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Mortgage Lead GlossaryAmortization When one pays a debt in consistent installments of principal and interest rather than interest only payments. Annual Percentage Rate (APR) From the Truth-in-Lending Act; the APR corresponds to the percentage relationship of the total finance charge to the sum of the loan. It reflects the cost of your mortgage loan as an annual rate, and is higher than the interest rate stated on the note because, in addition to the interest rate, it incorporates loan discount points, fees and mortgage insurance. Application Used by a mortgage lender to record the vital information of a potential mortgage. Application Fee Amount of the initial mortgage processing expenses. Appraisal An estimate, or the process of estimating property value. Assessed Valuation Value placed on real or personal property by the taxing authority. Automated Valuation An automated report that estimates property value by comparing sales in the area. Borrower Also known as a mortgagor, a borrower receives money via loans and has the responsibility of paying back principal with interest. Buydown Advanced funds that contribute to reducing the monthly payments for a home mortgage either for a full term or for an agreed upon timeframe. Cash to Close Liquid assets used to pay the closing costs of a mortgage transaction. Closing The completion of a real-estate transaction; includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds. Closing Costs Funds paid by the borrower during the closing of a mortgage loan (usually includes an attorney's fees, appraisal, origination fee, discount points, , credit report, title insurance, , survey, and prepaid items such as tax and insurance escrow payments). Closing Statement Used during closing; provides a statement of the funds accepted and paid at the closing (includes the escrow deposits for taxes, hazard insurance, and mortgage insurance). Co-Borrower Additional borrower(s) whose contributing funds qualifies them for a loan and are subject to equal legal obligations. Collateral Property guaranteed as security for a debt. Commitment (Loan) A guarantee between the lender and the borrower to make a loan with a stated interest rate, or within a stated period of time for a stated purpose. Commitment Fee (Loan) Fee paid by a prospective borrower to a lender for the lender's promise to lend funds at a specified rate and within a specified timeframe. Commitment Letter A lenderıs formal offer to a home buyer that includes the lenderıs terms. Conforming Loan Standard home mortgages available for sale and delivery to the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Conventional Mortgage A mortgage not acquired via a government insured program (i.e., FHA or VA). Credit Report A report that outlines an individual's credit history. Deed of Trust When a trustee receives property from the borrower, in favor of the lender, and is reinstituted upon full payment. Default Failure to meet the specifications of a contract. Delinquency A late loan payment still within the period before default. DeMinimus PUD When a common property has less than a 2% influence on the value of said property. Calculate by dividing the dollar amount of amenities by the total number of units. Deposit Money given to ensure a sale (also known as earnest money). Depreciation Loss of property value caused by deterioration, age and functional or economic outdatedness. Discount Point The sum owed to the lender by the borrower or seller to increase the lender's profit (one point equals one percent of the loan). Discounted Loan When the lender necessitates additional points to raise the profit of a loan to the market rate because the note rate on a loan equals less than that of the market rate. Earnest Money Down payment included with a purchase offer by the purchaser of real estate to the seller or an escrow agency as evidence of compliance (also known as a deposit). Amortization Equal Credit Opportunity Act (ECOA) A Federal law that obliges lenders to make credit available and without regard to race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act. Equity The ownershipıs interest. Escrow When an unbiased third party manages legal documents and finances for the seller and buyer. Fair Credit Reporting Act (FCRA) A federal law requiring a lender whoıs rejecting a loan request because of bad credit to notify the borrower of the source; also requires consumer reporting agencies to maintain fairness, accuracy and confidentiality while organizing and disclosing credit information. Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC) Responsible for purchasing standard mortgages in the secondary mortgage market from depository institutions and HUD-approved mortgage bankers; sells participation sales certificates obtained by conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC; sells Government National Mortgage Association bonds to incur funds to finance the purchase of mortgages. Federal National Mortgage Association - FNMA (FANNIE MAE) A taxpaying corporation that purchases and sells residential mortgages insured by the Federal Housing Administration (FHA), guaranteed by the Veterans Administration (VA), and standard home mortgages. First Mortgage A real estate loan with priority over any additional mortgages. Fixed Interest Rate An interest rate that is unalterable during the term of the loan. Foreclosure A legal process wherein property mortgaged for loan security is sold to recompense the defaulting borrower. Gift Letter Formal letter including the following statement on behalf of the gift-giver: "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time." Gross Monthly Income Income earned before taxes and deductions. Hazard Insurance A contract wherein an insurer compensates the insured for a loss of property because of hazards (i.e. fire). High-Ratio Loan When a mortgage loan over 80 percent of the loan amount is divided by the lower sales price or appraised value. Homeowners' Association Dues Fees required by a condominium or homeowners' association for the upkeep of common areas. Insured Loans A loan insured by a governmental agency or a private insurance company. Interest Money paid for the use/borrowing of funds (also a right, share or title in property). Interest rate The percentage of a sum of money paid for its use for an agreed period of time. Lien A legal claim against property as security for payment of an obligation. Loan-To-Value Ratio Ratio between the amount of a stated mortgage loan and the lower sales price of appraised value. Market Value The price that a buyer would pay and a seller would accept (the market value can be different from the price the property is actually sold for). Maturity The date on which payment in full is expected. Monthly Payment The amount of principal, interest, taxes, and insurance (PITI) paid on a monthly mortgage loan. Mortgage Real property given as security for the payment of a loan. Mortgagee The lender of a mortgage transaction. Mortgage Insurance Premium (MIP) Consideration paid by a mortgagor for mortgage insurance (to either the FHA or a private mortgage insurer). Mortgage Note A written guarantee that states a sum of money will be paid at a stated interest rate during a stated term (the note includes the terms and conditions under which the loan is to be repaid). Mortgagor A borrower who guarantees property as security for debt. Non-Conforming Loan Standard home mortgages not qualified for sale and delivery to either FNMA or FHLMC because of the loan amount, its characteristics or the underwriting guidelines. Occupancy When a property is full-time residence to either the title-holder or another agreed upon party. Origination Fee Sum charged by the party handling the application and processing of the loan. Percentage Point One percent of the loan or a quantified interest rate. PITI (Principal, Interest, Taxes, and Insurance) Components of a monthly mortgage payment. Preliminary Title Report The results of a title search by a title company before it makes a commitment to insure a clear title. Primary Residence Principal residence occupied by the borrower. Principal Balance Balance due on a debt that does not include interest or other charges. Private Mortgage Insurance Insurance issued by private company to guard the mortgage lender against potential damages from a mortgage default. Processing Preparation of a mortgage loan application and its supporting documentation. PUD (Planned Unit Development) A combination of diverse land uses (i.e., housing, recreation, and shopping in a single development) that often features common land for use by the housing unit owners and an association of unit owners that typically own, pays fees on, and maintain the common areas. Purchase Contract (Agreement/Offer) An agreement between a buyer and seller of real property; sets the price and terms of the sale. Rate Lock Option An agreement ensuring that a stated interest rate on a loan is closed within a stated timeframe. Real Assets Owned real estate or real property. Real Estate Settlement Procedures Act (RESPA) A federal law neccessitating lenders to furnish home mortgage borrowers with known or estimated settlement costs; also establishes guidelines for escrow account balances. Real Property Land and its affixtures. Refinancing Repayment of a debt using the funds of a new loan and the same property as security. Satisfaction of Mortgage When a lender verifies the full payment of a mortgage debt. Second Home (Vacation Home, Weekend Home) A residence other than the borrower's principal residence; must be suitable for year-round occupancy. Secondary Mortgage A secondary lien in second position on the title. Security The collateral deposited, given or guaranteed to assure the payment of a debt. Settlement Services Lenderıs services at the loanıs closing. Survey Measurement/description by a licensed surveyor. Term The time limit set for a loanıs payment. Title Legal document containing ownership rights to real property. Title Insurance Policy A contract wherein the insurer guarantees payment to the insured party for a stated amount for any loss caused by defects of title on real estate. Title Search Examination of the past and current facts regarding a propertyıs ownership. Truth-in-Lending Act A Federal law demanding full disclosure of credit terms; intended to assist comparisons between lending terms and financial institutions. Underwriting Analysis of risk and setting of a rate and terms for a borrowerıs mortgage on a property. Zero Point Option Allows the borrower to select a slightly higher loan interest rate instead of paying the loan origination points. |
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