Real Estate & Housing

Real Estate Financing Terms

Adjustable rate mortgage (AML’s)
A type of mortgage rate loan that allows the interest rate to change periodically up or down, to more closely coincide with current rates. Adjustments are usually made once or twice a year.

Amortization
The reduction of a debt over time by making periodic payments (usually monthly). Installments are applied to both the interest and the principal (the outstanding amount of the mortgage debt).

Amortization Schedule
An accounting of the individual payments toward an amortized loan, broken down to indicate the amount applied to the interest and principal for each payment.

Annual Percentage Rate (A.P.R.)
The yearly interest percentage of a loan, expressed as the actual rate of interest paid. Disclosure of the A.P.R. is required under the federal truth in lending statutes.

Assumption of Mortgage
Agreement by which the mortgage holder permits a buyer to take over all responsibility for an existing note. The terms of the assumption will determine if the seller is released from his obligation.

Balloon Mortgage
A mortgage for a fixed term shorter than necessary to fully repay the debt. As a result, the remaining amount of principal is due at the maturity of the loan. The principal sum, due at maturity, is known as the "balloon".

Blanket Mortgage
A mortgage covering more than one parcel of property, such as all lots in a subdivision.

Bridge Loan
An interim loan, generally used when the purchaser needs to have more time before taking the long term financing. Bridge loans are commonly used when the purchaser has not sold an existing property before closing on a new one. The bridge loan is generally paid off from the sale proceeds of the existing property.

Cashier’s Check
A check drawn on a bank’s own funds rather than those of a depositor and therefore do not require a holding period. Funds being deposited for conversion to a cashier’s check may require a holding period. Buyers should check with their lending institution well in advance to confirm the policy.

Certified Check
A check drawn on an individual’s account and guaranteed by the bank. Funds are held in the account to pay the check and no checks drawn on that account that would impede payment of the certified check will be honored. Banks will not honor a stop payment of a certified check.

Closing Costs
Incidental expenses that the buyer must pay at the time of the closing in addition to the down payment which may include points, title charges, mortgage insurance premium, prepayments for property taxes, and homeowners insurance.

Conventional Loan
A mortgage not obtained under one of the government loan programs (such as F.H.A. or V.A.).

Down payment
The down payment is the cash portion paid by the borrower from his or her own funds. The down payment amount, plus the mortgage, equals the purchase price of a property.

Fair Credit Reporting Act
A federal law gives one the right to see his or her own credit report so that errors may be corrected. Buyers intending to obtain financing would be advised to check the status of their credit well in advance of closing to allow sufficient time to correct any possible adverse statements.

Fannie Mae
Nickname for the Federal National Mortgage Association, FNMA is a public corporation originally established by the federal government. Fannie Mae purchases mortgage loans from lenders, and thus, is a major source of funds for mortgage companies.

Farmer Home Administration (FmHA)
The federal agency which makes, participates, and insures loans for rural housing and farms.

Federal Home Loan Bank Board
The board which charters and regulates the federal savinngs and loan associations, as well as controlling the system of Federal Home Loan Banks.

Federal Home Loan Banks
These banks were created under the Federal Home Loan Bank Act of 1932 to keep a permanent supply of money available for home financing. Savings and loans, insurance companies, and other similar companies making long term mortgage loansmay become members of the system.

FHA or Federal Housing Administration
Part of the US Department of Housing and Urban Development (HUD) -- established in 1934 to encourage improvement in housing standards and communities. The FHA insures mortgage loans.

FHA Mortgage
A mortgage loan insured by the Federal Housing Administration.

GNMA (Ginnie Mae)
The Government National Mortgage Association, working with the F.H.A., offers assistance in obtaining mortgages and purchases mortgages on the secondary market.

Grace Period
A period of time, past the due date for a payment, during which time a payment may be made and not be considered delinquent.

Graduated Payment Mortgage
A mortgage with increasingly higher payments over the term of the loan. This type of mortgage allows for lower initial payments that increase as the buyers income (in theory at least) increases.

Junior Mortgage
Any mortgage of lesser priority than a first mortgage.

Late Charge
Penalty for failure to pay a mortgage installment on time.

Loan Commitment
A written promise to make or insure a loan for a specific amount and on specific terms.

Loan Origination Fee
A one-time fee charged by the lender for evaluating, preparing and submitting a proposed mortgage loan.

Loan Ratio (Loan-To-Value-Ratio; LTV)
The ratio, expressed as a percentage, of a mortgage loan principal to the property's appraised value or its sales price, whichever is lower. Loan-to-value ratios vary depending upon the individual lender's policy.

Lock-In Rate
A commitment made by a lender to make a mortgage loan at a specified rate, pending loan approval, on or prior to a specified date.

Mortgage
A lien on real estate given by the buyer to secure repayent of money borrowed to purchase the real estate.

Mortgage Broker
An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money. Some mortgage brokers may also handle collections and disbursements.

Mortgage Banker
A company provding mortgage financing through its own sources of funds.

Mortgage Company
A company authorized to service real estate loans. Service fees are charged.

Mortgagee
The party lending the money and receiving the mortgage.

Mortgage Insurance
A policy written by an independent mortgage insurance company that provides protection for the lender in case of default and/or guarantees repayment of the loan if the borrower becomes disabled or dies.

Mortgagor
The party borrowing the money and gives the mortgage.

Negative Amortization
Created when the loan payment is less than the interest alone. The unpaid interest amount is added to the outstanding balance and the amount owed continues to increase.

Prepaid Interest
Interest paid before it actually becomes due.

Prepaid Items
Those expenses of a property which are paid in advance and are usually prorated upon the sale. These items may include insurance, rents, taxes, etc.

Prepayment Penalty
A penalty under the tems of a mortgage that is imposed for paying off the balance before its due date.

Prepayment Privilege
The right to prepay a loan, either in part or in full, without penalty.

Private Mortgage Insurance (PMI Insurance)
Insurance issued to a lender to protect it against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios (generally in excess of 80%). The borrower pays the premiums.

PITI Payment
A loan payment that combines Principal, Interest, Taxes and Insurance.

Point
An amount equal to one percent of the loan amount paid to a lender for making the loan. A lender may charge the borrower several points in order to provide the loan.

Purchase Money Mortgage
Most common use of the term indicates a mortgage given from the buyer to the seller to secure all or a portion of the purchase price. Most frequently referred to as "Seller Financing".

Rate Index
The index used to determine the interest rate of an adjustable mortgage loan. An example is the chage in U.S. Treasury securities (T-Bills) with a 1 year maturity.

Secondary Financing
A loan secured by a mortgage that is junior to another mortgage.

Secondary Mortgage Market
The buying and selling of first mortgages by banks, insurance companies, government agencies, etc. The mortgages are usually sold at a discount but could be sold at full value or above.

Second Mortgage
A mortgage that ranks after a first mortgage in priority.

Take Out Commitment
Agreement by a lender to place a long term loan on real property after completion of construction.

Take Out Loan
The pemanent, or long term, financing of real estate after completion of construction.

VA loan
A mortgage loan guaranteed by the US Department of Veterans Affairs against loss to the lender, and made through a private lender.

Wrap-Around Mortgage
A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage.

[Real Estate in Indian River County]

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