Abstract Of Title
A written history of the title transactions or conditions on the title to a designated parcel of land. It covers the period from the original source of title to the present, and summarizes all subsequent instruments of public record by setting forth their material parts.
Acceleration Clause
A provision of a mortgage and note providing that the entire principal shall become immediately due and payable in the event of default.
Accrued Interest
The interest earned for the period of time that has elapsed since interest was paid.
Adjustable-Rate Mortgage
Adjustable-Rate Mortgages (ARM's) are mortgages on which the interest rate and monthly payment will change periodically. The main difference among ARM programs is the length of the initial fixed interest rate period.
Affidavit
A sworn statement in writing, usually made before a notary public or other public official.
Agent
One who is legally authorized by another to represent him/her on his/her behalf. For example, you may hire a broker to act as agent in obtaining your homeowners insurance.
Agreement Of Sale
A contract in which the buyer agrees to purchase a specific property and the seller agrees to sell under the stated conditions. Commonly referred to as a sales contract.
All-Risk Insurance
An insurance policy (home owners) that provides coverage for every conceivable risk except those specifically excluded by the policy itself, as opposed to a “named-perils” policy that covers only those risks specifically set forth in the policy.
Alta (American Land Title Association)
A national association of title insurance companies, abstractors, and attorneys, specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
Amortization
The gradual repayment of a mortgage loan by installment.
Amortization Schedule
A table that outlines the schedule for loan repayment. It shows the amount of principal and interest due at regular intervals. It also shows the unpaid balance of the loan remaining after each payment.
Amount Financed
This figure is used to calculate your APR. It represents your loan amount minus any prepaid finance charges (i.e., the sum of "Amount Financed" and "Finance Charge") assuming you kept the loan to maturity and made only the required monthly payments.
Annual Percentage Rate (APR)
There are two interest rates applicable to your loan: (i) your Actual Interest Rate and (ii) your Annual Percentage Rate. Your Actual Rate is the annual interest rate of your loan (sometimes referred to as the "note rate"), and is the rate used to calculate your monthly payments. The amount of interest you pay, as determined by your Actual Rate, is only one of the costs associated with your loan... there may be others. The Annual Percentage Rate (referred to as the "APR") encompasses both your interest and any additional costs or prepaid finance charges you may pay such as prepaid interest (necessary to adjust your first payment if you close mid-month), private mortgage insurance, closing fees, points, etc. Your APR represents the total cost of credit on a yearly basis after all charges are taken into consideration. It will usually be slightly higher than your Actual Rate because it includes these additional items and assumes you will keep the loan to maturity.
Application Fee
Some lenders charge an "Application Fee" fee for accepting and reviewing your loan application.
Appraisal
An appraisal is a written analysis of the estimated value of your property. A qualified appraiser who has knowledge, experience and insight into the marketplace prepares the document. It ensures you're paying fair market value for your home and is required to close on your new home or property.
Appraisal Fee
This fee is paid to the outside appraisal company we engage to objectively determine the fair market value of your property. This fee varies based on the location and type of your property.
Assignment Recording Fee
In many instances, after closing we transfer your loan to a specialized loan "servicer" who handles the collection of your monthly payments. The Assignment Fee covers the cost of recording this transfer at the local recording office.
Appraised Value
An estimate of property value made by a qualified expert. The expert, called an appraiser, is qualified by his education, training, and experience.
Appreciation
An increased value of property due to either a positive improvement of an area or the elimination of negative factors.
Assignment Of Mortgage
A document that evidences a transfer of ownership of a mortgage from one party to another.
Assumption Of Mortgage
A document that evidences a transfer of ownership of a mortgage from one party to another. Also refers to the agreement between buyer and seller where buyer assumes liability under an existing note secured by a mortgage or deed of trust.
Attorney In Fact
One who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agent’s authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader. Also referred to as Power of Attorney.
Balloon Note
A note in which periodic payments are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon payment” is due at maturity.
Basis Point
One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages.
Binder Of Insurance
A written evidence of temporary hazard or title coverage that one runs for a limited time and must be replaced by a permanent policy.
Biweekly Payment Mortgage
A mortgage that requires a payment to reduce the debt every two weeks (instead of the standard monthly payment schedule).
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 referred to as a “swing loan”.
Bridge Financing
A form of interim loan, generally made between a short term loan and a permanent (long term) loan, when the borrower needs to have more time before taking the long term financing.
Broker
Generally, an agent who acts as an intermediary between other parties and assists in negotiating agreements between them.
Broker Processing Fee
The fee charged to you by the broker, to have your file packaged and handed over to a selected lender.
Buydown
When the lender is paid a certain fee in order to reduce the interest rate or monthly payments on a mortgage for a limited duration (usually 1 or 2 years). Buydown fees can be paid by the seller or the lender in special lender paid buydown programs.
Cap
A term used in adjustable rate mortgages. Caps limit the increase or decrease allowed in the interest rate or monthly payment. Normally, there is a cap in effect per adjustment and also a “lifetime” cap that limits the amount of increase over the life of the loan.
Cash-out Refinance
A refinancing 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 this type of refinance, the borrower will receive “cash” at the time of closing which can be used for any purpose.
Certificate of Eligibility
A certificate obtained by a veteran from a Veteran’s Administration office which states that the veteran is eligible for VA insured loan.
Certificate of Occupancy
Written authorization given by a local municipality that allows a newly completed, or substantially completed structure to be inhabited.
Chain of Title
The history of all the documents transferring title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Chattel Mortgage
A lien on a personal property. A security interest.
Clear Title
Good title; marketable title; one free of encumbrance, obstruction, burden, or limitation.
Closing
The conclusion or consummation of a mortgage financing transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.
Closing Costs
All expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.
Closing Date
The date established by contractual agreement for the transferring of title or the date agreed upon by all parties to complete the real estate transfer.
Cloud on Title
When any conditions revealed by a title search adversely affect the title to property. Usually they cannot be removed except by a quit claim deed, release, or court action.
Co-Borrower (Co-Mortgagor)
The co-borrower is as equally responsible for repayment as the borrower and has an interest in the title of the property.
Collateral
The property being pledged as security for a debt, such as the real estate securing the mortgage.
Commitment
An agreement, often in writing, between a lender and the borrower to loan money at a future date subject to compliance with stated conditions.
(See conditional, firm, and standby commitments.)
Commitment Fee
Any fee paid by a potential borrower to a potential lender for the lender’s promise to lend money at a specified time in the future. The lender may or may not expect to fund the commitment.
Common Areas
Land or improvements for the benefit of all tenants and property owners. Shopping center parking lots and residential parks and playgrounds are generally common areas. All the space within a development that can be used by all the tenants in that development. (See condominium and planned unit development).
Comparables
Refers to the comparable properties used in the appraisal process. Facilities of reasonably the same size and location with similar amenities. Properties which have been recently sold, which have characteristics similar to property under consideration, thereby indicating the approximate fair market value of the subject property.
Condominium
A real estate project in which each unit owner holds 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. The condominium may be attached or detached. The homeowner’s association dues are included in the total monthly mortgage payment for qualifying purposes.
Consideration
The required element (usually money) in all contracts by which a legal right or promise is exchanged for the act or promise of another person.
Construction Loan
A short-term interim loan for financing the cost of construction. The lender disburses funds to the builder at periodic intervals as work progresses. Sometimes this loan is converted to a permanent loan once construction is completed, but not in all cases.
Contingency
Commonly, the dependence upon a stated event which must occur before a contract is binding. In most cases, the stated event is a mortgage commitment.
Contract
An agreement between one or more parties to do or not to do a particular lawful thing.
Conventional Loan
A mortgage loan neither insured by FHA nor guaranteed by VA.
Convertible Arm
A type of adjustable rate mortgage that includes an option for the mortgagor to change the mortgage to a fixed rate mortgage. There are normally some fees involved and conversion must be requested within a specific time frame.
Cooperative
A form of multiple ownership of real estate. A corporation or business trust entity holds title to a property and grants occupancy rights to a particular apartment or unit to shareholders by means of proprietary leases or similar arrangements.
Cost-Plus Contract
A construction contract in which the contract price is equal to the cost of the construction plus a profit allowance to the builder; as opposed to a fixed price contract.
Credit Rating
An evaluation of one’s ability to repay a loan. It is based on current financial situation as well as past performance in debt repayment, taking into account any defaults, and history of slow or delinquent payments.
Credit Report
On every loan transaction we order a credit report to determine your past credit history and your outstanding liabilities.
Debt-To-Income Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two types of calculations: A monthly housing-expense-to-income-ratio and a total obligations-to-income ratio.
Deed in Lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure; also called a voluntary conveyance.
Deferred Interest
When the monthly payments do not cover the interest accruing, the interest left unpaid is deferred to later years by adding it to the unpaid principal balance.
Depreciation
The decline in value of an asset. This can be caused by physical deterioration, functional obsolescence, or economic obsolescence.
Disbursement
The payment of money on a previously agreed to basis.
Discount Points (Points)
The term "point" refers to one percent of the loan amount. For example, one "point" on a $100,000 loan would equal $1,000. On most programs (and with certain limitations), you may pay "points" at the closing to lower the interest rate on your loan. The more points you pay, the lower your rate.
Document Preparation Fee
Occasionally we use outside companies to prepare the loan closing documents. This fee covers the cost of this service.
Downpayment
The difference between the sales price of real estate and the mortgage amount.
Due-On-Encumbrance Provision
A covenant in a multi family mortgage that allows the lender to call the mortgage due and payable if the mortgagor places a subordinate lien against the property without the lender’s permission. It also allows the lender to increase the mortgage interest rate if they approve the placement of a subordinate lien.
Due-On-Sale Provision
A covenant in a conventional mortgage that allows the lender to call the mortgage due and payable if ownership of the mortgage property is transferred without the lender’s permission.
Duplex
Owner occupied property for more than one family
Earnest Money Deposit
Money paid by purchaser of real estate when the buyer and seller reach an oral agreement for the sale of the property to show that the buyer’s offer is being made in “good faith”. Also referred to as the “down payment”.
Easement
Right or interest in the land of another entitling the holder to specific limited use, privilege, or benefit such as laying a sewer, putting up electrical power lines, or crossing the property.
ECOA (Equal Credit Opportunity Act)
ECOA is 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.
Encroachment
An improvement that intrudes illegally upon another’s property.
Encumbrance
Anything that affects or limits the fee simple title to property, such as mortgages, leases, easements, or restrictions.
End Loan
The final mortgage loan that is made to a borrower. It is called the “end loan” to distinguish it from construction loans or other loans that have been made for the purchase, development or construction of the same property. Also referred to as “permanent loan”.
Equity
The difference between fair market value and current indebtedness of the real estate. Usually refers to the amount or percentage of the owner’s interest.
Escrows
Lenders often set up an account, called an escrow or impound account, to hold the tax and insurance portions of your monthly mortgage payment. At closing, the lender collects sufficient money to establish the necessary reserves in this account. The reserves plus the monthly deposits are then held until such time they are used by the lender to pay the tax and insurance bills.
Escrow Account
A segregated trust account in which escrow funds are held for future use.
Estimated Closing Fees
An estimate of the fees that must be paid on or before the closing date by the buyer and/or seller for services, taxes and items necessary to obtain mortgage. These fees will average between 2% and 5% of the loan amount and vary by lender, property location, and type of mortgage.
Express/Courier Fee
This fee covers the cost of the overnight courier fees incurred while processing your file.
Fair Market Value
The price at which property is transferred between a willing buyer and a willing seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.
Fannie Mae
Federal National Mortgage Association (See FNMA definition)
Farmers Home Administration (FmHa)
A government agency established under the Farmers Home Administration Act of 1946 to provide financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
FDIC
Federal Deposit Insurance Corporation; a federally sponsored corporation that administers the federal deposit insurance system.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA does not lend money, nor plan, nor construct housing.
Federal National Mortgage Association (FNMA)
A tax paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. Popularly known as Fannie Mae.
Fee Simple
The absolute ownership of real property giving the owner and his heirs the unconditional power of disposition and other rights.
Filing Fees
The amount charged by public officials in your area for recording your mortgage and other documents.
Finance Charge
Your finance charge is the total of all the interest you would pay over the entire life of the loan, assuming you kept the loan to maturity, as well as all prepaid finance charges. If you pre-pay any principal during your loan, your monthly payments remain the same, but your total finance charge will be reduced.
First Lien
A lien against the property which takes priority over all other liens. A tax lien, for example, is a first lien and takes priority over all other liens…including the mortgage note.
First Mortgage
A real estate loan that creates a primary lien against real property.
Fixed Rate Mortgages
Fixed Rate Mortgages are mortgages on which the same rate of interest is charged for the life of the loan.
Float
Until you request to secure a lender's quoted interest rate, the interest rate will continue to change, or float, due to market fluctuations. Locking or securing a rate protects you from these potential fluctuations from the time your lock is confirmed to the day your lock period expires. You may choose to float your rate up until the time your lender contacts you to schedule your closing. At this time, an interest rate must be secured in order to prepare your closing documents.
Flood Certification Fee
Federal law requires that you obtain flood hazard insurance if your property lies in a flood zone. As part of our evaluation of your property, we engage a flood determination company to tell us whether or not your house lies in a flood zone. The flood certification fee covers the cost. If your house is located in a flood zone, you will be required to purchase Flood Insurance.
Flood Insurance
Insurance specifically insuring for loss by flood damage. Required by lenders (usually banks) in areas designated (federally) as potential flood areas.
Flood Life of Loan Coverage
Flood zone determinations may change from time to time. The "Life of Loan Coverage" fee allows us to track any changes in your property's flood zone status over the life of your loan.
Fully Amortized ARM
An adjustable rate mortgage that has a monthly payment sufficient to amortize the unpaid principal balance, at the interest accrual rate, over the mortgage term.
Government Recording Fee
We pay this fee to your local county recording office for recording our mortgage lien, and in the event of a purchase transaction, the deed which transfers title. Fees for recording vary by county and are set by state and local governments.
Grantee
The Person to whom an interest in real property is conveyed.
Grantor
The person conveying an interest in real property.
Gross Income (Personal)
Normal annual income including overtime that is regular or guaranteed. It may be from more than one source. Salary is generally the principal source, but other income may be significant and stable, and thus qualify.
Guideline Ratios
There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. The second is called the back-end, or bottom ratio, and is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross monthly income.
Home Equity Line of Credit
A home equity line of credit is a credit line that is kept open and restored as you pay off what is owed. An equity line of credit also has a high credit limit similar to a credit card that you are allowed to draw upon as needed.
Home Mortgage
A residential mortgage on a one-to four family property.
Homeowners Association
An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.
Homeowners Insurance
Just like you insure your automobile to protect against theft and damage, you insure your home. Homeowners insurance is required by all lenders to protect their investment, and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home.
HUD
Abbreviation for agency known as The Department of Housing and Urban Development. This agency is responsible for the implementation and administration of government housing and urban development programs. The broad range of programs includes community planning and development housing production and mortgage credit (FHA), equal opportunity in housing, research and technology.
Initial Interest Rate
The original interest rate of the mortgage when it is closed. This rate changes for adjustable rate mortgages.
Installment Debt
Borrowed money that is repaid in several successive payments, usually at regular intervals, for a specific amount and for a specified term, unlike a credit card.
Insurance Binder
A written document proving that the borrower has temporary hazard, flood or title insurance coverage for the property being mortgaged.
Insurance Rate Change Date
The date on which the mortgage interest rate changes for an adjustable rate mortgage.
Interest Rate Change Interval
The period that elapses between interest rate change dates for an adjustable rate mortgage.
Investment Property
Investment property is real property acquired for the specific purpose of realizing a profitable return at some future date. It is property which is held for the immediate and continuing production of income.
Joint Tenancy
An equal undivided ownership of property by two or more persons. The survivor will take the interest upon the death of the other.
Land Contract
An installment contract for sale of land. The seller (vendor) has legal title until paid in full. The buyer (vendee) has equitable title during the contract term.
Late Charge
The additional charge a borrower is required to pay as a penalty if they fail to pay a regular installment when due.
Lender Fees
Lender Fees are fees paid to the lender.
Lender Processing Fee
The lender processing fee covers the cost of analyzing your loan application and compiling and packaging the necessary supporting documentation to close your loan.
Liability Insurance
Insurance coverage that covers claims which arise due to the property owner’s negligence or inappropriate action resulting in bodily injury or property damage to another party.
Lien
A lien hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.
Liquidity
The degree of ease with which an individual’s assets, such as stocks, real estate and U.S. Savings Bonds, may be converted into cash. For example, checking and savings accounts are considered liquid whereas a 401K retirement account would not.
Loan Submission
When the loan package is delivered to a prospective lender for review and consideration of making a mortgage loan.
Loan-To-Value Ratio (LTV)
The relationship between the amount of the mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value or sales price, whichever is lower.
Loss Payable Clause
A clause in an insurance policy that provides payment (in the event of loss) first to the lender in order to pay off or reduce the loan amount.
Manufactured Home
A factory assembled residence built in units or sections that are transported to a permanent site and erected on a foundation.
Margin
The amount that is added to an index value to create the new mortgage interest rate for an adjustable rate mortgage at a specified adjustment time. The margin usually remains the same for the life of the loan and is specified in the note and ARM rider to the note.
Maximum Cash Out
The maximum amount of money you are allowed to get back from your mortgage transaction based on the loan information provided and the amount of equity you have in your home.
Maximum Financing
Any mortgage amount that is within the highest loan-to-value ratio allowed for a specific product.
Maximum Monthly Payment
As part of your Mortgage 1st approval, you are given a maximum monthly payment for which you qualify based on the information you provided. This maximum payment is inclusive of the three major components of a typical mortgage payment: loan principal and interest, taxes, and insurance.
Metes and Bounds
The description in a deed of the land location giving the specific boundaries defined by directions and distances.
Modification
The act of changing any of the terms of the mortgage.
Monthly Mortgage Payment
A monthly mortgage payment typically contains three parts called the PITI (principal & interest, taxes, and insurance). If you pay your taxes and insurance on your own, you pay only principal and interest to your lender.
Monthly Principal and Interest (P&I) Payment
Principal and interest is the dollar portion to repay the loan. All interest which occurs is calculated on the current balance owing. The principal reduces the remaining balance of a mortgage.
Mortgagee
The person or firm to whom property is conveyed as security for a loan made by such person or firm (a creditor).
Mortgagee Clause
A clause attached to a hazard (homeowner’s) policy that stipulates that the mortgagee (lender) receives enough insurance proceeds to pay off the remaining debt in the event of a covered loss.
Mortgage Backed Securities
Bond-type investment securities representing an undivided interest in pools of mortgages or trust deeds. Income from the underlying mortgage is used to pay off the securities.
Mortgage Banker
A firm or individual active in the field of mortgage banking. Mortgage Bankers, as local representatives of regional or national institutional lenders, act as a correspondent between lenders and borrowers.
Mortgage Broker
A firm or individual who brings the borrower and lender together, receiving a commission. A mortgage broker does not retain servicing.
Mortgage Insurance Premium (MIP)
A price paid by borrower for insurance against loss through default with their loan.
Mortgage Interest Rate
The rate of interest in effect for the monthly installment due. For fixed rate mortgages or for adjustable rate mortgages that have an initial fixed rate period, it is the rate in effect during that period
Mortgage Margin
The amount that is added to the index value to establish the mortgage interest rate on each interest rate change date for an adjustable rate mortgage.
Mortgage Note
The note or other evidence of indebtedness for a mortgage loan. The promise to repay.
Mortgage Term
The length of time given to repay the loan.
Negative Amortization
A gradual increase in the mortgage debt that occurs when the monthly installment is not sufficient to cover all the accrued interest. This interest shortage is added to the unpaid principal 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.
No Cash Out Refinance
A refinancing transaction in which the mortgage amount is limited to the sum of the unpaid principal balance of the existing first mortgage plus closing costs (including prepaid items), points, and the amount required to satisfy any mortgage liens that re more than one year old.
Origination Points
A fee that is charged by the lender to originate your loan. The fee is typically set up as a percentage of the loan amount (i.e. a 1 point origination fee is equal to 1% of the loan amount).
PAR
The face value of the mortgage (unpaid principal balance) equals its selling price (100% - there are no discounts or premiums).
Partial Payment
In loan collection, a loan payment that is less than the amount due. Usually, a payment will not be credited until the full payment amount is received by the servicer.
Payment Change Date
The date on which the monthly payment changes for an adjustable rate mortgage. The effective date that a new amount is due from a borrower
Payment Change Interval
The period that elapses between the payment change dates for an adjustable rate mortgage.
Payment Rate
The percentage rate used to calculate the monthly payment when the monthly payment will not fully amortize the mortgage. It differs from the interest accrual rate.
Payment Schedule
The method for disclosing your payment schedule varies by loan type. For fixed rate loans, this section indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates.
Password
A password is a special code made up of letters and numbers that will allow you, and only you, to gain access to your personal account information. The best passwords combine letters (both upper and lower case) and numbers. It is best not to use your address, names of friends or family members, or other easily accessed or guessed words.
PITI
An appreviation, standing for the total of: principal, interest, taxes, and insurance. These are the four costs normally included in a monthly mortgage payment.
Planned Unit Development (PUD)
A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an owner's association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners' association must require automatic, non-severable membership for each individual unit owner, and provide for mandatory assessments.
Points (Discount Points)
The term "point" refers to one percent of the loan amount. For example, one "point" on a $100,000 loan would equal $1,000. On most programs (and with certain limitations), you may pay "points" at the closing to lower the interest rate on your loan. The more points you pay, the lower your rate.
Pre-Paids
Items that are payable at closing. These include: interest from day of closing through the end of the month that the loan closes; first year’s MI premium; first year’s hazard (homeowners) insurance premium; first year’s flood insurance premium (if applicable); escrow reserves for the above items as required by lender. If VA funding fee is not financed it is considered a pre-paid item.
Prepaid Interest
Prepaid Interest is interest on your new mortgage that is paid at closing. The amount of interest will vary from 0 to 30 days, as it is calculated from the date of closing to month end. For example, if the loan closed on March 20th, prepaid interest would be owed from March 20th through March 31st. A normal monthly principal and interest payment would cover interest due for the previous month. If the loan closed on March 20th, the first payment would be due May 1st. The May 1st payment would cover interest due for the month of April.
Prepayment Penalty
A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information.
Prime Rate
The interest rate that commercial banks set as their base lending rate. This rate is set separately by banks and is closely watched as an indicator of general trends in interest rates.
Principal Balance
The outstanding balance of a mortgage, exclusive of interest and any other charges.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is the insurance a borrower is required to pay if they have less than 20% (in some cases 25%) equity in their home. If you are required to pay PMI, the monthly amount must be calculated and included in the proposed mortgage payment and also included when estimating the amount needed to establish your escrow account.
Processing
The preparation of a mortgage loan application and supporting documents for consideration by a lender or insurer.
Property Taxes
The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal.
Proprietary Lease
A lease that a cooperative corporation gives to a tenant-stockholder to cover the unit that he or she will occupy. The lease is called proprietary because the tenant-shareholder is both a shareholder in the landlord cooperative corporation and a tenant under the lease.
Purchase Money Transaction
The acquisition of property through the payment of money or its equivalent.
Qualifying Income Ratio
Ratios are used by lenders to aide in deciding whether to offer an individual a loan. The proposed monthly mortgage payment is compared to the income and all the monthly obligations are compared to the monthly income.
Quitclaim Deed
A deed by which the grantor releases any interest he may have in the real property, without attempting to convey title. The grantor makes no warranty; if he has title, he conveys it; if he does not have title, he is not responsible for failure to convey a clear title, and the grantee has no right of action against him.
Recording
The filing in the county registrar’s office of the details of a properly executed legal document (deed, mortgage, satisfaction of mortgage) thereby making it a part of the public record.
Refinance Transaction
The repayment of a debt from the proceeds of 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.
Rent Free
If you are living with a relative or friend without paying rent, this is considered "rent free".
Requested Cash Out
The amount of money you requested to get back from your mortgage transaction. Remember, your closing costs and escrows will be subtracted from this amount.
Rescission
Cancellation of a contract or transaction. A rescission can occur when all involved parties agree to make the transaction invalid or when a law or rule makes the transaction void. “Right of Rescission” refers to the three days a borrower has to rescind or cancel a refinance transaction. Funding does not occur until the rescission period expires.
Residential Home Mortgage
A mortgage that covers a one to four family dwelling that is used to provide living accommodations.
RESPA (Real Estate Settlement Procedures Act)
RESPA is a federal law that requires lenders to provide home mortgage borrowers with information of known or estimated settlements costs. RESPA also limits the amount of lenders may require to be held in an escrow account for real estate taxes and the insurance, requires the disclosure of known settlement costs to both buyers and sellers by the person conducting the settlement, and outlaws certain referral fees.
Reverse Annuity Mortgage
An unusual mortgage where an individual receives monthly payments from a lender for a short period of time, usually less than ten years. At the end of the mortgage, the owner agrees to refinance the loan or to sell the property to pay off the loan. Such payments from the lender are often beneficial for retired individuals who plan to sell their home within 5 or 10 years.
Revolving Debt
An arrangement for credit in which the customer receives purchases or services on an ongoing basis prior to payment. Repayment is usually at regular intervals but not for a specified amount or term. Example: credit cards.
Right of First Refusal
A provision or agreement given by a property owner to a potential buyer, giving the buyer the opportunity to buy (or lease) a property before it is offered to others.
Satisfaction of Mortgage
A legal document which proves that a loan is paid off. It is given to the borrower by the lender after final payment has been received.
Second Mortgage
A second mortgage is a lien in which you are given a lump sum amount which you pay off in installments over a specified period of time. When the second mortgage is paid off, the obligation is considered closed. Home improvement and debt consolidation loans are considered second mortgages.
Secondary Financing
Financing real estate with a loan, or loans, that are subordinate to the first mortgage or first trust deed.
Secondary Mortgage Market
An unorganized market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.
Security
This refers to the address of the property being pledged as security for your loan.
Security Instrument
A legal document that is recorded and held by the lender (ie; mortgage). It pledges the title of a property as insurance to the lender or repayment of the debt.
Servicing
The duties of the mortgage banker as a loan correspondent as specified in the servicing agreement for which a fee is received. The collection for an investor of payments, interest, principal, and trust items such as hazard insurance and taxes, on a note by the borrower in accordance with the terms of the note. Servicing also consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency, delinquency loan follow-up and loan analysis.
Settlement Costs
A term sometimes used interchangeable with closing costs. Includes closing costs, the down payment and any pre-paid items.
Shipping
Preparing and sending the complete package of mortgage documents to the lender.
Single Family
It is a residence that houses one family.
Start Rate
An arbitrarily created initial interest rate for an adjustable rate mortgage, which does not follow the standard practice of determining the interest rate by adding the applicable index value and the specified margin. This rate will be lower than the prevailing market rate.
Subject Property
The home that you intend to obtain the mortgage on is called the subject property. If you are doing a refinance, the subject property is typically the address of the home you are living in now. If you want to refinance your second home, list the address of that home as the subject property. If you are purchasing a home, the subject property is the address of the home you are buying.
Subordination
Occurs when a party agrees in writing that its claim on a property is inferior to the claim of another.
Survey
A measurement of land, prepared by a registered land surveyor showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements.
Survey Fee
A survey is a bird's eye sketch of your property which shows the boundary lines of your lot, and details any encroachments between you and your neighbors. The survey fee covers the cost of the survey.
Sweat Equity
The contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
Tax Lien
A claim on an individual’s property by local, state or federal government for the amount of due and unpaid taxes.
Tax Service Fee
In some cases, we engage a third party to monitor and/or handle the payment of your property tax bills. The Tax Service Fee covers the cost of this service.
Teaser Rate
A term used in adjustable rate mortgage. It refers to the initial interest rate that is considerably lower than the current market rate which is determined by adding the index to the margin.
Tenancy
A holding of real estate under any kind of right of title. Used alone, tenancy implies a holding under a lease.
Tenant
One who is not the owner but occupies real property with the consent of the owner. The tenant is entitled to exclusive possession and enjoyment of the property for a specified period of time and payment of rent as specified in a lease.
Term
The period of time between the commencement date and termination of a note, mortgage, legal document, or other contract
Third Party Fees
Fees paid to a third party for services requested by the lender on your behalf.
Title
Individuals who will have legal ownership in the property are considered "on title" and will sign the mortgage and other documentation.
Title Binder
A temporary title insurance policy. The title binder insures the purchaser’s right to property ownership for an interim period only. It must be replaced with a permanent title insurance policy,
Title Company Closing Fee
This fee is paid to the title insurance company which conducts your closing and handles the transfer of funds among the parties.
Title Defect
Any legal right to property claimed by a person other than the owner.
Title Exception
An exception appearing in a title policy against which the company does not insure.
Title Insurance
Title insurance protects a lender against any title dispute that may arise over a particular property. It is required to close on your home.
Title Insurance Premium
In order to determine that the property is properly owned and not subject to any unacceptable liens, we require a search of the local real estate records, and a title insurance policy insuring the lender that there are no defects in title. The Title Insurance Premium covers the cost of the search and the insurance. The cost of title insurance varies both by state and by county.
Title Search
An examination of public records, laws and court decisions to disclose the past and current facts regarding ownership of real estate.
Total Payments
This is the total amount you will have paid over the life of the loan for principal, interest and prepaid finance charges, assuming you keep the loan to maturity and made only the required monthly payments.
Town House
A residential unit on a small lot that shares at least one exterior wall with others similar units. The title to the entire lot belongs to an individual buyer, and in some cases, the buyer also receives a fractional interest in the common areas.
Transfer of Ownership
Any means by which the ownership of a property changes hands.
Transfer Tax
State and local taxes charged on the price of property for transferring the property from one person to another.
Treasury Index
The index that is used to determine interest rate changes for certain ARM programs. It is based on the results of auctions that the U.S. Treasury holds for its treasury bills and securities.
Underwriting
In mortgage lending, the process of approving or denying a loan based on an evaluation of the property and the applicant’s ability to repay the loan.
Underwriting Fee
The underwriting fee covers the cost of evaluating your entire loan package, including your credit report and appraisal, to determine whether we can approve your loan request.
Uniform Commercial Code (UCC)
A comprehensive codification and modernization of commercial law (but excluding law dealing with real property).
VA
Abbreviation for a government agency known as the Department of Veteran Affairs.
VA Mortgage
A mortgage that is guaranteed by Veterans Adminstration.
Variable Rate Mortgage
A mortgage agreement that allows for adjustment of the interest rate in keeping with the fluctuating market and terms agreed on in the note.
Veterans Administration (VA)
An independent agency of the federal government created by the Servicemen’s Readjustment Act of 1944 to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.
Waiver of Lien
Normally, someone who supplies labor or materials, such as a contractor, holds his legal claim to the value of those materials until he is paid for them. When a supplier signs a waiver or lien, he surrenders that claim against the property, and his right to force payment through it.
Warranty Deed
A deed in which the grantor or seller warrants or guarantees that good title is being conveyed, as opposed to a quit-claim deed that contains no representation, or warranty as to the quality of title being conveyed.
Wire Transfer Fee
On occasion, we will transmit funds to you, your prior lender, and/or the title insurance company conducting your closing via the inter-bank wire transfer system. This fee covers the cost of such transfer.
Without Recourse
A qualified endorsement of a negotiable instrument that protects the endorser from liability.
Yield
Ratio of income from an investment to the total cost of the investment over a given period of time. Return on investment.
Zoning
The type of land usage established by local governments. The basic zoning categories are residential, commercial, and industrial.