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Mortgage Glossary

 

ARM (Adjustable Rate Mortgage)

A mortgage in which the interest rate is adjusted periodically, based on the movement of the financial index

 

Amortization

Repayment of loan installment payments. As the payments are made, the debt is reduced so that at the end of the fixed period or term, no money will be owed.

 

Appraisal

        A report made by a qualified person as to the value of the property as of a given date.

 

Assumption of Mortgage

        The purchaser takes over mortgage payments for the balance of the loan, assuming primary liability.

 

Bridge Loan

A short term loan secured by the equity an a yet unsold house, with the funds to be used for a down payment and/or closing costs on a new house.

Closing

The concluding day of a real estate transaction., when title passes from the seller to buyer. 

 

Closing Costs

Expenses (Over and above the price of the property) incurred by buyers and sellers in transferring ownership of property.

 

Commitment

An agreement between lender and borrower to loan money at a future date, subject to certain condition.

 

Conventional Mortgage

            Any mortgage loan that is not insured

 

Credit Report

            The report to a prospective lender on the credit standing of a prospective lender.

 

Equity

The value in which the owner has in real estate over and above the mortgage against it.  When the mortgage and all other debts against the property are  paid in full, the owner has 100% equity in the property.

 

Fixed Rate Mortgage

A mortgage with an interest rate and a monthly payment that remain constant over the life of the loan.

 

Foreclosure

A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrowers debt.

 

Gross Income

            Normal income prior to any payroll deductions, that is regular and dependable.

 

Loan to Value Ratio

The relationship between the amount of the mortgage and property value  shown as a percentage.

 

Market Value

The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure

 

Mortgage

A contract in which a borrower’s property is pledged as security for a loan which is to be repaid on an installment basis.

 

Offer to Purchase

A written proposal to buy a piece of real estate that becomes binding when accepted by the seller.

 

PIT

            An acronym for payment to lender that cover principle, interest and taxes.

 

Prepayment Penalty

A charge paid to the lender by the borrower if a mortgage loan is repaid before it’s term is over.

 

Pre-Approval

A commitment by a lender to extend credit provided that specific conditions are met.

 

Pre-Qualification

A preliminary assessment of a buyer’s ability to secure a loan, based on a specific set of lending guidelines and buyer representations made.  This is not a guarantee or commitment by a lender to extend credit.

 

Principal

The amount borrowed or remaining unpaid; also the part of the monthly payment  that reduces the outstanding balance of the mortgage.

 

Qualifying Ratios

Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt to income ratios.

 

Refinancing

Repaying a debt with the proceeds of a new loan, using the same property as  security.

 

Second Mortgage

A loan issued on property that is already encumbered by an existing mortgage (i.e. the first mortgage). The second mortgage is subordinate to the first.

 

Survey

A map prepared by an engineer or surveyor charting a particular piece of real estate.

 

Title

Ownership of a property.  A clear title is one without any outstanding liens or encumbrances which could impair the title.

 

Title Search

A check of public record to disclose the past and current facts regarding ownership of a particular property.

 

Underwriting

The process of evaluating a loan application to determine the risk involved for the lender.