The right of the
mortgagee (lender) to demand the immediate repayment of
the mortgage loan balance upon the default of the
mortgagor (borrower), or by using the right vested in
the Due-on-Sale Clause.
Adjustable rate
mortgage (ARM)
Is a mortgage in which
the interest rate is adjusted periodically based on a
pre-selected index. Also sometimes known as the re
negotiable rate mortgage, the variable rate mortgage or
the Canadian rollover mortgage.
Adjustment interval
On an adjustable rate
mortgage, the time between changes in the interest rate
and/or monthly payment, typically one, three or five
years, depending on the index.
Amortization
Means loan payment by
equal periodic payment calculated to pay off the debt at
the end of a fixed period, including accrued interest on
the outstanding balance.
Annual percentage
rate (A.P.R.)
Is a interest rate
reflecting the cost of a mortgage as a yearly rate. This
rate is likely to be higher than the stated note rate or
advertised rate on the mortgage, because it takes into
account point and other credit cost. the APR allows home
buyers to compare different types of mortgages based on
the annual cost for each loan.
Appraisal
An estimate of the value
of property, made by a qualified professional called an
"appraiser".
Assessment
A local tax levied
against a property for a specific purpose, such as a
sewer or street lights.
Assumption
The agreement between
buyer and seller where the buyer takes over the payments
on an existing mortgage from the seller. Assuming a loan
can usually save the buyer money since this is an
existing mortgage debt, unlike a new mortgage where
closing cost and new, probably higher, market-rate
interest charges will apply.
Balloon (payment)
mortgage
Usually a short-term
fixed-rate loan which involves small payments for a
certain period of time and one large payment for the
remaining amount of the principal at a time specified in
the contract.
Blanket Mortgage
A mortgage covering at
least two pieces of real estate as security for the same
mortgage.
Borrower
(Mortgagor)
One who applies for and
receives a loan in the form of a mortgage with the
intention of repaying the loan in full
Broker
An individual in the
business of assisting in arranging funding or
negotiating contracts for a client buy who does not loan
the money himself. Brokers usually charge a fee or
receive a commission for their services.
Buy-down
When the lender and/or
the home builder subsidized the mortgage by lowering the
interest rate during the first few years of the loan.
While the payments are initially low, they will increase
when the subsidy expires.
Cash Flow
The amount of cash
derived over a certain period of time from an
income-producing property. The cash flow should be large
enough to pay the expenses of the income producing
property (mortgage payment, maintenance, utilities,
etc.)
Caps (interest)
Consumer safeguards
which limit the amount the interest rate on an
adjustable rate mortgage may change per year and/or the
life of the loan.
Caps (payment)
Consumer safeguards
which limit the amount monthly payments on an adjustable
rate mortgage may change.
Certificate of
Eligibility ,
The document given to
qualified veterans which entitles them to VA guaranteed
loans for homes, business, and mobile homes.
certificates of eligibility may be obtained by sending
DD-214 (Separation Paper) to the local VA office with VA
form 1880 (request for Certificate of Eligibility)
Certificate of
Reasonable Value (CRV)
An appraisal issued by
the Veterans Administration showing the property's
current market value
Certificate of
veteran status
The document given to
veterans or reservists who have served 90 days of
continuous active duty (including training time) It may
be obtained by sending DD 214 to the local VA office
with form 26-8261a (request for certificate of veteran
status. This document enables veterans to obtain lower
down payments on certain FHA insured loans).
Closing
The meeting between the
buyer, seller and lender or their agents where the
property and funds legally change hands. Also called
settlement. closing costs usually include an origination
fee, discount points, appraisal fee, title search and
insurance, survey, taxes, deed recording fee, credit
report charge and other costs assessed at settlement.
The cost of closing usually are about 3 percent to 6
percent of the mortgage amount.
Commitment
A promise by a lender to
make a loan on specific terms or conditions to a
borrower or builder. A promise by an investor to
purchase mortgages from a lender with specific terms or
conditions. an agreement, often in writing, between a
lender and a borrower to loan money at a future date
subject to the completion of paperwork or compliance
with stated conditions.
Construction loan
A short term interim
loan to pay for the construction of buildings or homes.
These are usually designed to provide periodic
disbursements to the builder as he progresses.
Contract sale or
deed:
A contract between
purchaser and a seller of real estate to convey title
after certain conditions have been met. It is a form of
installment sale.
Conventional loan
A mortgage not insured
by FHA or guaranteed by the VA.
Credit Report
A report documenting the
credit history and current status of a borrower's credit
standing.
Debt-to-Income Ratio
The ratio, expressed as
a percentage, which results when a borrower's monthly
payment obligation on long-term debts is divided by his
or her gross monthly income. See housing
expenses-to-income ratio.
Deed of trust
In many states, this
document is used in place of a mortgage to secure the
payment of a note.
Default
Failure to meet legal
obligations in a contract, specifically, failure to make
the monthly payments on a mortgage.
Deferred interest
When a mortgage is
written with a monthly payment that is less than
required to satisfy the note rate, the unpaid interest
is deferred by adding it to the loan balance.
amortization
Delinquency
Failure to make payments
on time. this can lead to foreclosure.
Department of
Veterans Affairs (VA)
An independent agency of
the federal government which guarantees long-term,
low-or no-down payment mortgages to eligible veterans.
Discount Point
see point
Down Payment
Money paid to make up
the difference between the purchase price and the
mortgage amount.
Due-on-Sale-Clause
A provision in a
mortgage or deed of trust that allows the lender to
demand immediate payment of the balance of the mortgage
if the mortgage holder sells the home.
Earnest Money
Money given by a buyer
to a seller as part of the purchase price to bind a
transaction or assure payment.
Entitlement
The VA home loan benefit
is called entitlement. Entitlement for a VA guaranteed
home loan. This is also known as eligibility.
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.
Equity
The difference between
the fair market value and current indebtedness, also
referred to as the owner's interest. The value an owner
has in real estate over and above the obligation against
the property.
Escrow
An account held by the
lender into which the home buyer pays money for tax or
insurance payments. Also earnest deposits held pending
loan closing.
Fannie Mae
see Federal National
Mortgage Association.
Farmers Home
Administration (FmHA)
provides financing to
farmers and other qualified borrowers who are unable to
obtain loans elsewhere.
Federal Home Loan
Bank Board (FHLBB)
The former name for the
regulatory and supervisory agency for federally
chartered savings institutions. Agency is now called the
Office of Thrift Supervision
Federal Home Loan
Mortgage Corporation(FHLMC) also called "Freddie
Mac",
is a quasi-governmental
agency that purchases conventional mortgage from insured
depository institutions and HUD-approved mortgage
bankers
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. FHA also sets standards for
underwriting mortgages.
Federal National
Mortgage Association (FNMA) also know as "Fannie
Mae"
A tax-paying corporation
created by Congress that purchases and sells
conventional residential mortgages as well as those
insured by FHA or guaranteed by VA. This institution,
which provides funds for one in seven mortgages, makes
mortgage money more available and more affordable.
FHA loan
a loan insured by the
Federal Housing Administration open to all qualified
home purchasers. While there are limits to the size of
FHA loans ($155,250 as of 1/1/96), they are generous
enough to handle moderately-priced homes almost anywhere
in the country.
FHA mortgage
insurance
Requires a fee (up to
2.25 percent of the loan amount) paid at closing to
insure the loan with FHA. In addition, FHA mortgage
insurance requires an annual fee of up to 0.5 percent of
the current loan amount, paid in monthly installments.
The lower the down payment, the more years the fee must
be paid.
FHLMC
The Federal Home Loan
Mortgage Corporation provides a secondary market for
savings and loans by purchasing their conventional
loans. Also known as "Freddie Mac."
Firm Commitment
A promise by FHA to
insure a mortgage loam for a specified property and
borrower. A promise from a lender to make a mortgage
loan.
Fixed Rate Mortgage
The mortgage interest
rate will remain the same on these mortgages throughout
the term of the mortgage for the original borrower.
FNMA
The Federal National
Mortgage Association is a secondary mortgage institution
which is the largest single holder of home mortgages in
the United States. FNMA buys VA, FHA, and conventional
mortgages from primary lenders. Also known as "Fannie
Mae."
Foreclosure
A legal process by which
the lender or the seller forces a sale of a mortgaged
property because the borrower has not met the terms of
the mortgage. Also known as a repossession of property.
Freddie Mac
see Federal Home
Loan Mortgage Corporation
Ginnie Mae
see Government
National Mortgage Association.
Government National
Mortgage Association (GNMA)
Graduated Payment
Mortgage (GPM)
A type of
flexible-payment mortgage where the payments increase
for a specified period of time and then level off. This
type of mortgage has negative amortization built into
it.
Guaranty
A promise by one party
to pay a debt or perform an obligation contracted by
another if the original party fails to pay or perform
according to a contract
Hazard Insurance
A form of insurance in
which the insurance company protects the insured from
specified losses, such as fire, windstorm and the like.
Housing
Expenses-to-Income Ratio
The ratio, expressed as
a percentage, which results when a borrower's housing
expenses are divided by his/her gross monthly income.
See debt-to-income ratio.
Impound
That portion of a
borrower's monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they
become due. Also known as reserves.
Index
A published interest
rate against which lenders measure the difference
between the current interest rate on an adjustable rate
mortgage and that earned by other investments (such as
one- three-, and five-year U.S. Treasury security
yields, the monthly average interest rate on loans
closed by savings and loan institutions, and the monthly
average costs-of-funds incurred by savings and loans),
which is then used to adjust the interest rate on an
adjustable mortgage up or down.
Interim Financing
A construction loam made
during completion of a building or a project. A
permanent loan usually replaces this loan after
completion.
Investor
A money source for a
lender.
Jumbo Loan
a loan which is larger
(more than $214,600 as of 1/1/97) than the limits set by
the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation.
Because jumbo loans cannot be funded by these two
agencies, they usually carry a higher interest rate.
Lien
A claim upon a piece of
property for the payment or satisfaction of a debt or
obligation.
Loan-to-Value Ratio
The relationship between
the amount of the mortgage loan and the appraised value
of the property expressed as a percentage.
Margin
The amount a lender adds
to the index on an adjustable rate mortgage to establish
the adjusted interest rate.
Market Value
The highest price that a
buyer would pay and the lowest price a seller would
accept on a property. Market value may be different from
the price a property could actually be sold for at a
given time.
MIP (Mortgage
Insurance Premium)
It is insurance from FHA
to the lender against incurring a loss on account of the
borrower's default.
Mortgage Insurance
Money paid to insure the
mortgage when the down payment is less than 20 percent.
See private mortgage insurance, FHA mortgage
insurance.
Mortgagee
The lender
Mortgagor
The borrower or
homeowner
Negative Amortization
Occurs when your monthly
payments are not large enough to pay all the interest
due on the loan. This unpaid interest is added to the
unpaid balance of the loan. the danger of negative
amortization is that the home buyer ends up owing more
than the original amount of the loan.
Net Effective Income
The borrower's gross
income minus federal income tax.
Non Assumption Clause
A statement in a
mortgage contract forbidding the assumption of the
mortgage without the prior approval of the lender. Note:
The signed obligation to pay a debt, as a mortgage note.
Office of Thrift
Supervision (OTS)
The regulatory and
supervisory agency for federally chartered savings
institutions. Formally known as Federal Home Loan
Bank Board
Origination Fee
The fee charged by a
lender to prepare loan documents, make credit checks,
inspect and sometimes appraise a property; usually
computed as a percentage of the face value of the loan.
Permanent Loan
A long term mortgage,
usually ten years or more. Also called an "end loan."
PITI
Principal, Interest,
Taxes and Insurance. Also called monthly housing
expense.
Pledged account
Mortgage (PAM):
Money is placed in a
pledged savings account and this fund plus earned
interest is gradually used to reduce mortgage payments.
Points (loan
discount points)
Prepaid interest
assessed at closing by the lender. Each point is equal
to 1 percent of the loan amount (e.g., two points on a
$100,000 mortgage would cost $2,000).
Power of Attorney
A legal document
authorizing one person to act on behalf of another.
Prepaid Expenses
Necessary to create an
escrow account or to adjust the seller's existing escrow
account. Can include taxes, hazard insurance, private
mortgage insurance and special assessments.
Prepayment
A privilege in a
mortgage permitting the borrower to make payments in
advance of their due date.
Prepayment Penalty
Money charged for an
early repayment of debt. Prepayment penalties are
allowed in some form (but not necessarily imposed) in
many states.
Primary Mortgage
Market
Lenders making mortgage
loans directly to borrower's such as savings and loan
associations, commercial banks, and mortgage companies.
These lenders sometimes sell their mortgages into the
secondary mortgage markets such as to FNMA or
GNMA, etc.
Principal
The amount of debt, not
counting interest, left on a loan.
Private Mortgage
Insurance (PMI)
In the event that you do
not have a 20 percent down payment, lenders will allow a
smaller down payment - as low as 5 percent in some
cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage
insurance. Private mortgage insurance will usually
require an initial premium payment and may require an
additional monthly fee depending on you loan's
structure.
Realtor
A real estate broker or
an associate holding active membership in a local real
estate board affiliated with the National Association of
Realtors.
Recision
The cancellation of a
contract. With respect to mortgage refinancing, the law
that gives the homeowner three days to cancel a contract
in some cases once it is signed if the transaction uses
equity in the home as security.
Recording Fees
Money paid to the lender
for recording a home sale with the local authorities,
thereby making it part of the public records.
Refinance
Obtaining a new mortgage
loan on a property already owned. Often to replace
existing loans on the property.
Renegotiable Rate
Mortgage
a loan in which the
interest rate is adjusted periodically. See
adjustable rate mortgage.
RESPA
short for the Real
Estate Settlement Procedures Act. RESPA is a federal law
that allows consumers to review information on known or
estimated settlement cost once after application and
once prior to or at a settlement. The law requires
lenders to furnish the information after application
only.
Reverse Annuity
Mortgage (RAM)
a form of mortgage in
which the lender makes periodic payments to the borrower
using the borrower's equity in the home as Satisfaction
of Mortgage: The document issued by the mortgagee when
the mortgage loam is paid in full. Also called a
"release of mortgage."
Second Mortgage
A mortgage made
subsequent to another mortgage and subordinate to the
first one.
Secondary Mortgage
Market
The place where primary
mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans. It provides
liquidity for the lenders. security.
Servicing
all the steps and
operations a lender performs to keep a loan in good
standing, such as collection of payments, payment of
taxes, insurance, property inspections and the like.
Settlement/Settlement
Costs
see closing/closing
costs
Shared Appreciation
Mortgage (SAM)
a mortgage in which a
borrower receives a below-market interest rate in return
for which the lender (or another investor such as a
family member or other partner) receives a portion of
the future appreciation in the value of the property.
May also apply to mortgage where the borrowers shares
the monthly principal and interest payments with another
party in exchange for part of the appreciation.
Simple Interest
Interest which is
computed only on the principle balance.
Survey
A measurement of land,
prepared by a registered land surveyor, showing the
location of the land with reference to know points, its
dimensions, and the location and dimensions of any
buildings.
Sweat Equity
Equity created by a
purchaser performing work on a property being purchased.
Title
a document that gives
evidence of an individual's ownership of property.
Title Insurance
a policy, usually issued
by a title insurance company, which insures a home buyer
against errors in the title search. The cost of the
policy is usually a function of the value of the
property, and is often borne by the purchaser and/or
seller. Policies are also available to protect the
lender's interests.
Title Search
an examination of
municipal records to determine the legal ownership of
property. Usually is performed by a title company.
Truth-In-Lending
a federal law requiring
disclosure of the Annual Percentage Rate to home buyers
shortly after they apply for the loan. Also known as
Regulation Z.
Two-Step Mortgage
a mortgage in which the
borrower receives a below-market interest rate for a
specified number of years (most often seven or 10), and
then receives a new interest rate adjusted (within
certain limits) to market conditions at that time. the
lender sometimes has the option to call the loan due
with 30 days notice at the end of seven or 10 years.
also called "Super Seven" or "Premier" mortgage.
Underwriting
the decision whether to
make a loan to a potential home buyer based on credit,
employment, assets, and other factors and the matching
of this risk to an appropriate rate and term or loan
amount.
USURY
Interest charged in
excess of the legal rate established by law.
VA Loan
a long-term, low-or
no-down payment loan guaranteed by the Department of
Veterans Affairs. Restricted to individuals qualified by
military service or other entitlements.
VA Mortgage Funding
Fee
a premium of up to 1-7/8
percent (depending on the size of the down payment) paid
on a VA-backed loan. On a $75,000 fixed-rate mortgage
with no down payment, this would amount to $1,406 either
paid at closing or added to the amount financed.
Variable Rate
Mortgage (VRM)
see adjustable rate
mortgage
Verification of
Deposit (VOD)
a document signed by the
borrower's financial institution verifying the status
and balance of his/her financial accounts.
Verification of
Employment (VOE)
a document signed by the
borrower's employer verifying his/her position and
salary.
Warehouse Fee
Many mortgage firms must borrow funds
on a short term basis in order to originate loans which
are to be sold later in the secondary mortgage market
(or to investors). When the prime rate of interest is
higher on short term loans than on mortgage loans, the
mortgage firm has an economic loss which is offset by
charging a warehouse fee.
Georgia's Most Resourceful Residential &
Commercial Mortgage Company
This is not an
offer to make a loan or to make a loan on any particular
terms. All loan applicants must submit a written application and all
required documentation. All information submitted by loan
applicants is subject to verification. All loan applicants must
qualify under our underwriting requirements and satisfy all
contingencies of loan approval. Loan approval will be
subject to satisfactory appraisal, title review and no change in
financial condition. Some loan types may not be
available in all jurisdictions. This loan program is subject to
change without notice. (c) Banker's Secrets, Inc.. All rights
reserved.
NOTE: BANKER'S SECRETS is a registered tradename, and
cannot be incorporated into any other show or program similar to
BANKER'S SECRETS, Inc.™.
