GLOSSARY OF HOME LOAN TERMINOLOGY

ABSTRACT-The written legal history of a property that traces its ownership over the years

ADJUSTABLE RATE MORTGAGE LOAN (ARM)-Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates.  The amounts and times of adjustment are agreed to at the inception of the loan.

AMORTIZATION-Payment of a debt in equal periodic installments of principal and interest.

ANNUAL PERCENTAGE RATE (APR)-The yearly interest percentage of a loan.  A rate which reflects the loan's total finance charges, interest, points, and other fees.

APPRAISAL-A professional opinion of value based upon a factual analysis.

BALLOON NOTE-A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

BIWEEKLY ACCELERATED MORTGAGE-A mortgage repaid by biweekly payments.  A biweekly payment is equal to one-half the regular monthly payment.  This reduced payment is then paid biweekly or 26 times per year.  Under this accelerated plan, the borrower pays off more principal than a borrower making monthly payments.

BLANKET MORTGAGE-A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision.

BUYDOWN-A payment to the lender from the seller, buyer, third party or some combination of these, causing the lender to reduce the interest rate during the early years of a loan.  The buydown is usually for the first 1 to 5 years of the loan.

CAP-The interest rate above which the rate of an Adjustable-Rate Loan cannot be adjusted.

CASH RESERVES-Requires buyers to have sufficient cash remaining after closing to make two months' payments, plus taxes and homeowners insurance.

CERTIFICATE BACKED MORTGAGE-A variation of the buydown.  The seller purchases a savings certificate from the lender.  The lender sets the buyer's interest rate below market.  Should the seller withdraw the certificate funds, the buyer's rate goes to market rate.

CERTIFIED CHECK-A personal check drawn by an individual which is certified to be good.  The bank holds the funds to pay the certified check.  The bank will not honor a stop payment of a certified check.

CHATTEL MORTGAGE-A lien on personal property.  Also called a security interest or financing statement.

CLOSING-The final procedure in which documents are executed and recorded and the sale or loan is completed.

CLOSING COSTS-Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc...

CO-MORTGAGOR-One who signs a mortgage with another as borrower. 

COLLATERAL NOTE-A promissory note secured by specific property.

COMMITMENT LETTER-A formal offer by a lender to lend money to a borrower under specified terms.

CONSTRUCTION LOAN-Short term financing of real estate construction.  Generally followed by long term financing called a "take out" loan, issued upon completion of improvements.

CONVENTIONAL LOAN-A mortgage or deed of trust not obtained under a government insured program, such as F.H.A. or V.A.

CONVERTIBLE MORTGAGE-A mortgage which enables the lender to take an equity position in the collateral security as opposed to that of a lienholder.

CREDIT LINE MORTGAGE-A maximum amount is established as a line of credit.  The borrower can write checks up to this amount.

CREDIT REPORT-A report on the pat ability of a loan applicant to pay installment payments.  Several nationa and local companies make such reports.

DEED-A legal document used to transfer the ownership of a property.

DEFAULT-The failure to perform the legal duty; make payment.

DOWN PAYMENT-Cash portion paid by a buyer from his own funds.

EQUITY-The market value of real property, less the amount of existing liens.

FANNIE MAE (FEDERAL NATIONAL MORTGAGE ASSOCIATION, FNMA)-A government-sponsored corporation that promotes the flow of funds for home loans by purchasing home loans from lenders.

FHA (FEDERAL HOUSING ADMINISTRATION)-A division of the U.S. Department of Housing and Urban Development that insures residential home loans made by private lenders.

FIXED-RATE LOAN-A mortgage having a rate of interest which remains the same for the life of the mortgage.

FREDDIE MAC (FEDERAL HOME LOAN MORTGAGE CORPORATION, FHLMC)-A government-sponsored corporation, that provides a service similar to Fannie Mae's.

GRADUATED PAYMENT MORTGAGE-A mortgage calling for increasingly higher payments over the term of the loan.

HUD-1(SETTLEMENT STATEMENT)-A two-page document that details the sources and uses of all funds collected and paid out by the buyers, sellers, and their agents at closing.

INTEREST-Money charged for the use of money.

INTEREST RATE-The percentage of an amount of money which is paid for its use for a specified time.

LIEN-A legal claim against a property.

LOAN-A lending of a principal sum of money to one who promises to repay said sum, plus interest.

LOAN TO VALUE RATION-The ration, expressed as a percentage, of the amount of a loan to the value or selling price of real property. 

MARGIN-The amount the lender adds to the predetermined index rate of an adjustable-rate loan to determine the new interest rate at each adjustment.

MORTGAGE-The instument by which real estate is hypothecated as security for the repayment of a loan.

OPEN-END MORTGAGE-A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.

POINTS-One percent of the amount of the loan.

PRINCIPAL-Amount of debt, not including interest.  The face value of a note.

PRIVATE MORTGAGE INSURANCE (PMI)-Insurance that protects a lender against part or all of their loss in the event the borrower's default on their home loan.

RECORDING-Filing documents affecting real property as a matter of public record.  Recording is controlled by statute and usually requires the witnessing and notarizong of an instrument to be recorded.

RESPA (REAL ESTATE SETTLEMENT PROCEDURES ACT)-A federal statute effective June 20, 1975, requiring disclosure of certain costs in the sale of residential improved property which is to be financed by a federally insured lender.

TRUTH IN LENDING-A federal law that requires lenders to fully disclosure, in writing, the terms, conditions, and costs of a loan, including the annual percentage rate and other charges.

UNDERWRITER-One who insures another. 

VARIABLE INTEREST RATE-An interest rate which fluctuates as the prevailing rate moves up or down.



CONTACT ME
Julie Nellis, ABR, GRI, e-Pro
Associate broker
Long Realty
1890 E. River Rd.
Tucson, AZ 85718
520-918-3843

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