit
housing complex own shares in the cooperative corporation that
owns the property, giving each resident the right to occupy
a specific apartment or unit.
cooperative
corporation
A business trust entity that holds title to a cooperative project
and grants occupancy rights to particular apartments or units
to shareholders through proprietary leases or similar arrangements.
cooperative
mortgages
Mortgages related to a cooperative project. This usually refers
to the multifamily mortgage covering the entire project but
occasionally describes the share loans on the individual units.
cooperative
project
A residential or mixed-use building wherein a corporation or
trust holds title to the property and sells shares of stock
representing the value of a single apartment unit to individuals
who, in turn, receive a proprietary lease as evidence of title.
corporate
relocation
Arrangements under which an employer moves an employee to another
area as part of the employer's normal course of business or
under which it transfers a substantial part or all of its operations
and employees to another area because it is relocating its headquarters
or expanding its office capacity.
cost
of funds index (COFI)
An index that is used to determine interest rate changes for
certain adjustable-rate mortgage (ARM) plans. It represents
the weighted-average cost of savings, borrowings, and advances
of the 11th District members of the Federal Home Loan Bank of
San Francisco. See adjustable-rate
mortgage (ARM).
covenant
A clause in a mortgage that obligates or restricts the borrower
and that, if violated, can result in foreclosure.
credit
An agreement in which a borrower receives something of value
in exchange for a promise to repay the lender at a later date.
credit
history
A record of an individual's open and fully repaid debts. A credit
history helps a lender to determine whether a potential borrower
has a history of repaying debts in a timely manner.
credit
life insurance
A type of insurance often bought by mortgagors because it will
pay off the mortgage debt if the mortgagor dies while the policy
is in force.
creditor
A person to whom money is owed.
credit
report
A report of an individual's credit history prepared by a credit
bureau and used by a lender in determining a loan applicant's
creditworthiness. See merged credit report.
credit
repository
An organization that gathers, records, updates, and stores financial
and public records information about the payment records of
individuals who are being considered for credit.
debt
An amount owed to another. See installment
loan and revolving liability.
deed
The legal document conveying title to a property.
deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt
and avoid foreclosure. Also called a "voluntary conveyance."
deed
of trust
The document used in some states instead of a mortgage; title
is conveyed to a trustee.
default
Failure to make mortgage payments on a timely basis or to comply
with other requirements of a mortgage.
delinquency
Failure to make mortgage payments when mortgage payments are
due.
deposit
A sum of money given to bind the sale of real estate, or a sum
of money given to ensure payment or an advance of funds in the
processing of a loan. See earnest
money deposit.
depreciation
A decline in the value of property; the opposite of appreciation.
discount
points
See point.
dower
The rights of a widow in the property of her husband at his
death.
down
payment
The part of the purchase price of a property that the buyer
pays in cash and does not finance with a mortgage.
due-on-sale
provision
A provision in a mortgage that allows the lender to demand repayment
in full if the borrower sells the property that serves as security
for the mortgage.
due-on-transfer
provision
This terminology is usually used for second mortgages. See due-on-sale
provision.
earnest
money depositearnest
money deposit
A deposit made by the potential home buyer to show that he or
she is serious about buying the house.
easement
A right of way giving persons other than the owner access to
or over a property.
effective age
An appraiser’s estimate of the physical condition of a
building. The actual age of a building may be shorter or longer
than its effective age.
effective
gross income
Normal annual income including overtime that is regular or guaranteed.
The income may be from more than one source. Salary is generally
the principal source, but other income may qualify if it is
significant and stable.
eminent
domain
The right of a government to take private property for public
use upon payment of its fair market value. Eminent domain is
the basis for condemnation proceedings.
Employer-assisted
housing
A special Fannie Mae housing initiative that offers several
different ways for employers to work with local lenders to develop
plans to assist their employees in purchasing homes.
encroachment
An improvement that intrudes illegally on another’s property.
encumbrance
Anything that affects or limits the fee simple title to a property,
such as mortgages, leases, easements, or restrictions.
endorser
A person who signs ownership interest over to another party.
Contrast with co-maker.
Equal
Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make
credit equally available without discrimination based on race,
color, religion, national origin, age, sex, marital status,
or receipt of income from public assistance programs.
equity
A homeowner's financial interest in a property. Equity is the
difference between the fair market value of the property and
the amount still owed on its mortgage.
escrow
An item of value, money, or documents deposited with a third
party to be delivered upon the fulfillment of a condition. For
example, the deposit by a borrower with the lender of funds
to pay taxes and insurance premiums when they become due, or
the deposit of funds or documents with an attorney or escrow
agent to be disbursed upon the closing of a sale of real estate.
escrow account
The account in which a mortgage servicer holds the borrower’s
escrow payments prior to paying property expenses.
escrow
analysis
The periodic examination of escrow accounts to determine if
current monthly deposits will provide sufficient funds to pay
taxes, insurance, and other bills when due.
escrow collections
Funds collected by the servicer and set aside in an escrow account
to pay the borrower’s property taxes, mortgage insurance,
and hazard insurance.
escrow
disbursements
The use of escrow funds to pay real estate taxes, hazard insurance,
mortgage insurance, and other property expenses as they become
due.
escrow payment
The portion of a mortgagor’s monthly payment that is held
by the servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due.
Known as "impounds" or "reserves" in some
states.
estate
The ownership interest of an individual in real property. The
sum total of all the real property and personal property owned
by an individual at time of death.
eviction
The lawful expulsion of an occupant from real property.
examination
of title
The report on the title of a property from the public records
or an abstract of the title.
exclusive listing
A written contract that gives a licensed real estate agent the
exclusive right to sell a property for a specified time, but
reserving the owner’s right to sell the property alone
without the payment of a commission.
executor
A person named in a will to administer an estate. The court
will appoint an administrator if no executor is named. "Executrix"
is the feminine form.
Fair Credit
Reporting ActFair
Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer
credit reports by consumer/credit reporting agencies and establishes
procedures for correcting mistakes on one's credit record.
fair
market value
The highest price that a buyer, willing but not compelled to
buy, would pay, and the lowest a seller, willing but not compelled
to sell, would accept.
Fannie
Mae
A New York Stock Exchange company and the largest non-bank financial
services company in the world. It operates pursuant to a federal
charter and is the nation's largest source of financing for
home mortgages.
Over the past 30
years, Fannie Mae has provided nearly $2.5 trillion of mortgage
financing for over 30 million families.
Fannie
Mae's Community Home Buyer's ProgramSM
An income-based community lending model, under which mortgage
insurers and Fannie Mae offer flexible underwriting guidelines
to increase a low- or moderate-income family's buying power
and to decrease the total amount of cash needed to purchase
a home. Borrowers who participate in this model are required
to attend pre-purchase home-buyer education sessions.
Fannie
97®
A financing option for a fixed-rate mortgage that offers home
buyers a 3 percent down payment loan with either a 25- or 30-year
term. The mortgage features a loan-to-value (LTV) percentage
of 97 percent, and is designed to expand homeownership opportunities
for people with modest incomes. Borrowers must take a pre-purchase
home-buyer education session to qualify for a Fannie 97 mortgage.
Federal
Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development
(HUD). Its main activity is the insuring of residential mortgage
loans made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct
housing.
fee
simple
The greatest possible interest a person can have in real estate.
fee
simple estate
An unconditional, unlimited estate of inheritance that represents
the greatest estate and most extensive interest in land that
can be enjoyed. It is of perpetual duration. When the real estate
is in a condominium project, the unit owner is the exclusive
owner only of the air space within his or her portion of the
building (the unit) and is an owner in common with respect to
the land and other common portions of the property.
FHA
coinsured mortgage
A mortgage (under FHA Section 244) for which the Federal Housing
Administration (FHA) and the originating lender share the risk
of loss in the event of the mortgagor's default.
FHA
mortgage
A mortgage that is insured by the Federal Housing Administration
(FHA). Also known as a government mortgage.
finder's
fee
A fee or commission paid to a mortgage broker for finding a
mortgage loan for a prospective borrower.
firm commitment
A lender’s agreement to make a loan to a specific borrower
on a specific property.
first
mortgage
A mortgage that is the primary lien against a property.
fixed
installment
The monthly payment due on a mortgage loan. The fixed installment
includes payment of both principal and interest.
fixed-rate
mortgage (FRM)
A mortgage in which the interest rate does not change during
the entire term of the loan.
fixture
Personal property that becomes real property when attached in
a permanent manner to real estate.
flood
insurance
Insurance that compensates for physical property damage resulting
from flooding. It is required for properties located in federally
designated flood areas.
foreclosure
The legal process by which a borrower in default under a mortgage
is deprived of his or her interest in the mortgaged property.
This usually involves a forced sale of the property at public
auction with the proceeds of the sale being applied to the mrotgage
debt.
forfeiture
The loss of money, property, rights, or privileges due to a
breach of legal obligation.
401(k)/403(b)
An employer-sponsored investment plan that allows individuals
to set aside tax-deferred income for retirement or emergency
purposes. 401(k) plans are provided by employers that are private
corporations. 403(b) plans are provided by employers that are
not for profit organizations.
401(k)/403(b)
loan
Some administrators of 401(k)/403(b) plans allow for loans against
the monies you have accumulated in these plans -- monies must
be repaid to avoid serious penalty charges.
fully
amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that
is sufficient to amortize the remaining balance, at the interest
accrual rate, over the amortization term.
government
mortgage
A mortgage that is insured by the Federal Housing Administration
(FHA) or guaranteed by the Department of Veterans Affairs (VA)
or the Rural Housing Service (RHS). Contrast with conventional
mortage.
Government
National Mortgage Association
A government-owned corporation within the U.S. Department of
Housing and Urban Development (HUD). Created by Congress on
September 1, 1968, GNMA assumed responsibility for the special
assistance loan program formerly administered by Fannie Mae.
Popularly known as Ginnie Mae.
grantee
The person to whom an interest in real property is conveyed.
grantor
The person conveying an interest in real property.
ground
rent
The amount of money that is paid for the use of land when title
to a property is held as a leasehold estate rather than as a
fee simple estate.
group
home
A single-family residential structure designed or adapted for
occupancy by unrelated developmentally disabled persons. The
structure provides long-term housing and support services that
are residential in nature.
growing-equity
mortgage (GEM)
A fixed-rate mortgage that provides scheduled payment increases
over an established period of time, with the increased amount
of the monthly payment applied directly toward reducing the
remaining balance of the mortgage.
guarantee
mortgage
A mortgage that is guaranteed by a third party.
guaranteed
loan
Also known as a government mortgage.
hazard
insurancehazard
insurance
Insurance coverage that compensates for physical damage to a
property from fire, wind, vandalism, or other hazards.
Home
Equity Conversion Mortgage (HECM)
A special type of mortgage that enables older home owners to
convert the equity they have in their homes into cash, using
a variety of payment options to address their specific financial
needs. Unlike traditional home equity loans, a borrower does
not qualify on the basis of income but on the value of his or
her home. In addition, the loan does not have to be repaid until
the borrower no longer occupies the property. Sometimes called
a reverse mortgage.
home
equity line of credit
A mortgage loan, which is usually in a subordinate position,
that allows the borrower to obtain multiple advances of the
loan proceeds at his or her own discretion, up to an amount
that represents a specified percentage of the borrower's equity
in a property.
home
inspection
A thorough inspection that evaluates the structural and mechanical
condition of a property. A satisfactory home inspection is often
included as a contingency by the purchaser. Contrast with appraisal.
HomeKeeperSM
Fannie Mae's adjustable-rate conventional reverse mortgage,
which allows older homeowners to borrow against the value of
their homes and receive the proceeds according to the payment
option they select. The amount available is based on the number
of borrowers and their ages and the adjusted property value.
Anyone 62 years or older who either owns his or her own home
free and clear or has very low mortgage debt is eligible.
homeowners'
association
A nonprofit association that manages the common areas of a planned
unit development (PUD) or condominium project. In a condominium
project, it has no ownership interest in the common elements.
In a PUD project, it holds title to the common elements.
homeowner's
insurance
An insurance policy that combines personal liability insurance
and hazard insurance coverage for a dwelling and its contents.
homeowner's
warranty (HOW)
A type of insurance that covers repairs to specified parts of
a house for a specific period of time. It is provided by the
builder or property seller as a condition of the sale.
HomeStyle®
Mortgage Loan
A mortgage that enables eligible borrowers to obtain financing
to remodel, repair, and upgrade their existing homes or homes
that they are purchasing. The financing takes the form of a
conventional second mortgage or a Federal Housing Administration
(FHA) Section 203(k) first mortgage.
housing
expense ratio
The percentage of gross monthly income that goes toward paying
housing expenses.
HUD
median income
Median family income for a particular county or metropolitan
statistical area (MSA), as estimated by the Department of Housing
and Urban Development (HUD).
HUD-1
statement
A document that provides an itemized listing of the funds that
are payable at closing. Items that appear on the statement include
real estate commissions, loan fees, points, and initial escrow
amounts. Each item on the statement is represented by a separate
number within a standardized numbering system. The totals at
the bottom of the HUD-1 statement define the seller's net proceeds
and the buyer's net payment at closing. The blank form for the
statement is published by the Department of Housing and Urban
Development (HUD). The HUD-1 statement is also known as the
"closing statement" or "settlement sheet."
income
propertyincome
property
Real estate developed or improved to produce income.
index
A number used to compute the interest rate for an adjustable-rate
mortgage (ARM). The index is generally a published number or
percentage, such as the average interest rate or yield on Treasury
bills. A margin is added to the index to determine the interest
rate that will be charged on the ARM.. This interest rate is
subject to any caps that are associated with the mortgage.
in-file
credit report
An objective account, normally computer-generated, of credit
and legal information obtained from a credit repository.
inflation
An increase in the amount of money or credit available in relation
to the amount of goods or services available, which causes an
increase in the general price level of goods and services. Over
time, inflation reduces the purchasing power of a dollar, making
it worth less.
initial
interest rate
The original interest rate of the mortgage at the time of closing.
This rate changes for an adjustable-rate mortgage (ARM). Sometimes
known as "start rate" or "teaser."
installment
The regular periodic payment that a borrower agrees to make
to a lender.
installment
loan
Borrowed money that is repaid in equal payments, known as installments.
A furniture loan is often paid for as an installment loan.
insurable
title
A property title that a title insurance company agrees to insure
against defects and disputes.
insurance
A contract that provides compensation for specific losses in
exchange for a periodic payment. An individual contract is known
as an insurance policy, and the periodic payment is known as
an insurance premium.
insurance
binder
A document that states that insurance is temporarily in effect.
Because the coverage will expire by a specified date, a permanent
policy must be obtained before the expiration date.
insured
mortgage
A mortgage that is protected by the Federal Housing Administration
(FHA) or by private mortgage insurance (MI). If the borrower
defaults on the loan, the insurer must pay the lender the lesser
of the loss incurred or the insured amount.
interest
The fee charged for borrowing money.
interest
accrual rate
The percentage rate at which interest accrues on the mortgage.
In most cases, it is also the rate used to calculate the monthly
payments, although it is not used for an adjustable-rate mortgage
(ARM) with payment change limitations.
interest
rate
The rate of interest in effect for the monthly payment due.
interest
rate buydown plan
An arrangement wherein the property seller (or any other party)
deposits money to an account so that it can be released each
month to reduce the mortgagor's monthly payments during the
early years of a mortgage. During the specified period, the
mortgagor's effective interest rate is "bought down"
below the actual interest rate.
interest
rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest
rate, as specified in the mortgage note.
interest
rate floor
For an adjustable-rate mortgage (ARM), the minimum interest
rate, as specified in the mortgage note.
investment
property
A property that is not occupied by the owner.
IRA
(Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred
contributions to a personal retirement fund. Individuals can
place IRA funds in bank accounts or in other forms of investment
such as stocks, bonds, or mutual funds.
joint tenancyjoint
tenancy
A form of co-ownership that gives each tenant equal interest
and equal rights in the property, including the right of survivorship.
judgment
A decision made by a court of law. In judgments that require
the repayment of a debt, the court may place a lien against
the debtor's real property as collateral for the judgment's
creditor.
judgment
lien
A lien on the property of a debtor resulting from the decree
of a court.
judicial
foreclosure
A type of foreclosure proceeding used in some states that is
handled as a civil lawsuit and conducted entirely under the
auspices of a court.
jumbo loan
A loan that exceeds Fannie Mae’s legislated mortgage amount
limits. Also called a nonconforming loan.
There are no entries
for K.
late chargelate
charge
The penalty a borrower must pay when a payment is made a stated
number of days (usually 15) after the due date.
lease
A written agreement between the property owner and a tenant
that stipulates the conditions under which the tenant may possess
the real estate for a specified period of time and rent.
leasehold
estate
A way of holding title to a property wherein the mortgagor does
not actually own the property but rather has a recorded long-term
lease on it.
lease-purchase
mortgage loan
An alternative financing option that allows low- and moderate-income
home buyers to lease a home from a nonprofit organization with
an option to buy. Each month's rent payment consists of principal,
interest, taxes and insurance (PITI) payments on the first mortgage
plus an extra amount that is earmarked for deposit to a savings
account in which money for a downpayment will accumulate.
legal
description
A property description, recognized by law, that is sufficient
to locate and identify the property without oral testimony.
liabilities
A person's financial obligations. Liabilities include long-term
and short-term debt, as well as any other amounts that are owed
to others.
liability
insurance
Insurance coverage that offers protection against claims alleging
that a property owner's negligence or inappropriate action resulted
in bodily injury or property damage to another party.
lien
A legal claim against a property that must be paid off when
the property is sold.
lifetime
payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount
that payments can increase or decrease over the life of the
mortgage. See cap.
lifetime
rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount
that the interest rate can increase or decrease over the life
of the loan. See cap.
line
of credit
An agreement by a commercial bank or other financial institution
to extend credit up to a certain amount for a certain time to
a specified borrower. See home
equity line of credit.
liquid
asset
A cash asset or an asset that is easily converted into cash.
loan
A sum of borrowed money (principal) that is generally repaid
with interest.
loan
commitment
See commitment letter.
loan
origination
The process by which a mortgage lender brings into existence
a mortgage secured by real property.
loan-to-value
(LTV) percentage
The relationship between the principal balance of the mortgage
and the appraised value (or sales price if it is lower) of the
property. For example, a $100,000 home with an $80,000 mortgage
has a LTV percentage of 80 percent.
lock-in
A written agreement in which the lender guarantees a specified
interest rate if a mortgage goes to closing within a set period
of time. The lock-in also usually specifies the number of points
to be paid at closing.
lock-in
period
The time period during which the lender has guaranteed an interest
rate to a borrower. See lock-in.
marginmargin
For an adjustable-rate mortgage (ARM), the amount that is added
to the index to establish the interest rate on each adjustment
date, subject to any limitations on the interest rate change.
master
association
A homeowners' association in a large condominium or planned
unit development (PUD) project that is made up of representatives
from associations covering specific areas within the project.
In effect, it is a "second-level" association that
handles matters affecting the entire development, while the
"first-level" associations handle matters affecting
their particular portions of the project.
maturity
The date on which the principal balance of a loan, bond, or
other financial instrument becomes due and payable.
maximum
financing
A mortgage amount that is within 5 percent of the highest loan-to-value
(LTV) percentage allowed for a specific product. Thus, maximum
financing on a fixed-rate mortgage would be 90 percent or higher,
because 95 percent is the maximum allowable LTV percentage for
that product.
merged
credit report
A credit report that contains information from three credit
repositories. When the report is created, the information is
compared for duplicate entries. Any duplicates are combined
to provide a summary of a your credit.
modification
The act of changing any of the terms of the mortgage.
money
market account
A savings account that provides bank depositors with many of
the advantages of a money market fund. Certain regulatory restrictions
apply to the withdrawal of funds from a money market account.
money
market fund
A mutual fund that allows individuals to participate in managed
investments in short-term debt securities, such as certificates
of deposit and Treasury bills.
monthly
fixed installment
That portion of the total monthly payment that is applied toward
principal and interest. When a mortgage negatively amortizes,
the monthly fixed installment does not include any amount for
principal reduction.
monthly
payment mortgage
A mortgage that requires payments to reduce the debt once a
month.
mortgage
A legal document that pledges a property to the lender as security
for payment of a debt.
mortgage
banker
A company that originates mortgages exclusively for resale in
the secondary mortgage market.
mortgage
broker
An individual or company that brings borrowers and lenders together
for the purpose of loan origination. Mortgage brokers typically
require a fee or a commission for their services.
mortgagee
The lender in a mortgage agreement.
mortgage
insurance
A contract that insures the lender against loss caused by a
mortgagor's default on a government mortgage or conventional
mortgage. Mortgage insurance can be issued by a private company
or by a government agency such as the Federal Housing Administration
(FHA). Depending on the type of mortgage insurance, the insurance
may cover a percentage of or virtually all of the mortgage loan.
See private mortgage insurance
(MI).
mortgage
insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either
to a government agency such as the Federal Housing Administration
(FHA) or to a private mortgage insurance (MI) company.
mortgage
life insurance
A type of term life insurance often bought by mortgagors. The
amount of coverage decreases as the principal balance declines.
In the event that the borrower dies while the policy is in force,
the debt is automatically satisfied by insurance proceeds.
mortgagor
The borrower in a mortgage agreement.
multidwelling
units
Properties that provide separate housing units for more than
one family, although they secure only a single mortgage.
multifamily
mortgage
A residential mortgage on a dwelling that is designed to house
more than four families, such as a high-rise apartment complex.
negative
amortizationnegative
amortization
A gradual increase in mortgage debt that occurs when the monthly
payment is not large enough to cover the entire principal and
interest due. The amount of the shortfall is added to the remaining
balance to create "negative" amortization.
net
cash flow
The income that remains for an investment property after the
monthly operating income is reduced by the monthly housing expense,
which includes principal, interest, taxes, and insurance (PITI)
for the mortgage, homeowners' association dues, leasehold payments,
and subordinate financing payments.
net
worth
The value of all of a person's assets, including cash, minus
all liabilities.
no
cash-out refinance
A refinance transaction in which the new mortgage amount is
limited to the sum of the remaining balance of the existing
first mortgage, closing costs (including prepaid items), points,
the amount required to satisfy any mortgage liens that are more
than one year old (if the borrower chooses to satisfy them),
and other funds for the borrower's use (as long as the amount
does not exceed 1 percent of the principal amount of the new
mortgage).
nonliquid
asset
An asset that cannot easily be converted into cash.
note
A legal document that obligates a borrower to repay a mortgage
loan at a stated interest rate during a specified period of
time.
note
rate
The interest rate stated on a mortgage note.
notice
of default
A formal written notice to a borrower that a default has occurred
and that legal action may be taken.
original
principal balanceoriginal
principal balance
The total amount of principal owed on a mortgage before any
payments are made.
origination
fee
A fee paid to a lender for processing a loan application. The
origination fee is stated in the form of points. One point is
1 percent of the mortgage amount.
owner
financing
A property purchase transaction in which the property seller
provides all or part of the financing.
partial
paymentpartial
payment
A payment that is not sufficient to cover the scheduled monthly
payment on a mortgage loan.
payment
change date
The date when a new monthly payment amount takes effect on an
adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate
mortgage (GPARM). Generally, the payment change date occurs
in the month immediately after the adjustment date.
periodic
payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount
that payments can increase or decrease during any one adjustment
period. See cap.
periodic
rate cap
For an adjustable-rate mortgage (ARM), a limit on the amount
that the interest rate can increase or decrease during any one
adjustment period, regardless of how high or low the index might
be. See cap.
personal
property
Any property that is not real property.
PITI
See principal,
interest, taxes, and insurance (PITI).
PITI
reserves
A cash amount that a borrower must have on hand after making
a down payment and paying all closing costs for the purchase
of a home. The principal, interest, taxes, and insurance (PITI)
reserves must equal the amount that the borrower would have
to pay for PITI for a predefined number of months.
planned
unit development
See PUD.
point
A one-time charge by the lender for originating a loan. A point
is 1 percent of the amount of the mortgage.
power of attorney
A legal document that authorizes another person to act on one’s
behalf. A power of attorney can grant complete authority or
can be limited to certain acts and/or certain periods of time.
prearranged
refinancing agreement
A formal or informal arrangement between a lender and a borrower
wherein the lender agrees to offer special terms (such as a
reduction in the costs) for a future refinancing of a mortgage
being originated as an inducement for the borrower to enter
into the original mortgage transaction.
preforeclosure
sale
A procedure in which the investor allows a mortgagor to avoid
foreclosure by selling the property for less than the amount
that is owed to the investor.
prepayment
Any amount paid to reduce the principal balance of a loan before
the due date. Payment in full on a mortgage that may result
from a sale of the property, the owner's decision to pay off
the loan in full, or a foreclosure. In each case, prepayment
means payment occurs before the loan has been fully amortized.
prepayment
penalty
A fee that may be charged to a borrower who pays off a loan
before it is due.
pre-qualification
The process of determining how much money a prospective home
buyer will be eligible to borrow before he or she applies for
a loan.
prime
rate
The interest rate that banks charge to their preferred customers.
Changes in the prime rate influence changes in other rates,
including mortgage interest rates.
principal
The amount borrowed or remaining unpaid. The part of the monthly
payment that reduces the remaining balance of a mortgage.
principal
balance
The outstanding balance of principal on a mortgage. The principal
balance does not include interest or any other charges. See
remaining balance.
principal,
interest, taxes, and insurance (PITI)
The four components of a monthly mortgage payment. Principal
refers to the part of the monthly payment that reduces the remaining
balance of the mortgage. Interest is the fee charged for borrowing
money. Taxes and insurance refer to the amounts that are paid
into an escrow account each month for property taxes and mortgage
and hazard insurance.
private
mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance
company to protect lenders against loss if a borrower defaults.
Most lenders generally require MI for a loan with a loan-to-value
(LTV) percentage in excess of 80 percent.
promissory
note
A written promise to repay a specified amount over a specified
period of time.
public
auction
A meeting in an announced public location to sell property to
repay a mortgage that is in default.
Planned
Unit Development (PUD)
A project or subdivision that includes common property that
is owned and maintained by a homeowners' association for the
benefit and use of the individual PUD unit owners.
purchase
and sale agreement
A written contract signed by the buyer and seller stating the
terms and conditions under which a property will be sold.
purchase
money transaction
The acquisition of property through the payment of money or
its equivalent.
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qualifying
ratios
Calculations that are used in determining whether a borrower
can qualify for a mortgage. They consist of two separate calculations:
a housing expense as a percent of income ratio and total debt
obligations as a percent of income ratio.
quitclaim
deed
A deed that transfers without warranty whatever interest or
title a grantor may have at the time the conveyance is made.
radonradon
A radioactive gas found in some homes that in sufficient concentrations
can cause health problems.
rate-improvement
mortgage
A fixed-rate mortgage that includes a provision that gives the
borrower a one-time option to reduce the interest rate (without
refinancing) during the early years of the mortgage term.
rate
lock
A commitment issued by a lender to a borrower or other mortgage
originator guaranteeing a specified interest rate for a specified
period of time. See lock-in.
real
estate agent
A person licensed to negotiate and transact the sale of real
estate on behalf of the property owner.
Real
Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers
advance notice of closing costs.
real
property
Land and appurtenances, including anything of a permanent nature
such as structures, trees, minerals, and the interest, benefits,
and inherent rights thereof.
Realtor®
A real estate broker or an associate who holds active membership
in a local real estate board that is affiliated with the National
Association of Realtors.
recission
The cancellation or annulment of a transaction or contract by
the operation of a law or by mutual consent. Borrowers usually
have the option to cancel a refinance transaction within three
business days after it has closed.
recorder
The public official who keeps records of transactions that affect
real property in the area. Sometimes known as a "Registrar
of Deeds" or "County Clerk."
recording
The noting in the registrar’s office of the details of
a properly executed legal document, such as a deed, a mortgage
note, a satisfaction of mortgage, or an extension of mortgage,
thereby making it a part of the public record.
refinance
transaction
The process of paying off one loan with the proceeds from a
new loan using the same property as security.
rehabilitation
mortgage
A mortgage created to cover the costs of repairing, improving,
and sometimes acquiring an existing property.
remaining
balance
The amount of principal that has not yet been repaid. See principal
balance.
remaining
term
The original amortization term minus the number of payments
that have been applied.
rent
loss insurance
Insurance that protects a landlord against loss of rent or rental
value due to fire or other casualty that renders the leased
premises unavailable for use and as a result of which the tenant
is excused from paying rent.
rent
with option to buy
See lease-purchase mortgage
loan.
repayment
plan
An arrangement made to repay delinquent installments or advances.
Lenders' formal repayment plans are called "relief provisions."
replacement
reserve fund
A fund set aside for replacement of common property in a condominium,
PUD, or cooperative project -- particularly that which has a
short life expectancy, such as carpeting, furniture, etc.
revolving
liability
A credit arrangement, such as a credit card, that allows a customer
to borrow against a preapproved line of credit when purchasing
goods and services. The borrower is billed for the amount that
is actually borrowed plus any interest due.
right
of first refusal
A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease
the property before he or she offers it for sale or lease to
others.
right
of ingress or egress
The right to enter or leave designated premises.
right
of survivorship
In joint tenancy, the right of survivors to acquire the interest
of a deceased joint tenant.
Rural
Housing Service (RHS)
An agency within the Department of Agriculture, which operates
principally under the Consolidated Farm and Rural Development
Act of 1921 and Title V of the Housing Act of 1949. This agency
provides financing to farmers and other qualified borrowers
buying property in rural areas who are unable to obtain loans
elsewhere. Funds are borrowed from the U.S. Treasury.
sale-leasebacksale-leaseback
A technique in which a seller deeds property to a buyer for
a consideration, and the buyer simultaneously leases the property
back to the seller.
second
mortgage
A mortgage that has a lien position subordinate to the first
mortgage.
secondary
mortgage market
The buying and selling of existing mortgages.
secured
loan
A loan that is backed by collateral.
security
The property that will be pledged as collateral for a loan.
seller
take-back
An agreement in which the owner of a property provides financing,
often in combination with an assumable mortgage. See owner
financing.
servicer
An organization that collects principal and interest payments
from borrowers and manages borrowers’ escrow accounts.
The servicer often services mortgages that have been purchased
by an investor in the secondary mortgage market.
servicing
The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
settlement
See closing.
settlement
sheet
See HUD-1 statement.
special
deposit account
An account that is established for rehabilitation mortgages
to hold the funds needed for the rehabilitation work so they
can be disbursed from time to time as particular portions of
the work are completed.
standard
payment calculation
The method used to determine the monthly payment required to
repay the remaining balance of a mortgage in substantially equal
installments over the remaining term of the mortgage at the
current interest rate.
step-rate
mortgage
A mortgage that allows for the interest rate to increase according
to a specified schedule (i.e., seven years), resulting in increased
payments as well. At the end of the specified period, the rate
and payments will remain constant for the remainder of the loan.
subdivision
A housing development that is created by dividing a tract of
land into individual lots for sale or lease.
subordinate
financing
Any mortgage or other lien that has a priority that is lower
than that of the first mortgage.
subsidized
second mortgage
An alternative financing option known as the Community Seconds®
mortgage for low- and moderate-income households. An investor
purchases a first mortgage that has a subsidized second mortgage
behind it. The second mortgage may be issued by a state, county,
or local housing agency, foundation, or nonprofit corporation.
Payment on the second mortgage is often deferred and carries
a very low interest rate (or no interest rate). Part of the
debt may be forgiven incrementally for each year the buyer remains
in the home.
survey
A drawing or map showing the precise legal boundaries of a property,
the location of improvements, easements, rights of way, encroachments,
and other physical features.
sweat
equity
Contribution to the construction or rehabilitation of a property
in the form of labor or services rather than cash.
tenancy
by the entiretytenancy
by the entirety
A type of joint tenancy of property that provides right of survivorship
and is available only to a husband and wife. Contrast with tenancy
in common.
tenancy
in common
A type of joint tenancy in a property without right of survivorship.
Contrast with tenancy by the entirety and with joint tenacy.
tenant-stockholder
The obligee for a cooperative share loan, who is both a stockholder
in a cooperative corporation and a tenant of the unit under
a proprietary lease or occupancy agreement.
third-party
origination
A process by which a lender uses another party to completely
or partially originate, process, underwrite, close, fund, or
package the mortgages it plans to deliver to the secondary mortgage
market. See mortgage broker.
title
A legal document evidencing a person's right to or ownership
of a property.
title
company
A company that specializes in examining and insuring titles
to real estate.
title
insurance
Insurance that protects the lender (lender's policy) or the
buyer (owner's policy) against loss arising from disputes over
ownership of a property.
title
search
A check of the title records to ensure that the seller is the
legal owner of the property and that there are no liens or other
claims outstanding.
total
expense ratio
Total obligations as a percentage of gross monthly income. The
total expense ratio includes monthly housing expenses plus other
monthly debts.
trade
equity
Equity that results from a property purchaser giving his or
her existing property (or an asset other than real estate) as
trade as all or part of the down payment for the property that
is being purchased.
transfer
of ownership
Any means by which the ownership of a property changes hands.
Lenders consider all of the following situations to be a transfer
of ownership: the purchase of a property "subject to"
the mortgage, the assumption of the mortgage debt by the property
purchaser, and any exchange of possession of the property under
a land sales contract or any other land trust device. In cases
in which an inter vivos revocable trust is the borrower, lenders
also consider any transfer of a beneficial interest in the trust
to be a transfer of ownership.
transfer
tax
State or local tax payable when title passes from one owner
to another.
Treasury
index
An index that is used to determine interest rate changes for
certain adjustable-rate mortgage (ARM) plans. It is based on
the results of auctions that the U.S. Treasury holds for its
Treasury bills and securities or is derived from the U.S. Treasury's
daily yield curve, which is based on the closing market bid
yields on actively traded Treasury securities in the over-the-counter
market. See adjustable-rate
mortgage (ARM).
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing,
the terms and conditions of a mortgage, including the annual
percentage rate (APR) and other charges.
two-step
mortgage
An adjustable-rate mortgage (ARM) that has one interest rate
for the first five or seven years of its mortgage term and a
different interest rate for the remainder of the amortization
term.
two-
to four-family property
A property that consists of a structure that provides living
space (dwelling units) for two to four families, although ownership
of the structure is evidenced by a single deed.
trustee
A fiduciary who holds or controls property for the benefit of
another.
underwritingunderwriting
The process of evaluating a loan application to determine the
risk involved for the lender. Underwriting involves an analysis
of the borrower's creditworthiness and the quality of the property
itself.
unsecured
loan
A loan that is not backed by collateral.
VA mortgageVA
mortgage
A mortgage that is guaranteed by the Department of Veterans
Affairs (VA). Also known as a government mortgage.
vested
Having the right to use a portion of a fund such as an individual
retirement fund. For example, individuals who are 100 percent
vested can withdraw all of the funds that are set aside for
them in a retirement fund. However, taxes may be due on any
funds that are actually withdrawn.
Department
of Veterans Affairs (VA)
An agency of the federal government that guarantees residential
mortgages made to eligible veterans of the military services.
The guarantee protects the lender against loss and thus encourages
lenders to make mortgages to veterans.
what-if
analysis
what-if
analysis
An affordability analysis that is based on a what-if scenario.
A what-if analysis is useful if you do not have complete data
or if you want to explore the effect of various changes to your
income, liabilities, or available funds or to the qualifying
ratios or down payment expenses that are used in the analysis.
what-if
scenario
A change in the amounts that is used as the basis of an affordability
analysis. A what-if scenario can include changes to monthly
income, debts, or down payment funds or to the qualifying ratios
or down payment expenses that are used in the analysis. You
can use a what-if scenario to explore different ways to improve
your ability to afford a house.
wraparound
mortgage
A mortgage that includes the remaining balance on an existing
first mortgage plus an additional amount requested by the mortgagor.
Full payments on both mortgages are made to the wraparound mortgagee,
who then forwards the payments on the first mortgage to the
first mortgagee.
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for X.
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for Y.
Calculators
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