103s and 107s – No need for a down payment. Borrower is allowed to borrow 3-7% more than the property value.
40-Year Mortgage – Mortgage payments are stretched over a 40 years, usually with a slightly higher interest rate.
Adjustable Rate Loan – The Interest rate can change monthly, quarterly, annually, every 3 to 5 years, depending on the type of loan. During times of loan interest rates, adjustable rates are favored but if interest rates go up, the rate and monthly payments can quickly increase.
Affidavit- A sworn statement under oath in writing usually in the presence of a notary.
Amortization – The gradual elimiation of due funds, such as a mortgage, in regular payments over a specified period of time. These payments will cover both principal and interest due.
Appraisal – Determination of property value based on recent sales information in the area comparable to similar properties.
Arrearage- The past due balance on your real estate loan and includes the balance due on the loan, unpaid interest, late charges and statutory attorney fees and costs.
Assignment- The transfer of real property to be held in trust or to be used for the benefit of the lender.
Auction- Usually the final phase in the foreclosure process in which your property is sold to the highest bidder.
Balloon Mortgage – Acts like a fixed-rate mortgage for a set number of years and then must be paid off in full in a single ‘balloon’ payment.
Bankruptcy – A proceeding in federal court in which an debtor’s assets and liquidated and the debtor is relieved of further liability.
Beneficial Interest – beneficial interest n. the right of a party to some profit, distribution, or benefit from a contract or trust. A beneficial interest is distinguished from the rights of someone like a trustee or official who has responsibility to perform and/or title to the assets, but does not share in the benefits
Buyers’ Market – Supply exceeds demand and prices become more negotiable with sellers and/or low therefore giving buyers more of an advantage.
Cash-Out Refinancing – The process of taking out a new mortgage at an amount that exceeds the existing balance on the current mortgage in order to refinance the original mortgage and receive additional cash for other use.
Certificate of Sale- A legal document tendered to the winning bidder at a foreclosure sale stating their rights to the property once the borrowers redemption period has expired.
Closing Costs – Fees paid by the borrower when a property is purchase or refinanced. These costs include, loan origination fee, discount points, appraisal fee, title search, survey, taxes, title insurance, deed recording fee, and credit report charges.
Conforming Loan – A loan that meets the standards of the lender.
Collateral – Assets pledged by a borrower to secure a loan or other credit which is subject to seizure in the event of a default.
Convertible ARM – An adjustable rate mortgage that can be converted to a fixed rate mortgage under certain circumstances.
Co-Signer – An individual other than the borrower who signs a promissory note and assumes equal liability for it.
Credit Bid- A bid usually on behalf of the lender at a foreclosure auction. The bid amount must be less than or equal to the balance of the loan that is in default.
Credit Limit – The maximum amount of credit a bank, lender, or credit card company will extend a customer.
Credit Line – A bank or vendor extends a specified amount of unsecured credit to a borrower for a specific time period.
Credit Rating – Borrowers are rated by lenders according to their credit-worthiness and risk profile. Ratings are based on factors such as payment history, foreclosures, bankruptcies and charge offs.
Credit Risk – The possibility that a bond issuer will default, by failing to repay the principal and interest on time.
Deed – A legal document that records the transfer of ownership of real estate from seller to buyer.
Deed of Trust- A legal document in which the borrower (tustor) pledges the property to a neutral third party (trustee) as security for repayment of the loan to the lender (beneficiary).
Deed in lieu of Foreclosure- The process and legal instrument in which the lender agrees to accept the deed to your real property in lieu of foreclosing and selling your property.
Default: Usually a breach of the obligations in a promissory note in which the borrower has failed to comply with the terms of repayment in accordance with the loan and which the lender considers the default to be a material enough to be in breach of the contract.
Deficiency- The difference between the balance of your unpaid loan and the proceeds received by your lender from the foreclosure and sale of your property.
Down Payment – Money paid by buyer from bank account and not financed.
Equitable Title- The legal right to possess property and to acquire legal title once certain conditions are met.
Escrow – Third party agent that received, holds, and/or disburses funds and documents during the sale of a property.
Fair Market Value- The market price of a property in the open market.
Fannie Mae – Fannie Mae stands for ‘The Federal National Mortgage Association’. It is a government-sponsored organization that purchases mortgages from lenders and sells them to investors.
Fixed Rate Loan – Interest rate does not change during the entire life of the loan.
Forbearance- The lenders agreement to refrain from foreclosing on your property for the purpose of affording you additional time to repay your loan in full.
Foreclosure – Situation in which a homeowner is unable to pay mortgage payments. The lender can seize and sell the property as stipulated in the terms of the mortgage contract. Sometimes, a special agreement can be made in which creditors make adjustments to the repayment schedule to allow the homeowner to retain the home.
Gross Monthly Income – The total income borrower earns each month before taxes or expenses.
Hazard Insurance – Hazard insurance is required by lenders before you buy or refinance a home. The insurance protects the owner against property damage caused by fire or severe storm and would cover the cost or rebuilding the home.
Interest Only – Loan payment that only pays interest on loan and does not include any amount of principal.
Judgment- The judicial decree which is issued by the trial judge after the hearing and presentation of the evidence and which states the specific outcome of the lawsuit, specifically whether the plaintiff lost or won and the sums owed, if any, between the parties to the lawsuit. A judgment can be appealed to a higher court for review of the decision if there was an error of law during the judicial proceedings.
Nonjudicial Foreclosure – A foreclosure in which the mortgage lacks the power of sale clause. Many states require the foreclosure to be processed through the state’s court system. If the court find the debt is in deed in default, an auction is held for the sale of the property to repay the lender.
Lend – To grant the use of money with the agreement that it will be returned at a future date.
Liability – Obligation that legally binds an individual or company to settle a debt. They are responsible to pay the debt or settle a wrongful act they may have committed.
Liquidate – To convert into cash and/or sell a borrower’s assets to pay outstanding debts.
Lis Pendens- A written notice of a pending legal action which filed and recorded in the county recorders office relating to the specific property and which serves to notify subsequent buyers and lenders that a lawsuit has been filed involving the property and or its possession.
Loan-To-Value Ration (LTV) – The relationship between the amount of the mortgage loan and the appraised value of the property. A LTV ration of 80 means the borrower is borrowing 80% of the value of the property and is paying 20% as a down payment
Mortgage – A legal document that describes the loan itself and states the property to a creditor for the repayment of the loan.
Mortgage Banker – A financial institution that originates or funds loans, collects payments, inspects property and forecloses if necessary. They fund their own loan and sell them on the secondary market, usually to Fannie Mae, Ginny Mae, or Freddie Mac.
Mortgage Broker – A mortgage company that originates loans.
Negative Amortization Mortgage – An interest-only product that allows borrower to pay less than the full amount of interest necessary to cover the cost of the mortgage. The difference between a full interest only loan and the amount actually paid is added to the balance of the loan.
Non-Conforming Loan – A loan that does not meet the standards of the lender.
Nonjudicial Foreclosure – States which use a Deed of Trust as a mortgage contract and provide for such, a method of Foreclosure which allows the Lender to sell the property directly with NO assistance from the courts.
Pay Option ARM Mortgage – A hybrid mortgage between an ARM which offers a lower fixed rate during the first five to seven years and annually adjusts and a negative amortization loan that allows the borrower to pay less than the full amount of the interest on each payment. The lenders sends the borrower a payment coupon that calculates four possible payment options: interest only, 30 year amortized, 20 year amortized, negative amortization. The homeowner decides how much they want to pay.
Piggy-Back Mortgage – The loan is two mortgages, first covers 80% and the second covers the remaining balance of the property value.
Portable Mortgage – E*trade launched a program called Mortgage on the Move in 2003. It allows home buyers to lock in today’s low interest rates and take the loan with them if they move into a new house a few years later. This type of mortgage is priced slightly higher at 3/8 to 1/2 a percentage point higher.
Pre-approval – A lender has reviewed your credit report and income to determine you qualify for a loan. The lender will state the maximum amount of loan it will approve, which loan programs are qualified, and interest rates offered for each loan. This isn’t a guarantee that the lender will approve the loan. When buying a home, it’s important to have a pre-approval before shopping to estimate your buying power.
Pre-Foreclosure Sale – A procedure that allows the borrower to sell their property for an amount less than what is owned to avoid foreclosure to satisfy debt.
Pre-Paid Interest – The interest that accrues between the day the loan closes and the last day of that month which is added to your closing costs.
Pre-Payment – Any amount paid to reduce principal before next due date.
Prepayment Penalty – Lenders who impose a penalty charge on borrowers who pay a part or all of their loan in advance.
Pre-Qualification – Pre-qualification does not usually include analysis of your credit report and your true ability to buy a home. A pre-qualification can be done by a lender, real estate agent or yourself. The term means someone has taken a general look at your income and expenses.
Private Mortgage Insurance (PMI) – Paid by borrower to protect the lender in case of default and usually charged to borrowers who’s LTV is greater than 80%.
Promissory Note – A document signed by a borrower promising to repay a loan upon agreed terms.
Refinancing – The process of paying off one loan with proceeds from the new loan for the same property.
Short Sale – A short sale happens when a property is sold and the lender agrees to accept a discounted payoff. The lender releases the loan that is secured to the property that is of less money than owned.
Short-Term ARMS – Offers fixed rate periods and the interest rate floats with the index.
Trustee- This is the name of the party that holds legal title to the property as collateral to secure your repayment of the loan.
Wraparound Mortgage – A financing agreement which an existing mortgage is refinanced and additional money loaned at an interest rate between the rate charged on the older loan and current market rates. The lender, combines or wraps the remainder of the loan with the new loan and the borrower make one monthly payment. Generally they earn a higher yield for the lender than new mortgage loans since the wraparound lender advances only the difference between the unpaid first mortgage and the combined principal of the 2 loans. It’s an alternative to refinancing the entire loan when a borrower needs more funds.