A buyer’s or seller’s agreement to enter into a contract and be bound by the terms of the offer.
An attachment to a contract to add, remove or amend specified terms or conditions.
A mortgage or home equity loan in which your interest rate and monthly payments may change periodically during the life of the loan, based on the fluctuation of an index. Lenders may charge a lower interest rate for the initial period of the loan. Most ARMs have a rate cap that limits the amount the interest rate can change, both in an adjustment period, and over the life of the loan. Also called a variable-rate mortgage.
The gradual reduction in the principal amount owed on a debt. During the earlier years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal (unless there has been negative amortization).
The total amount of income earned in one year. This does not need to include alimony, child support, or separate maintenance income unless you wish to have it considered as a basis of repaying this obligation.
The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage. Unlike an interest rate, however, it includes other charges or fees (such as mortgage insurance, most closing costs, discounts points and loan origination fees) to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing certain costs of loans.
An informed estimate of the value of a property. When made in connection with an application for a loan secured by a home, a professional appraiser usually performs the appraisal.
An increase in the value of property over time. Important factors in a home’s appreciation are its location and condition, and the selling price of similar homes in the area. Appreciation increases the amount of equity, which may also increase the amount you can borrow for a home equity loan or line of credit.
The amount of tax due to local government. May also refer to the amount due to local government or to common owners of a property (e.g., a homeowner’s association) for a special payment to cover expenses for improvements or maintenance, such as new sewers or roads.
Property or a possession of value that a lender may be willing to accept as collateral to secure repayment of debt. For example, real estate, stocks, mutual funds, cash, or automobiles.
The method of transferring a right or contract, such as the terms of a loan, from one person to another.
When you sell your home, your buyer may be able to qualify to take over your existing mortgage at your current rate—making your mortgage assumable. Assumption eligibility is determined in the note or mortgage. ARM loans in the adjustable period, VA and FHA loans are generally assumable, but not all loans are assumable.
An assumption requires the assuming borrower to qualify for the existing note or mortgage based on current underwriting guidelines for the applicable loan program.
A ratio that indicates what portion of a person’s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI, or principal, interest, taxes and insurance), credit card payments, child support and other loan payments. Also known as debt-to-income ratio.
A short-term loan with smaller payments for a certain period of time, and one or more large payments for the remaining principal amount, due at a specified time.
A property now owned by the lender as a result of the previous owner defaulting on the loan. Also known as a “foreclosure property” or a “real estate owned (REO) property.”
A loan that requires payments to reduce the debt every 2 weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required, and they are usually drafted from the borrower’s bank account. This option allows you to pay off your loan more quickly and to build equity faster. Sometimes there are additional costs associated with choosing this option.
An interest-bearing certificate of debt with a maturity date. A real estate bond is a written obligation that is usually secured by a mortgage or a deed of trust.
A type of mortgage financing between the termination of one loan and the start of another loan. For example, a mortgage secured by the borrower’s present home (which is usually up for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.
A third party who arranges funding or negotiates a contract between parties, but does not lend the money.
A buydown is the prepayment by a lender or homebuilder of a portion of the interest that will become due on your promissory note during the buydown period, thereby reducing your monthly payments. The buydown period may be one, two, or three years, during which time your monthly payments will increase annually, in accordance with a predetermined schedule, ending with the monthly payment specified in your note.
A real estate agent who represents the interests of the buyer and has fiduciary and/or statutory duties to the buyer.
A person’s present income and anticipated future earnings. Lenders consider this when determining if a borrower will be able to make payments on a loan.
Borrower funds that are available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from specified sources, the borrower’s cash available for closing does not include cash reserves or money from other sources.
The amount a homebuyer needs in cash at the closing of the loan. Typically, this includes down payment and closing costs.
A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement, or any other purpose. The borrower effectively borrows against the home’s available equity.
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
A statement provided by an abstract company, title company, or attorney stating who holds title to real estate based on the public record.
The history of all of the documents affecting title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Titles that are marketable and are free of liens or disputed legal questions as to ownership of the property.
A status of closed indicates that no further action is required on this item.
The time and place, at which all documents for your loan are signed, dated, and notarized. See also: settlement.
Closing costs, also known as settlement costs, are the costs incurred when obtaining your loan. For new purchases, these costs also include ownership transfer of any collateral property from the seller to you. Costs may include and are not limited to: attorney’s fees, preparation and title search fees, discount points, appraisal fees, title insurance, and credit report charges. They are typically about 3% of your loan amount, and they are often paid at or just before your loan closes.
Funds often needed to close a loan, such as homeowners insurance, property taxes, and escrow impound account funds, aren’t included in closing costs and are considered separate. You should be prepared to pay these costs before your loan closes.
An accounting of funds given to both buyer and seller before real estate is sold.
An additional person who assumes equal responsibility for repayment of a loan and is fully obligated under the terms of the loan. This person also has equal rights to the proceeds of the loan.
A second person who signs your loan and assumes equal responsibility for payment of the loan but receives no benefit from the loan proceeds.
The efforts used to bring a delinquent loan current and, if necessary, to file legal papers and notices to proceed with foreclosure.
A formal notification from a lender stating that the borrower’s loan has been conditionally approved and specifying the terms under which the lender agrees to make the loan.
In some Western and Southwestern states, the law specifies that property acquired during a marriage is presumed to be owned jointly by the husband and wife unless acquired as separate property of one spouse or the other.
An abbreviation for “comparable properties” used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
A building or development with many housing units where each person owns his or her individual unit and shares an interest in the common areas and facilities of the entire project. You go through the same process of buying a condo as you do when buying a house, and have a deed to and a mortgage on your particular unit. You also pay property taxes on your unit.
A mortgage loan that has the standard features as defined by and is eligible for sale to Fannie Mae and Freddie Mac.
A short-term, interim loan for financing the cost of home construction. The lender makes payments to the builder at periodic intervals as the work progresses.
A specified condition in a sales contract that must be satisfied before the home sale can occur. When buying a home, the two most common contingencies are that the house must pass inspection and that the borrower must be approved for a loan.
A home loan that is not insured or guaranteed by the federal government. Can be for conforming or non-conforming loan amounts.
An arrangement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
An organization that gathers, records, updates and stores financial and public records of individuals who have been granted credit and provides this information to lenders and other authorized users for a fee.
A record of an individual’s debts and payment habits over time. It helps a lender determine whether or not a potential borrower is a good business risk.
A numeric expression of creditworthiness based upon an individual’s present financial condition and past credit history.
A record of an individual’s debts and payment habits. It helps a lender determine whether or not a potential borrower is a good business risk.
A number that rates the quality of an individual’s credit. Credit reporting agencies calculate this number, often with the assistance of computer systems, as part of the process of assigning rates and terms to the loans they make. The number helps predict the relative likelihood that a person will repay a credit obligation, such as a mortgage loan. In general, the higher your credit score, the more likely you are to be approved for and to pay a lower interest rate on a loan.
A certificate issued by the Department of Veterans Affairs to establish the amount the government will guarantee for a VA mortgage loan.
Debt-to-income ratio is the percentage of your gross monthly income (before taxes are taken out) that you pay toward debt (loans, credit cards, court-ordered payments), as well as your projected total monthly home payment. It also will include HOA dues and private mortgage insurance, if applicable.
A document that legally transfers ownership of real estate from a seller to a buyer. It’s delivered to the buyer at closing. Before making a loan, a lender will usually require a title search or a title report to make sure the borrower legally owns the real estate that is to secure the loan.
The document used in some states instead of a mortgage; title is vested in a trustee to secure repayment of the loan.
A deed given by a borrower to the lender to satisfy a debt and avoid foreclosure. Also called a “voluntary conveyance.”
The amount of cash you pay toward the purchase of your home to make up the difference between the purchase price and your mortgage loan. Down payments often range between 5% and 20% of the sales price depending on many factors, including your loan, your lender, your credit history, and so forth.
A provision in a mortgage home loan that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the loan.
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
The right of way given to persons other than the owner, to access a property.
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, deeds, or restrictions.
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balances and other liens.
An item of value, money, or documents deposited with a third party, to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender, of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent, to be disbursed upon the closing of a sale of real estate.
An escrow impound account is designed to make sure your property taxes and insurance premium are always paid on time. The account is set up along with your new loan. It works by collecting 1/12th of the annual property taxes and/or insurance each time you pay your mortgage payment. When your taxes and insurance premium are due each year, the impound account will already have collected the payment and will make the payment for you.
The portion of a borrower’s monthly payment that is held by the loan servicer to pay for taxes, hazard homeowners insurance, mortgage insurance, lease payments, and other items as they become due. Known as “impounds” or “reserves” in some states.
The likely selling price of a home between a willing buyer and a willing seller on the open market. In a mortgage or a home equity loan, the fair market value is usually determined by an appraisal.
Federal National Mortgage Association, a government-sponsored enterprise that buys and securitizes mortgages for resale in the secondary market.
An agency of the Department of Housing and Urban Development. The FHA provides mortgage insurance for certain residential mortgages. It sets standards for underwriting these mortgages and for construction of homes secured by these mortgages.
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
A mortgage home loan that is insured by the Federal Housing Administration (FHA). Also known as a government loan. FHA mortgage insurance protects the lender (not the borrower) if a borrower defaults on the FHA loan. This insurance enables a lender to provide loan options and benefits often not available through conventional financing.
The finance charge is the cost of consumer credit expressed as a dollar amount. It includes the amount of interest you will pay during the terms of the loan, origination points, and certain other items. Some closing costs are not treated as finance charges.
Objectives you set for yourself related to money management, saving, paying off debt and financial stability.
A loan rate for which the lender has not “locked” or committed to lend at a particular interest rate. The floating interest rate and any discount points are not guaranteed. Your actual interest rate and discount points will be based on the market price available for your loan product at the time your interest rate is locked.
A determination by a reputable source about whether property is located within a special flood hazard zone.
A government-sponsored enterprise that buys and securitizes mortgages for resale in the secondary market.
A ratio that indicates what portion of an individual’s income is used to make mortgage payments. It is calculated as an individual’s monthly housing expenses divided by his or her monthly gross income and is expressed as a percentage.
The Fund step is the date on which the proceeds from a loan are available to or disbursed for the benefit of the borrowers.
The date on which the proceeds from a loan are available to or disbursed for the benefit of the borrowers.
The funds a borrower receives that do not have to be paid back. The gift is often from a family member to be used towards a down payment on a home purchase.
A loan that is insured by the Federal Housing Administration (FHA), guaranteed by the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). The insurance protects the lender (not the borrower) if a borrower defaults on the loan. This insurance enables a lender to provide loan options and benefits often not available through conventional financing.
The person to whom an interest in real property is conveyed (e.g., the buyer).
The total amount of income from all sources (not just salary) that a borrower receives per year before deductions.
Insurance to protect your home against damage from fire, hurricanes and other catastrophes. Usually, hazard insurance also covers you against theft and vandalism, as well as personal liability in case someone is hurt or injured on your property. A lender will likely require you to name it as a payee under the insurance if you need to make a claim. Also called homeowners insurance.
An installment loan secured by the equity in a borrower’s residence. It can be used for home improvements, debt consolidation, and other major purchases or expenses. On the funding date, all of the principal is advanced for the benefit of the borrower(s). Often referred to as a “second mortgage.”
An inspection of the condition of a property. A third party conducts the inspection, which includes all major appliances and structural elements. If an inspector finds something wrong, and your sales contract allows you to, you can request that the seller pay for the repairs. If the seller refuses, and your sales contract allows you to, you may not have to proceed with the purchase of the home.
A type of insurance that covers repairs to specified parts of a house for a specific period of time. The builder or property seller as a condition of the sale may provide it, but homeowners can also purchase it.
An organization of property owners that administers the rules and upholds the covenants of a subdivision, development, or condominium complex.
Fees paid monthly to cover the maintenance and amenities of a condominium complex or neighborhood.
Insurance to protect your home against damage from fire, hurricanes and other catastrophes. Usually, hazard insurance also covers you against theft and vandalism, as well as personal liability in case someone is hurt or injured on your property. A lender will likely require you to name it as a payee under the insurance if you need to make a claim. Also called Hazard Insurance.
The percentage of gross monthly income that goes toward paying housing expenses.
An acronym for the U.S. Department of Housing and Urban Development. HUD is a government agency that is responsible for the implementation and administration of housing and urban development programs.
A closing document, which provides an itemized list of the credits and charges, for both the buyer and the seller, based on the contract terms.
An account specifically set up by a lender to hold funds that are set aside for the payment of property taxes and insurance. These funds are held in escrow until disbursed on behalf of the borrower to the appropriate parties.
When used in a mortgage note or credit agreement, a financial index is the measurement used to decide how much the annual percentage rate will change at the beginning of each adjustment period. Generally, the index plus or minus margin equals the new rate that will be charged, subject to any caps. Lenders use various financial index rates: London Interbank Offered Rate [(LIBOR and Treasury-Indexed ARMs (T-Bills)]
A request for your credit report, made by you or a company considering you for an offer of credit.
A loan that is repaid in equal payments, known as installments.
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
A mortgage that is protected by an insurer in case of default. The insurance protects the lender (not the borrower) if a borrower defaults on the loan.
The annual cost of a loan to a borrower, usually expressed as a percentage. The interest rate does not include fees charged for the loan. See also: Annual percentage rate (APR).
A temporary buydown that gives a borrower a reduced monthly payment during the first few years of a home loan, and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buydown is paid the same way but reduces the interest rate over the entire life of a home loan.
A limit on how much the variable interest rate can increase at any one time. Many home loans have both annual (or semiannual) caps and lifetime caps, which limit the amount your payments can increase in an adjustment period and over the life of the loan. Many caps allow a rate increase of 2-5% over the starting interest rate in an adjustment period, i.e., a starting rate of 5.0% could increase to 7.0%, or depending on the loan guidelines, to 10.0%. Common lifetime caps are 6.0% over the life of the loan.
A loan for which you pay only the interest due for a portion of the loan term. This lowers your periodic payment but does not decrease your principal balance on the loan.
Some lenders permit you to pay only the interest due on a loan for a portion of the loan term, which lowers your periodic payment during that period, but does not decrease your principal balance on the loan. Making interest-only payments will result in larger payments being due (“payment shock”) at the end of the interest-only payment period. See also: balloon loan and balloon payment.
Property that is purchased to generate rental income, or to be sold once it has appreciated in value.
A form of co-ownership that gives each tenant equal undivided interest and rights in the property, including the right of survivorship. Contrast with tenancy in common and tenancy by the entirety.
A decree by a court of law that one person is indebted to another for a specified amount. In some states, the court may place a lien against the debtor’s real property as collateral for payment of the judgment to the creditor.
Also known as a nonconforming loan. The amount of the loan exceeds standards that would make it eligible for sale to Fannie Mae and Freddie Mac. Certain geographical areas have temporary conforming loan limits higher than typical conforming limits. Lenders may charge additional fees and place certain restrictions due to the large loan amounts.
The penalty charged to the borrower when a payment is made past the due date or any allowable grace period.
A written agreement between a property owner and a tenant that stipulates the conditions under which the tenant may use the estate property for a specified period of time and the amount of rent to be paid.
A person’s debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.
An agreement by a lender to extend credit up to a maximum amount for a specified time. In a home equity line of credit, the line of credit is secured by the borrower’s home.
The agent who represents the seller in the real estate transaction.
The asking price of the home, or the price the home is listed for.
The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in conjunction with a request for credit.
A formal notification from a lender stating that the borrower’s loan has been conditionally approved and specifying the terms under which the lender agrees to make the loan.
The period of time during which a loan must be repaid. For example, a 30-year fixed loan has a term of 30 years. Also called term. See also: maturity date.
The ratio between the unpaid principal amount of your loan, or your credit limit in the case of a line of credit, and the appraised value of your collateral. Expressed as a percentage.
A lock period refers to the amount of time prior to closing that you can secure an interest rate for your loan. Lock periods typically range from 30 days to more than 90 days. Generally, the longer the lock period, the more you pay in points or interest.
Loan-to-Value Ratio. The ratio between the unpaid principal amount of your loan, or your credit limit in the case of a line of credit, and the appraised value of your collateral. Expressed as a percentage.
A structure that has been partially or entirely constructed at another location and moved onto the property (on a permanent foundation). A manufactured home may or may not be a mobile home.
The number of percentage points the lender adds to or subtracts from the index rate to determine the interest rate.
The likely selling price of a home between a willing buyer and a willing seller on the open market. In a mortgage or a home equity loan, the fair market value is usually determined by an appraisal. Also called fair market value.
The day on which the outstanding principal, interest, and fees must all be repaid.
The minimum amount you must pay (usually monthly) on your account to avoid a delinquency. Some loans may permit a minimum payment of interest only. Other loans may require a minimum payment of principal and interest. Many other variations of minimum payments also exist.
The amount paid each month toward the principal and interest amount of a loan. The monthly payment may or may not include taxes and insurance.
A legal document giving a lender a lien on real estate to secure repayment of a loan. Mortgage loans generally run from 10 to 30 years, after which the loan is required to be paid off. Also called deed of trust and/or security deed.
For conventional loans, insurance that protects the lender if you default on your loan. If your down payment is less than 20%, most lenders will require you to pay mortgage insurance. Also called private mortgage insurance (PMI).
The lender or other party named in the mortgage as the party who’s entitled to receive repayment of the home loan.
The borrower, or other party named in the mortgage as the party obligated to repay the home loan.
A residential property with 2 to 4 individual housing units (duplex, triplex, or quadplex).
A service used by real estate brokers to distribute information on properties for sale to other brokers in the community.
A federal program that makes flood insurance available in communities in predefined flood areas.
The result when monthly payments don’t cover all the interest due on the loan. The unpaid interest is added to the unpaid balance, which means the homebuyer will owe increasingly more than the original amount of the loan.
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expenses (principal, interest, taxes, insurance for the mortgage, homeowners association dues, leasehold payments, and subordinate financing payments).
The amount of money left over from the sale of your home after subtracting the outstanding loan balance plus transaction costs, which may include sales commissions, fees, closing costs, repairs, and prorated taxes.
The total value of a person’s complete assets (including cash) and minus all liabilities.
A mortgage loan that’s not eligible for sale to Fannie Mae and Freddie Mac due to nonstandard features. These loans are often sold on the secondary market to private investors or held in the lender’s portfolio as an asset.
A written agreement in which the signer promises to pay to a named person or company a specific sum of money at a specified date or on demand.
A property purchase transaction in which the property seller provides all or part of the financing and takes back a security instrument.
A property that the owner occupies as a principal residence.
An abbreviation meaning principal and interest. Principal and interest accounts for the majority of your mortgage payment, but it doesn’t include escrow payments for taxes, insurance and any other costs that are paid monthly, or fees that periodically come due.
The periodic amount of money, to be paid by the borrower, to reduce the balance of a loan. Sometimes referred to as principal and interest or “P & I.” Principal and interest accounts for the majority of your mortgage payment, but doesn’t include escrow payments for taxes, insurance, mortgage insurance (if any) and any other costs that are paid monthly, or fees that periodically come due.
Payment of the outstanding balance of a loan in full. Also, the amount required to pay the outstanding balance in full.
The amount of interest that accrues daily on a loan. This is calculated by multiplying the outstanding loan balance by the annual rate of interest, then dividing the result by 365.
An acronym for principal, interest, taxes, and insurance. Also referred to as the monthly housing expense.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
A project or subdivision that includes common property that is owned and maintained by a homeowners association for the benefit and use of the individual PUD unit owners.
An acronym for private mortgage insurance. If your down payment is less than 20% on a conventional loan, most lenders will require you to get private mortgage insurance. This is insurance that protects the lender if you default on your loan. Also called mortgage insurance.
A lender’s conditional agreement to lend a specific amount on specific terms, to a homebuyer.
The expenses that are usually paid in advance, such as escrows for taxes and insurance (which are paid at closing).
The interim interest that’s collected at closing of a first mortgage, covering the period from the date of disbursement to the start of the next payment period.
An amount paid to reduce the principal balance of a loan before the principal is due.
A penalty assessed by some lenders if a loan is paid off before the specified term. This is a lump-sum amount due and payable in addition to the loan balance, and is usually limited to the early years of a mortgage. A prepayment penalty is called a “hard” penalty if it applies when you sell or refinance your home or a “soft” penalty if it applies only to refinancing. Not all loans have prepayment penalties.
The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in order for the lender to preliminarily estimate how much loan the borrower may obtain for the purchase of a home. A prequalification is not a commitment to lend.
This is the home in which a borrower resides most of the time.
The unpaid portion of the loan amount. The principal balance does not include interest or any other charges.
If your down payment is less than 20%, most lenders will require you to get private mortgage insurance. This is insurance that protects the lender if you default on your loan. This insurance usually costs from 0.15% to 2.5% of the loan amount. Also called mortgage insurance.
A written promise to repay a specified amount over a specified period of time.
A fixed percentage based on the appraised value of your home that you pay to the county in which the home is located. The specific percent varies dramatically from county to county in every part of the country. You pay this tax annually, semiannually or as part of your monthly mortgage payments. Depending on when you actually close your loan, some of this property tax may be due at the time of closing. The local county assessor’s office can give you the rate for your county.
The current value of a property as determined by an appraisal or other method of valuation. Also known as appraisal or appraised value.
A meeting in an announced public location to sell property to repay a mortgage that is in default.
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
The total amount paid by a buyer to a seller for the purchase of property.
Calculations that are used to determine whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio, and total debt obligations as a percent of income ratio.
A deed that transfers, without warranty of ownership, whatever interest or title a grantor may have at the time the conveyance is made.
A commitment issued by a lender to a borrower guaranteeing a specific interest rate for a specified period of time.
Rate lock periods are a fixed number of days, 30-day, 45-day, etc. Rate lock expiration occurs when that period has passed, subjecting the interest rate on the loan to market fluctuations since the date of the initial rate lock. The interest rate and discount points may be higher than the interest rate and discount points that were originally locked. When a rate lock expires, you will need to contact your Mortgage Loan Officer to establish a new rate lock prior to closing your loan.
A person who is typically licensed by the state and who, for a commission or a fee, assists in negotiating a real estate transaction.
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.
To take the remaining balance of a mortgage loan and establish a new period of amortization after which the principal balance will be zero. Typically used after the end of the term of an interest-only loan.
The noting in a book of public record of the terms of a legal document affecting title to real property, such as a deed, a security instrument, a satisfaction of mortgage, or an extension of mortgage.
Paying off your existing loan with the proceeds from a new loan, generally using the same property as collateral, in order to take advantage of lower monthly payments, lower interest rates, or save on financing costs.
In a line of credit, the period when no advances of principal are available and during which the line must be fully repaid, according to the payment terms. In a home equity line of credit, the repayment period (typically 15 years) is the portion of the loan term that follows the draw period (typically 10 years).
The cancellation of a contract. In certain real estate-secured transactions that involve the refinance of a primary residence, applicants have three business days to cancel the transaction.
The amount of savings, separate from the down payment, that a homebuyer sets aside in case of unforeseen events or emergencies. During the loan approval process, many lenders require reserves—typically the equivalent of two monthly mortgage payments—to be verified.
A mortgage product available to homeowners who are at least 62 years of age that enables them to remain in their home and receive periodic payments secured by the home’s equity. Rather than paying a monthly mortgage payment to the lender, the homeowner receives funds from the lender.
A line of credit that allows up to the credit limit amount to be re-borrowed in repeated transactions once it’s been repaid.
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
A property occupied part-time by a person in addition to his or her primary residence.
The traditional term for a home loan that’s a subordinate lien and not a first mortgage, such as a home equity loan or line of credit.
The completion of a property’s sale or purchase, or the completion of all steps necessary to receive the proceeds of and create an obligation to repay a loan.
A person or entity that conducts the settlement to transfer title of the property and to close on the mortgage loan. May be an attorney, a title insurer, a title agent or an escrow agent.
A commonly used alternative to a foreclosure. If a homeowner can no longer afford to make mortgage payments and their home is worth less than they owe, a short sale allows them to sell the home to pay off the mortgage. In a short sale, the lender agrees to accept an amount less than is actually owed on the loan, based on a showing of financial hardship.
A detached individual housing unit. The property shares no common ground with neighboring properties and shares no wall or roof, but can be part of a planned unit development (PUD).
Any mortgage or other lien that has a priority that is lower than that of the first mortgage. The subordinate loan has a claim to payment in a foreclosure only after the first mortgage is paid.
Contribution to the construction or rehabilitation of a property in the form of labor or services performed personally by the owner.
The amount you may save in taxes by itemizing deductions on income tax returns. Mortgage interest and property taxes are two expenses that you may realize tax savings on, since you may be able to deduct these expenses from your income. Always check with your tax advisor for advice on tax deductibility.
Taxes and insurance refer to the amounts that may be paid into an escrow account each month to pay for future property taxes and mortgage and hazard insurance.
The number of years it will take to pay off a loan. The loan term is used to determine the payment amount, repayment schedule and total interest paid over the life of the loan.
The agency that will investigate a property’s title (or deed) for discrepancies or undiscovered liens and that will issue title insurance to the lender after the title is deemed clear. Also see Title insurance.
Insurance that protects an interested party, either the owner or the lender, against defects that would affect legal ownership of the property.
An examination of records used to determine the legal ownership of property and all liens and encumbrances on it. Usually performed by a title company or attorney.
The total of all closing costs, points, prepaid expenses, down payment, and any other fees or adjustments due at closing.
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts. Used to help qualify a potential borrower for a home loan.
The total of all of your combined expenses due to the ownership of property, including: principal, interest, property taxes, homeowners insurance, mortgage insurance, homeowners association dues, and any special assessments.
The person who approves or denies a home loan, based on the lender’s underwriting and approval criteria.
The lender’s process of deciding whether to make a loan to a potential borrower based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate, term, and loan amount.
The standard loan application form published by the Federal National Mortgage Association (Fannie Mae) and used by most lenders.
Revolving line of credit that has no collateral pledged, typically accessed with a check or credit card.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA) for qualified veterans of U.S. military forces. Also known as a government loan.
A vacation home is a single-family property that the borrower occupies in addition to his or her primary residence. The property cannot be considered income-producing and must not be part of a mandatory rental pool, but occasionally may be rented to friends and relatives. When property is classified as a second home, rental income may not be used to qualify the applicant. A 2- to 4-unit property is not eligible for second home status. Also known as second home.
An interest rate that may fluctuate or change periodically, often in relation to an index, such as the prime rate or other criteria. Payments may increase or decrease accordingly.
The form you get from your employer every year and used for filing your income tax returns.
A final inspection a day or two before settlement to make sure the property is in the same condition that it was at the time the offer contract was written.
The report shows how much was paid in interest during the year, as well as the remaining mortgage loan balance at the end of the year. If the bank has an impound account for you, it will also show how much was paid and reserved in property taxes. If the bank does not have a property tax impound account, then tax details are not displayed on the report.