ADJUSTABLE RATE MORTGAGE
A loan that allows the lender to adjust the borrower's interest rate and payments
at prescribed terms and sometimes with prescribed limits.
AMORTIZED LOAN
A loan which is paid off in equal installments during its term.
APPRAISAL
An estimate of real estate value, usually issued to the standards of FHA, VA, FNMA.
Recent comparable sales in the neighborhood are the most important factor in
determining value.
ASSUMABLE MORTGAGE
Purchaser takes ownership to real estate encumbered by an existing mortgage and
assumes responsibility as the guarantor for the unpaid balance of the mortgage.
CLOSING COSTS
Expenses incurred in the closing of a real estate or mortgage transaction.
Purchaser's expenses normally include: costs of examinations, premiums for title
policies, survey, attorney fee, lender's service fees, and recording charges.
In addition, the purchaser may have to place in escrow a sum of money to cover
accrued real estate taxes and insurance.
CONVENTIONAL MORTGAGE
A loan neither insured by the FHA nor guaranteed by the VA.
EQUITY
The difference between the market value of the property and the homeowner's
indebtedness (i.e., their mortgage).
ESCROW PAYMENT
That portion of a mortgagor's monthly payment held in trust by the lender to pay for
taxes, hazard insurance, mortgage insurance, lease payments, and other terms as they
become due -- known as "impounds" in some states.
EXCHANGE
The trading of the equity in a piece of property for the equity in another.
FANNIE MAE
The nickname of the 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.
FIXED RATE MORTGAGE
A loan that fixes the interest rate at a prescribed rate for the duration of the loan.
FREDDIE MAC
The nickname for the 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.
GRADUATED PAYMENT MORTGAGE
An FHA, VA, or conventional loan where the borrower pays a portion of the interest due
each month during the first few years of the loan. The payment increases gradually
during the first few years to the amount necessary to fully amortize the loan during its life.
INVESTOR
The 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 AGREEMENT
Buyer makes a deposit for the future purchase of a property with the right to lease
property in the interim.
LOAN TO VALUE RATIO
The ratio of the mortgage loan principal (amount borrowed) to the property's appraised
value (selling price). For example, on a $100,000 home with a mortgage loan principal
of $80,000, the loan to value ratio is 80%.
MORTGAGE/DEED OF TRUST
Pledge of real property to secure a debt by a written instrument given by the mortgagor.
Should be recorded in the County Recorder's Office.
MORTGAGE INSURANCE PREMIUM (MIP)
The consideration paid by the mortgagor for mortgage insurance either to the FHA or
a private mortgage insurance (PMI) company. This insurance protects the investor
from possible loss in the event of a borrower's default on a loan.
MORTGAGEE
The lender of money or the receiver of the mortgage document.
MORTGAGOR
The borrower of money or the giver of the mortgage document.
NOTE
A written promise to pay a certain amount of money.
ORIGINATION FEE
A fee charged for work involved in the evaluation, preparation, and submission of a
proposed mortgage loan.
POINT
One percent of a loan amount.
PREPAYMENT PRIVILEGE
The right given to a purchaser to pay all or part of a debt prior to its maturity.
The mortgagee cannot be compelled to accept any payment other than those originally agreed to.
PREPAYMENT PENALTY
A fee paid to the mortgagee for paying the mortgage before it becomes due,
also known as "prepayment fee" or "investment fee."
PRIVATE MORTGAGE INSURANCE (PMI)
Insurance written by a private company protecting the mortgage lender against loss
occasioned by a mortgage default.
RENT WITH OPTION
A contract which gives one the right to lease property at a certain sum with the option to
purchase at a future date.
SECOND MORTGAGE/SECONT TRUST
Junior Mortgage or Junior Lien; an additional loan imposed on a property with a first
mortgage. Generally at a higher interest rate and shorter term than a "first" mortgage.
STRAIGHT LOAN
A loan with periodic payments of interest only; the principal sum due in one lump upon
maturity.
TITLE
Often used interchangeable with the word "ownership." It indicated the accumulation of
all rights in property; the owners and others.
TITLE INSURANCE
An insurance policy which protects the insured (purchaser or lender) against loss arising
from defects in title.
