Adjustable
Rate Mortgage (ARM)
adjustable rate mortgage (ARM), variable rate mortgage or floating rate mortgage is a mortgage loan where the interest rate on the note is periodically adjusted based
on an index, such as 30-year Treasury bills or the
Cost-of-Funds index.
Abstract of Title
Short history of Title to land, noting all Conveyances, Transfers, Grants, Wills and judicial proceedings, and all Encumbrances and Liens, together with evidence of satisfaction and any other facts affecting title.
Assessment
A valuation or a determination as to the value of property. It is often used in connection with assessing property taxes or leving property taxes.
Agent
A licensed person who represents the seller (and/or buyer) and who
provides market assessment, sales or buying strategy, recommends
various services and sources important to the seller or buyer.
Amortization
A method by which monthly mortgage payments are equalized over the
life of the loan despite the fact that the proportion of principal
to interest changes.
Appraisal
Professional and unbiased written opinion of property’s value
based on recent, comparable sales, quality of construction, current
condition and style of architecture.
Assumption
of Mortgage
Assumption of mortgage is the purchase of mortgaged property whereby the buyer accepts liability for the debt that continues to exist. The seller remains liable to the mortgage lender (whether the lender is a commercial bank, thrift, credit union, mortgage banker or mortgage broker) unless the lender agrees to release him.
Broker
A person licensed to represent home buyers or sellers for a contracted
fee. Most real estate offices are managed by a broker who employs
licensed sales agents to sell the properties.
Closing
The final settlement at which time the title is transferred from
seller to buyer, accounts are settled, new mortgages signed and
all fees and expenses dispersed or satisfied.
Closing
Costs
All fees, taxes, charges, commissions and other costs paid by buyer
and/or seller at the closing.
Collateral
Personal property pledged as the security for a debt. The mortgage
is usually the collateral for the property itself.
Commission
A previously agreed upon percentage of the home’s sale price
paid to the listing and selling agent(s).
Credit
Report
A report outlining the credit history of an individual which includes
current and previous debts, payment amounts, late payments and past
due amounts and other related information on every credit source
the individual has used.
Deed
A legal “instrument” that conveys the title to a property
from seller buyer.
Disclosure
Statement concerning the condition of the property for sale and
the surrounding area.
Down
Payment
The buyer’s payment to the seller at the time the sales contract
has been mutually agreed to, or at closing, for the percentage of
the total purchase price required by the buyer’s mortgage loan.
Equity
The difference between the sale price of a property and the mortgage
on the property.
Escrow
Account
A third party account used to retain funds including the property
owner’s real estate taxes, buyer’s earnest money or hazard
insurance premiums.
Free
and Clear Title
Title to a property which is free from any mortgage, lien, or other
encumbrance.
Graduated
Payment Mortgage
This mortgage offers low initial monthly payments which increase
at a pre-determined rate, then cap at a final level for the duration
of the mortgage.
Hazard
Insurance
Often confused with “Homeowner’s” insurance, it’s
designed to compensate for specific hazards including fire and wind.
An “all-risk home owner’s policy” provides more complete
coverage.
Home
Inspection
A formal survey of a home’s structure, mechanical systems and
overall condition, generally performed by a licensed professional
inspector.
Homeowner’s
Policy
A hazard insurance policy covering at the very least the appraised
value of a house and property.
Interest
The pre-determined charge or fee paid to a lender by the borrower
for the use of monies loaned.
Joint Ownership
Two parties share in the ownership of a particular piece of property
Judgment
The judgment of a court against a certain person(s) or company(s) that can cause a lien on the title.
Market
Price
The actual price at which a property is sold.
Market
Value
The price that is established by existing economic conditions, property
location and market style and size preferences.
Mortgage
A legal claim received by the lender on a property as security for
the loan made to a buyer to facilitate the purchase.
Mortgage
Interest
The amount the borrower pays the lender to compensate the lender
for the use of money to purchase the borrower’s home. This
is tax deductible interest.
Negative
Amortization
Most likely to occur with ARMs when monthly payments are not sufficient
to cover interest cost. Additional interest is added to principal
balance and the borrower may end up owing more than at the initiation
of the loan.
Origination
Fee
Similar to a point, this fee is a supplemental fee paid by buyers
to lenders.
Payment
Cap
A limit on the amount monthly payments on an adjustable rate mortgage
can increase or decrease at each adjustment period.
Point
A single percent of the loan principal, often charged by the lender
in addition to various fees and interest.
Prepayment
Penalty
A fee included in the mortgage agreement requiring borrower to pay
in the event the loan is paid before the due date.
Prequalification
An informal estimate of the “financing potential” of a
prospective borrower.
Principal
The amount of money borrowed against which interest and possibly
fees will be charged. (A second meaning: one of the parties to a
contract.)
Prorate
Proportionate division of expense based on days or time occupied
or used by the seller and/or buyer.
Qualify
Ability of a borrower to satisfy a lender’s mortgage approval
requirements.
Refinancing
The process of applying for a new mortgage to gain better terms
or use of equity.
RESPA
Statement
The Real Estate Settlement Procedures Act requires a precise listing
of all closing costs for both sellers and buyers.
Settlement
This term relates to all legal and financial transactions required
to finalize the contract between buyer and seller, at the conclusion
of which closing takes place.
Tax Lien
A tax lien is a lien imposed on property by law to secure payment of taxes. Tax liens may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.
Title
A legal document that defines the property, right of ownership and
possession.
Title
Insurance
An insurance policy that protects the buyer against errors, omissions
or any defects in the title.
Walk-Through
Inspection
The final inspection by the buyer, usually in the company of the
buyer’s real estate sales agent, to ensure that all conditions
noted in the offer-to-purchase, and all seller-related contingencies
have been met. This inspection is most often completed immediately
prior to the official act of closing, after the seller has vacated
the premises.
Warranty
Protection provided to the purchaser regarding the condition of
appliances and pictures. Often, new homes have more extensive warranties
also covering the overall structure.
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