Glossary

Lending Terms & Definitions...

 

  • Adjustable Rate Mortgage (ARM) - A loan that allows the lender to adjust the borrower's interest rate and payments at prescribed times and with prescribed limits. Lower interest rates are customary.
  • Amortized LoanThe periodic reduction of the principle balance of your loan which occurs as you make your monthly payments.
  • AppraisalAn estimate of real estate value, usually issued to the standards of the FHA, VA, FNMA.

 

  • Closing CostsExpenses incurred in the closing of a real estate or mortgage transaction. The purchaser may have to place a sum of money in escrow for closing.
  • Conventional MortgageA loan neither insured by the FHA nor guaranteed by the VA.

 

  • EquityThe difference between the market value of property and the homeowner's indebtedness.
  • Escrow - That portion of a mortgagor's monthly payment held by the lender to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due.

 

  • FHA - A division of the Department of Housing and Urban Development whose main activity is the issuing of residential mortgage loans made by private lenders.
  • Fixed Rate Mortgage - A loan that fixes the interest rate at a prescribed rate for the duration of the loan.
  • Freddie Mac - Nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
  • Fannie Mae - Nickname for Federal National Mortgage Association (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.

 

  • InvestorThe holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.

 

  • Lease Purchase AgreementBuyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.
  • Loan to Value RatioThe ratio of the mortgage loan principal (amount borrowed) to the property's appraised value (selling price).

 

  • Mortgage Deed of TrustPledge of real property to secure a debt by written instrument given by the mortgagor.
  • Mortgage Insurance Premium (MIP)The consideration paid by a mortgagor for mortgage insurance to FHA. This insurance protects the investor from possible loss in the event of a borrower's default on a loan.
  • MortgageeThe lender
  • MortgagorThe borrower

 

  • NoteA written promise to repay a certain amount of money.

 

  • Origination FeeA fee paid at closing for origination of the loan.

 

  • PointOne percent of the loan amount.
  • PrepaidsA sum of money placed in escrow to cover accrued real estate taxes and insurance.
  • Prepayment PenaltyA fee paid to the Mortgagee for paying the mortgage before it becomes due.
  • Private Mortgage Insurance (PMI)Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

 

  • Second LienAn additional loan imposed on property with a first mortgage. Generally at a higher interest rate and shorter terms than a 'first' mortgage.
  • SurveyPerformed by a registered surveyor, this document depicts the boundary lines of the property and reflects that there are no encroachments, protrusions or easements which affect the liability or marketability of the property.

 

  • TitleOften used interchangeably with the word ownership. It indicates the accumulation of all rights in property; the owners and others.
  • Title Policy or Title InsuranceAn insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.

 

  • VAThe VA home loan guarantee program is designed to encourage lenders to offer a long term low down payment mortgage to eligible veterans by guaranteeing the lender against loss.