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Real Estate

Terms

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down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Home Equity Conversion Mortgage (HECM)
"Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. 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."
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."
liquid asset
A cash asset or an asset that is easily converted into cash.
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. Loans against 401K plans are an acceptable source of down payment for most types of loans.
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 earnest money deposit is put into escrow until delivered to the seller when the transaction is closed."
cash-out refinance
"When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a ""cash out refinance."" (top)"
homeowner's warranty
"A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay."
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. (top)
government loan (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). Mortgages that are not government loans are classified as conventional loans.
home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
deed
The legal document conveying title to a property.
eviction
The lawful expulsion of an occupant from real property.
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."
call option
Similar to the acceleration clause.
delinquency
"Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a ""late fee"" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus."
co-borrower
IAn additional individual who is both obligated on the loan and is on title to the property.
no cash-out refinance
"A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is caculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage. Often referred to as a ""rate and term refinance."""
life cap
"For an adjustable-rate mortgage (ARM), a limit on the amount that the enterest rate can increase or decrease over the life of the mortgage."
default
"Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default."
broker
"Broker has several meanings in different situations. Most Realtors are ""agents"" who work under a ""broker."" Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so."
encroachment
An improvement that intrudes illegally on another's property.
escrow analysis
"Once each year your lender will perform an ""escrow analysis"" to make sure they are collecting the correct amount of money for the anticipated expenditures."
bankruptcy
"By filing in federal bankruptcy court; an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types; but the most common for an individual seem to be a ""Chapter 7 No Asset"" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an ""A"" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt."
late charge
"The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days."
homeowner's insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
mortgage
"A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds."
margin
The difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
certificate of deposit index
One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit. (top)
bond market
"Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well."
mortgagee
The lender in a mortgage agreement.
asset
"Items of value owned by an individual. Assets that can be quickly converted into cash are considered ""liquid assets."" These include bank accounts; stocks; bonds; mutual funds; and so on. Other assets include real estate; personal property; and debts owed to an individual by others."
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.
lock-in period
The time period during which the lender has guaranteed an interest rate to a borrower.
lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
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."
lock-in
An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
appreciation
The increase in the value of a property due to changes in market conditions; inflation; or other causes.
multidwelling units
"Properties that provide separate housing units for more than one family, although they secure only a single mortgage."
firm commitment
A lender's agreement to make a loan to a specific borrower on a specific property.
acceleration clause
A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.
adjustable-rate mortgage (ARM)
A mortgage in which the interest changes periodically; according to corresponding fluctuations in an index. All ARMs are tied to indexes.
depreciation
"A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income."
note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
appraised value
An opinion of a property's fair market value; based on an appraiser's knowledge; experience; and analysis of the property. Since an appraisal is based primarily on comparable sales; and the most recent sale is the one on the property in question; the appraisal usually comes out at the purchase price.
creditor
A person to whom money is owed.
easement
A right of way giving persons other than the owner access to or over a property.
mortgage insurance (MI)
"Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves ""No MI"" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value."
closing
"This has different meanings in different states. In some states a real estate transaction is not consider ""closed"" until the documents record at the local recorders office. In others, the ""closing"" is a meeting where all of the documents are signed and money changes hands."
conventional mortgage
Refers to home loans other than government loans (VA and FHA).
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 and other liens.
balloon payment
The final lump sum payment that is due at the termination of a balloon mortgage.
community property
"In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area."
first mortgage
"The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions."
biweekly mortgage
"A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender."
amortization schedule
A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
HUD-1 settlement statement
"A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the ""closing statement"" or ""settlement sheet."""
Government National Mortgage Association (Ginnie Mae)
"A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)"
Fair 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.
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. [Top]
deed-in-lieu
"Short for ""deed in lieu of foreclosure,"" this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record."
discount points
"In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any ""points"" paid in addition to the one percent loan origination fee. A ""point"" is one percent of the loan amount."
hazard insurance
"Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards."
mortgage broker
"A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships."
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."
note rate
The interest rate stated on a mortgage note.
commission
"Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.(top)"
negative amortization
"Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called ""deferred interest."" The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization."
loan-to-value (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
legal description
"A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony."
exclusive listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
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.
chain of title
An analysis of the transfers of title to a piece of property over the years.
bill of sale
A written document that transfers title to personal property. For example; when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs; the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.
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.[Top]"
credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date. (top)
common area assessments
In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas. (top)
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.
balloon mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example; a loan may be amortized as if it would be paid over a thirty year period; but requires that at the end of the tenth year the entire remaining balance must be paid.
fee simple
The greatest possible interest a person can have in real estate.
loan
A sum of borrowed money (principal) that is generally repaid with interest.
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."
cost of funds index (COFI)
"One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank."
cap
"Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as ""caps."" Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap."
grantee
The person to whom an interest in real property is conveyed.
deed of trust
"Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing."
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. These are often found in resort areas like Hawaii."
appraisal
A written justification of the price paid for a property; primarily based on an analysis of comparable sales of similar homes nearby.
certificate of deposit
A time deposit held in a bank which pays a certain amount of interest to the depositor. (top)
contract
An oral or written agreement to do or not to do a certain thing.
adjustment date
The date the interest rate changes on an adjustable-rate mortgage.
earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
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. (top)"
assessed value
The valuation placed on property by a public tax assessor for purposes of taxation.
Certificate of Reasonable Value (CRV)
"Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV."
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)."
merged credit report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard factual credit report.
Certificate of Eligibility
A document issued by the Veterans Administration that certifies a veteran's eligibility for a VA loan.(top)
comparable sales
"Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as ""comps."""
loan origination
How a lender refers to the process of obtaining new loans.
Fannie Mae (FNMA)
"The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library."
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."
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.
joint tenancy
"A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety."
assumption
The term applied when a buyer assumes the seller's mortgage.
assessor
A public official who establishes the value of a property for taxation purposes.
collection
"When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to ""collection."" As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the 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.
clear title
A title that is free of liens or legal questions as to ownership of the property.
assignment
When ownership of your mortgage is transferred from one company or individual to another; it is called an assignment.
mortgage life and disability insurance
"A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days."
encumbrance
"Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions."
condominium
"A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership."
lease
A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time. [Top]
assessment
The placing of a value on property for the purpose of taxation.
fixture
Personal property that becomes real property when attached in a permanent manner to real estate.
debt
An amount owed to another.
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 deed, release, or court action."
collateral
"In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust."
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."
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 mortgage debt.
convertible ARM
An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.
appraiser
An individual qualified by education; training; and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders; most are independent.
closing statement
See Settlement Statement.
escrow disbursements
"The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due."
fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
jumbo loan
"A loan that exceeds Fannie Mae's and Freddie Mac's loan limits, currently at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans."
loan officer
"Also referred to by a variety of other terms, such as lender, loan representative, loan ""rep,"" account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution."
credit history
A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.
home equity line of credit
"A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount."
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.
modification
"Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification."
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. Other states use non-judicial foreclosure.
maturity
"The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.[Top]"
mortgage banker
"For a more complete discussion of mortgage banker, see ""Types of Lenders."" A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply this term to themselves, whether they are true mortgage bankers or simply mortgage brokers or correspondents."
grantor
The person conveying an interest in real property.
condominium conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
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."
common law
An unwritten body of law based on general custom in England and used to an extent in some states.
escrow account
"Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner's insurance when they come due. The lender pays them with your money instead of you paying them yourself."
amortization
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan; with the remainder being applied to the principal. Over time; the interest portion decreases as the loan balance decreases; and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
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."
notice of default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.
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."
examination of title
The report on the title of a property from the public records or an abstract of the title.
loan servicing
"After you obtain a loan, the company you make the payments to is ""servicing"" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services."
application
The form used to apply for a mortgage loan; containing information about a borrower's income; savings; assets; debts; and more.
FHA mortgage
"A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan."
assumable mortgage
"A mortgage that can be assumed by the buyer when a home is sold. Usually; the borrower must ""qualify"" in order to assume the loan."
annual percentage rate (APR)
This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing; expressed as a percentage. It works sort of like this; but not exactly; so only use this as a guideline: deduct the closing costs from your loan amount; then using your actual loan payment; calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount; the APR is always higher than the actual note rate on your loan.
no-cost loan
"Many lenders offer loans that you can obtain at ""no cost."" You should inquire whether this means there are no ""lender"" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a ""no-point"" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it."
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.
bridge loan
"Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property."
flood insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
closing costs
"Closing costs are separated into what are called ""non-recurring closing costs"" and ""pre-paid items."" Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. ""Pre-paids"" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application."
deposit
"A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an ""earnest money deposit."""
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. It is usually part of a homeowner's insurance policy.
lender
"A term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as ""lenders."""
mortgagor
The borrower in a mortgage agreement.[Top]

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