Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically based
on a pre-selected index. Also known as the re-negotiable rate mortgage,
the variable rate mortgage or the Canadian rollover mortgage.
Annual Percentage Rate (A.P.R.)
An 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 point and other
credit costs. The APR allows home buyer to compare different types
of mortgages based on the annual cost for each loan.
The agreement between buyer and seller where the buyer takes over
the payments on an existing mortgage from the seller. Assuming the
loan can usually save the buyer money since this is an existing mortgage
debt, unlike a new mortgage with closing costs and possibly higher
When a lender and/or the home builder subsidizes the mortgage by lowering
the interest rate during the first few years on the loan. While the
payments are initially low, they will increase when the subsidy expires.
Caps (interest) top
Safety precautions taken by the consumer to limit the amount that
the interest rate on an adjustable rate mortgage may change per year
and/or the life of the loan.
The tax paid upon certain types of real estate transactions. Contact
accountant for specifics.
Date stated on the purchase agreement that buyer and seller agree
to finalize or close the transaction
A promise by a lender to make a loan on specific terms or conditions
to a borrower or builder. A promise by an investor to purchase mortgages
from a lender with specific terms or conditions. An agreement, often
in writing, between a lender and a borrower to loan money at a future
date subject to the completion of paperwork or compliance with stated
Property types that usually have the following characteristics: they
are attached, have a homeowners association and dues, the outside
maintenance is taken care of by the association, and common areas
and amenities available to all owners in the association.
Person who agrees to make loan payments, if you cannot fulfill your
The number generated by the credit bureaus which is a numerical representation
of the subjects credit profile, range is from 450 on the low side
to 900 being the highest score possible.
The ratio, expressed as a percentage, which results when a borrower’s
monthly payment obligation on long term debts is divided by his or
her gross monthly income. See Housing Expenses-to-Income Ratio
A provision in a mortgage or deed of trust that allows the lender
to demand immediate payment of the balance of the mortgage if the
mortgage holder sells the home.
Equal Credit Opportunity Act (ECOA)
A Federal law that requires lenders and other creditors to make credit
equally available without discrimination based on race, religion,
national origin, age, sex, marital status or receipt of income from
public assistance programs.
Short name for the Federal National Mortgage Association. One of the
main Government Sponsored Agencies which are the companies who sell
mortgage backed bonds to investors. They are the ultimate source of
the money that we lend. Fannie Mae protects its investors by issuing
underwriting guidelines that are to be followed to ensure quality
Short name for Federal Home Loan Mortgage Corporation - see above
The Federal National Mortgage Association is a secondary mortgage
institution which is the largest single holder of home mortgage in
the United States. FNMA buys VA, FHA, and conventional mortgages from
primary lenders. Also known as “Fannie Mae.”
A form of insurance that protects the insured from specified losses
such as fire, wind and storm. Also known as homeowner’s insurance.
Home Equity Line of Credit. Second mortgage product, generally characterized
by interest only payments and the ability to draw, pay back, and redraw
Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrowers
housing expenses are divided by his/ her gross income. See Debt-to-Income
The portion of a borrower’s monthly payments which is held by
the lender or servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they are due. Also known
A published interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate mortage and
that earned by other investments (such as U.S. Treasury security yields,
monthly average interest rates closed by savings and loan institutions
and the monthly average cost of funds incurred by savings and loans).
It is then used to adjust the interest rate on an adjustable rate
mortgage – up or down.
Interim Financing top
A construction loan made during the completion of a building or project.
A permanent loan will usually replace this after completion.
The relationship, expressed as a percentage, between the amount of
the mortgage loan and appraised value of the property.
The amount that a lender adds to the index on an adjustable rate mortgage
to establish the adjusted interest rate.
Debt instrument by which the borrower (mortgagor) gives the lender
(mortgagee) a lien on the property as security for the repayment of
a loan. The borrower has use of the property, and the lien is removed
when the obligation is fully paid.
Money paid to insure the mortgage when the down payment is less than
20 percent. See Private Mortgage Insurance.
Negative Amortization top
Occurs when your monthly payments are not large enough to pay all
of the interest due on the loan. This unpaid interest is added to
the unpaid balance of the loan. The danger of negative amortization
is that the homeowner ends up owing more than the original amount
of the loan.
Principal, Interet, Taxes and Insurance. Also called monthly housing
Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point is
equal to 1 percent of the loan amount. (e.g. two points on a $100,000
mortgage would cost $2,000)
Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders
will allow a smaller down payment – as low as 3 1/2% in some cases.
With these loans, borrowers are required to carry private mortgage
insurance. Private mortgage insurance usually requires an initial
premium payment and may require an additional monthly fee, depending
on your loan structure
Money paid to the lender for recording a home sale with the local
authorities, thereby making it part of the public records.
Real Estate Settlement Procedures Act. RESPA is a Federal law that
allows consumers to review information on known or estimated settlement
costs once after application and once prior to or at settlement. The
law requires lenders to furnish the information after application
A policy, usually issued by a title insurance company, which insures
a homebuyer against errors in the title search. The cost of the policy
is usually a function of the value of the property and is often borne
by the purchaser and/or seller. Policies are also available to protect
the lender’s interests.
An examination of municipal records to determine the legal ownership
of property. Usually performed by a title company.
A Federal law which requires the lender or servicer to disclose the
Annual Percentage Rate to home buyers shortly after they apply for
the loan. Also known as Regulation Z.
| The Process
| Market Update
| Charity |
Website Powered by:MJA Consulting