Adjustment interval is the time between changes in the interest rate and/or monthly payment, on an adjustable rate mortgage; typically one, three or five years, depending on the index.
Amortization is the calculation of the loan payment by equal periodic payment 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 all initial lenders fees paid to open the loan. The APR allows home buyers to compare different types of mortgages based on the total annual cost for each loan.
Appraisal is an estimate of the value of property, made by a qualified professional called an "appraiser".
Assumption is an agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new market-rate interest charges will apply. The lending company will still require an application process and approval for the buyer.
Balloon (Payment) Mortgage is 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.
Broker is an individual in the business of assisting in arranging funding (mortgage brokers) or negotiating contracts (real estate broker) for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.
Caps (Interest) is defined as 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.
Closing or Settlement is the meeting between the buyer, seller and their agents where the property and funds legally change hands. This is where most of the legal paperwork required in the transaction is presented, signed and notarized.
Conventional Loan is a mortgage not insured by FHA or guaranteed by the VA.
Credit Report is a report documenting the credit history and current status of a borrower's credit standing.
Deed of Trust is used in many states, including Virginia, and is the document used in place of a mortgage to secure the payment of a note.
Deferred Interest is 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. See negative amortization.
Down Payment is the money paid to make up the difference between the purchase price and the mortgage amount.
Earnest Money Deposit is the money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
Escrow is 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.
Federal Home Loan Mortgage Corporation (FHLMC) (aka "Freddie Mac") is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA) is 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) (aka "Fannie Mae") is 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.
Fixed Rate Mortgage means the mortgage interest rate will remain the same throughout the term of the mortgage for the original borrower.
Freddie Mac, see Federal Home Loan Mortgage Corporation.
Hazard Insurance is homeowner's insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
Impound Reserves or Escrow Account is that portion of a borrower's monthly payments held by the loan servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items deemed necessary as they become due.
Index is 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.
Lien is a claim upon a piece of property for the payment or satisfaction of a debt or obligation.
Loan-to-Value Ratio is the relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Margin is the amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.
Mortgage Insurance is money paid to insure the mortgage for the lender against incurring a loss on account of the borrower's default.
Negative Amortization occurs when you have a deferred interest loan and the 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 up to a specified amount.
PITI = Principal, Interest, Taxes and Insurance, also called monthly housing expense.
Power of Attorney is a legal document authorizing one person to act on behalf of another; these can be very specific or very general.
Prepayment Penalty is money charged for an early repayment of the loan as specified in the loan documents.
Principal is the amount of debt, not counting interest, standing on a loan.
Private Mortgage Insurance (PMI), see Mortgage Insurance.
Realtor is a real estate broker or an associate (agent) holding active membership in a local real estate board affiliated with the National Association of Realtors.
Rescission is the right to cancel a contract. With respect to mortgage refinancing, the law that gives the homeowner three business days to cancel the loan transaction.
Recording Fees is money paid to the state and county for recording closing documents (deeds, deeds of trust, power of attorney, affidavits, etc.) thereby making it part of the public records.
Refinance is the process of obtaining a new mortgage loan on a property already owned to replace existing loans on the property.
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.
Second Mortgage is a mortgage made subsequent to another mortgage and subordinate to the first one.
Settlement, see closing.
Survey is a measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings.
Title is a document that gives evidence of an individual's ownership of property.
Title Insurance is an insurance policy issued by a title insurance company that insures a home buyer against errors in the chain of title. The cost of the policy is usually a function of the value of the property, and is often paid by the purchaser. Separate policies are also issued to protect the lender's interests as required by the lender and paid for by the purchaser.
Title Search is an examination of county records to determine the legal ownership of property. Searches can be performed by a title company or their agents.
Truth-In-Lending or Regulation Z is a disclosure required by federal law of the Annual Percentage Rate to home buyers shortly after they apply for the loan.
