Interest Only (Option) - [MP] An option attached to a mortgage, which allows the borrower to pay only the interest for some period.
Negative Amortization - [MP] A rise in the loan balance when the mortgage payment is less than the interest due. Sometimes called "deferred interest."
Home Equity Lines Of Credit (HELOC) - A Home Equity Line of Credit is a secured line of credit or type of checking account that is tied to the equity in your home. It works much like a credit card in the respect that if you pay down the amount owed, you free-up the amount you can borrow on the credit line. You only incur interest costs on the money you take out of the account which is usually determined by the current prime rate. Most HELOC's start at a short-term "teaser rate" with a low APR. Once the "teaser period" has expired the APR will be indexed and accompanied by a margin of 0.0% or higher. There are very few restrictions, if any, that limit the amount it can adjust and how often. The life cap, however, is usually set between 16-18%. Say, for example, the prime index was at 6.5% with a margin of .5%. Your rate would be 7% for that given time.
Closing Costs - [MP] Costs that the borrower must pay at the time of closing, in addition to the downpayment.
Also see Settlement Costs.
Annual Percentage Rate (APR) - The interest percentage of a loan expressed by the actual rate of interest paid.
Credit Score - [MP] A single numerical score, based on information in an individual's credit report, that measures that individual's creditworthiness. The most widely used credit score is called FICO for Fair Issac Co., which developed it. FICO scores range from 350 to 850, the higher the better.
Debt-to-Income Ratio - A measure of a borrower's financial stability expressed as a percentage.
Good Faith Estimate (GFE) - [MP] The form that lists the settlement charges the borrower must pay at closing, which the lender is obligated to provide the borrower within three business days of receiving the loan application.
Truth in Lending (TIL) - [MP] The federal law that specifies the information that must be provided to borrowers on different types of loans. Also, the form used to disclose this information.
Mortgage Insurance - Insurance written by an independent mortgage insurance company protecting the mortgage broker against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal government writes this form of insurance through the FHA and VA. Mortgage insurance is usually required when the LTV exceeds 80% on a conventional loan.
Reverse Mortgage - [MP] A mortgage loan to an elderly homeowner on which the borrower's debt rises over time, but that need not be repaid until the borrower dies, sells the house, or moves out permanently.
Quitclaim Deed - A deed operating as a release: intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.
Yield Spread Premium - [MP] A payment made by a lender to a mortgage broker for delivering an above-par loan.
CC&Rs (Covenants, Conditions, and Restrictions) - A document that controls the use, requirements, and restrictions of a property.
FHA Loan (Federal Housing Administration) - A federal agency, created by the National Housing Act of 1934, for the purpose of expanding and strengthening home ownership by making private mortgage financing possible on a long-term, low down payment basis. The vehicle is a mortgage insurance program, with premiums paid by the homeowner, to protect lenders against loss on these higher-risk loans. Since 1965, FHA has been part of the newly created Department of Housing and Urban Development (HUD).
MLS — Multiple Listing Service - An organization that collects, compiles, and distributes information about properties listed for sale by its members, who are real estate brokers. Membership isn’t open to the general public, although selected MLS data may be sold to real estate listing websites. MLS’s can be local or regional. There is no “one” MLS covering the entire nation
PITI - Principle, interest, taxes and insurance - (PITI) are the four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing the money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
CMA - Comparative Market Analysis - A CMA is a report that shows prices of properties that are comparable to a subject property and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.
Closing Costs - The entire package of miscellaneous expenses paid by the buyer and seller when the transaction closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney’s charges, recording fees, title insurance, etc. Closing costs generally are paid through escrow.
Contingency - Provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One common example is a buyer’s contractual right to obtain a professional home inspection before purchasing the home.
Title Insurance - An insurance policy that protects a lender’s or owner’s interest in real property from assorted types of unexpected or fraudulent claims of ownership. It’s customary for the buyer to pay for the lender’s title insurance policy.
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