Amortization - The
gradual reduction of debt by means of periodic payments sufficient to pay
principal and interest and thereby liquidate the debt.
ARM - Adjustable Rate Mortgage. A loan where the
interest rate can change according to the index, caps, and
margin.
Appraisal - An unbiased,
professional estimate of a property's value based on style, appearance,
quality of construction, improvements, usefulness, and the comparable value of nearby
properties.
Balloon
Mortgage - A short-term loan,
usually 5 to 7 years, that features a fixed interest rate, and a final
large balloon payment for the balance of the mortgage.
Borrower - A person who receives funds in the form of
a loan with the obligation of repaying the loan in full with interest, if
applicable.
Broker - One who, for a commission or fee, brings
parties together and assists in negotiating contracts between them. In
real estate transactions, the broker usually brings together the buyer and
the seller.
Caps -
The maximum or minimum amount by which the interest rate on an adjustable
rate mortgages can change over each adjustment and over its life. For
example, a 2/6 cap means that the ARM cannot adjust more than 2% up or
down each adjustment, or 6% from the start rate during its life.
Chattel - Personal Property.
Closing - The final settlement of the transfer of
property. Involves the buyer's signing the mortgage note and an exchange
of title.
Closing
Agent - Assures that all documentation related to the sale of a
house has been completed properly, including the title search and title
insurance. The closing agent explains all closing documents to the buyer
and the seller, obtains their signatures where necessary, and records the
documents.
Closing
Costs - Fees and other charges paid by the buyer and seller at
closing.
Closing
Statement - A financial disclosure giving an account of all funds
received and expected at the closing, including the escrow deposits for
taxes, hazard insurance, and mortgage insurance.
CO-Borrower - The person who is sharing the mortgage
responsibility with the borrower.
Contingency - A clause within an Offer to Purchase or
within the Contract for Sale that requires a certain condition be met
before proceeding to closing.
Contract - An agreement between two or more parties to
do or not to do a particular thing.
Contract for
Sale (Conditional Sale Contract) - A sales contract whereby the
borrower has possession of the property, but seller retains ownership of
the property until the buyer has fulfilled the obligations put forth in
the contract.
Conventional
Mortgage - A mortgage not insured by the government, unlike FHA and
VA loans that are insured by the government.
Counter
Offer - The offer made by one party (buyer or seller) in response to
an offer presented by the other.
Credit
Report - A report to a prospective lender on the credit standing of
a prospective borrower, used to help determine credit
worthiness.
Debt-To-Income
Ratio - Long-term debt expenses
as a percentage of monthly income.
Deed -
The instrument that transfers title from the seller to the
buyer.
Down
Payment - The buyer's payment to the seller at closing for a
percentage of the purchase price required by the buyer's mortgage
loan.
Earnest
Money - Money paid by the buyer
to the seller at the time the Offer to Purchase is presented. Generally,
earnest money is applied to the purchase price.
Equity -
The homeowner's interest in a property. It is the difference between fair
market value and the current amount the owner owes on the
property.
Fair Market
Value - The price at which a 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.
FHA- Federal
Housing Administration - A division of the Department of Housing and
Urban Development whose main activity is the insuring of residential
mortgage loans made by private lenders.
FHLMC- Federal
Home Loan Mortgage Corporation - A private corporation created by
Congress to support the secondary mortgage market. It sells participation
certificates secured by pools of conventional mortgage loans, their
principle and interest guaranteed by the federal government through FHLMC.
Popularly known as Freddie Mac.
First
Mortgage - A mortgage that is a first lien on the property pledged
as security.
FNMA- Federal
National Mortgage Association - A private corporation created by
Congress to support the secondary mortgage market. FNMA sells
mortgage-backed securities backed by pools of conventional loans. The US
government backs payment of principal and interest on these securities.
Popularly known as Fannie Mae.
Gross Monthly
Income - The amount of consistent and stable income that an
individual receives each month, averaged over a period of time. This
amount includes overtime pay, bonuses, commissions, and income from
dividends and interest, provided that the individual can show a consistent
history of receiving such income.
Hazard
Insurance - A contract whereby, for an agreed premium, one party
undertakes to compensate the other for loss on a specific subject by
specified hazards, such as acts of God or war.
Homeowner's
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.
Housing Expense
Ratio - A homeowner's monthly housing expense as a percentage of
their monthly income.
Index - A
published financial benchmark used to help determine the interest rate for
an adjustable rate mortgage on its adjustment. The margin is added to
it.
Interest - Money paid for the use of money- that is;
money paid for a loan.
Loan-To-Value
Ratio - The relationship between the amount of a home loan and the
total value of the property. For example, if you receive a loan of $95,000
on a home that costs $100,000, the loan-to-value ratio is 95%.
Margin -
The amount added to the index to help determine the new interest rate on
an adjustable rate mortgage.
Mortgage
Insurance - A policy that allows mortgage lenders to recover part of
their financial losses if a borrower fails to fully re-pay a loan.
Mortgage insurance makes it possible to buy a home with as little as 5%
down payment.
Offer To
Purchase - A legally binding, written contract that declares how
much a buyer will pay for a house, provided certain conditions are
met.
Origination
Fee - Similar to a point, it is the fee paid to lenders for
originating the loan.
PITI-
Principle, Interest, Taxes and Insurance - the four main parts of a
monthly mortgage payment.
Planned Unit
Development (PUD) - A subdivision having lots of areas owned in
common and reserved for the use of some or all of the owners of the
separately owned lots.
Points or
Discount Points - A fee paid to lenders to lower the interest rate
on the mortgage. One point equals one percent of the total mortgage
amount.
Pre-Approval - Obtaining loan approval, by having the
loan processed and underwritten, before an Offer to Purchase has been
accepted by a seller.
Pre-Qualify - Ability to meet a lender's mortgage
approval requirements.
Qualify -
Ability to meet a lender's mortgage approval requirements.
Servicer - After a mortgage loan closes, the loan
servicer collects the payments, manages escrow accounts, pays taxes and
insurance, and manages delinquent payments. Lenders may often sell or
"release" servicing to another business, which means that a homebuyer will
not necessarily send house payments to the original lender.
Title -
The right of ownership and possession of a property.
Title
Insurance - A policy that protects a buyer against errors, omissions
or defects in the title of the property.
Veteran's
Administration (VA) - An independent agency of the Federal
Government created in 1930. 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.
Equal Housing Opportunity | Licensed by The Texas Savings & Loan Department #3513