Adjustable-rate mortgage (ARM)- A mortgage in which the interest rate can change periodically based upon an agreed time-frame. The initial interest rates on ARMs are lower than rates on fixed-rate mortgages, as the borrower is taking the risk of the interest rising over time.
Agency – That relationship between principal and agent which arises out of a contract either expressed or implied, written or oral, wherein an agent is Employed by a person to do certain acts on the person’s behalf in dealing with a third party.
Agent – One who undertakes to transact some business or to manage some affair for another by authority of the latter.
Appraisal – An estimate of a property’s value by an appraiser who is usually presumed to be expert in his work.
Appraiser: one who is trained and educated in the methods of determining the value of property (appraised value). You will pay a fee for an appraisal report containing an opinion as to the value of your property and the reasoning leading to this opinion.
Annual percentage rate (APR)- A figure which reflects the true cost of borrowing money that are one time nonrefundable costs (i.e. points, appraisal fee , credit fee). These one time fees are added to the first years interest payments to obtain the APR.
Credit report fee: this fee covers the cost of a credit report which shows your credit history. The lender uses the information in a credit report to assess your credit worthiness.
Client – The one by whom a broker is employed.
Closing- The meeting to finalize financing by signing all documents and making the appropriate payments, including closing cost.
Closing Costs- Costs, in addition to the property price or loan payoff, that are due at the closing. Closing costs often include: origination fees; discount points; attorney’s fees; costs for title insurance, survey and recording documents; and prepayments of real estate taxes and insurance premiums. Closing cost may include other fees, such as appraisal , credit report cost and underwriting fees. Sometime the seller will help the borrower pay some of these costs.
Closing Date – The date upon which the property is conveyed by the seller to the buyer.
Closing Disclosure- The closing disclose is designed to provide disclosures that will be helpful to consumers in understanding all the costs of the transaction. This form must be provided to consumers at least three business days before consummation of the loan.
Collateral – Additional security pledged for the payment of an obligation.
Contract – An agreement between competent parties to do or not to do certain things which is legally enforceable, whereby each party acquires a right.
Debit – The amount charged as due or owing.
Default: the inability to pay monthly payments in a timely manner or to otherwise meet the mortgage terms.
Delinquency: failure of the borrower to make timely mortgage payments under a loan agreement.
Down Payment: the portion of a home’e purchase price that is paid in cash and is not part of the mortgage loan.
Down Payment Assistance: a special financing program that helps make homeownership a reality for homebuyers who otherwise may not have the funds for a down payment.
Earnest Money Deposit: money you will put down to show that you are serious about purchasing the home. It often becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or may be forfeited if you do not follow through with the deal.
Escrow Account: an impound account in which a portion of your monthly mortgage payment is deposited to cover annual charges for homeowner’s insurance, mortgage insurance (if applicable), and property taxes.
Exclusive Agency – An agreement of employment of a broker to the exclusion of all other brokers; if sale is made by any other broker during term of employment, broker holding exclusive agency is entitled to commissions in addition to the commissions payable to the broker who effected the transaction.
(See Rule 175. 24)
Exclusive Right to Sell – An agreement of employment by a broker under which the exclusive right to sell for a specified period is granted to the broker; if a sale during the term of the agreement is made by the owner or by any other broker, the broker holding such exclusive right to sell is nevertheless entitled to compensation.
(See Rule 175.24)
Fixed Rate- An interest rate that remains the same over the life of the loan.
Foreclosure: a legal process in which the mortgaged property is sold to pay the loan the defaulting borrowers.
Gift Letter- A letter or form verifying that part of the down payment is supplied by someone other than the borrower as a gift that does not have to be repaid.
Home Inspection: an inspection of the mechanical, electrical, and structural aspects of your home. You will pay a fee for this inspection, and the inspector will provide you a written report evaluating the condition of the home.
Homeowner’s Insurance or Home Hazard Insurance: an insurance policy that protects your home and your possessions inside from serious loss, such as that or fire. This insurance is usually required by all lenders to protect their investment and must be obtained before closing your loan.
HUD-1 Settlement Statement: a statement that itemizes the services provided to you and the fees charged for those services. This form is filled out by the person who conduct the settlement.
Interest: a fee charged by the lender for the use of its money.
Interest rate: the charge by the lender for borrowing money expressed as a percentage.
Lender Inspection Fees: this charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector.
Loan Estimate: an estimate of the settlement charges you are likely to incur; it also contains other information about the loan.
Loan to Value (LTV) ratio: a percentage calculated by dividing the amount to be borrowed by the price or appraised value of the home to be purchased (whichever is less). The loan to value rations used to qualify borrowers for a mortgage, and the higher the LTV, the tighter the qualification guidelines for certain mortgage programs become. Low loan to value ratios are considered below 80%, and carry lower rates since borrowers are lower risk.
Market Price – The actual selling price of a property.
Market Value – The most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
Mortgage: the transfer of an interest in property to a lender as a security for a debt. This interest may be transferred with a Deed of Trust in some states.
Origination Fee: a fee charged to the borrower by the loan originator for making a mortgage loan.
Payment Shock: a scenario in which monthly mortgage payments are so high that the borrower may not be able to afford the payments.
PITI: Principle, Interest, Taxes and Insurance: the four elements of a monthly mortgage payment; payments of principle and interest go towards repaying the loan while the portion that covers taxes and insurance goes into an escrow account to cover the fees when they become due.
Pest Inspection: an inspection for termites or other pest infections of your home. This inspection is frequently required by your lender.
Points: amount of money paid to reduce the interest rate on a loan. A point is usually equal to 1% of the loan amount.
Pre-paid items: lenders often require the prepayment of items such as insurance premiums for homeowner’s insurance and real estate taxes.
Prepayment Penalty: a fee charged if the mortgage loan is paid before the scheduled due date.
Private Mortgage Insurance (PMI): insurance that protects your lender if you default on you loan. With conventional loans, mortgage insurance is usually required if you do not make a down payment of at least 20% of the homes appraised value. Your lender may require payment of your first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan in advance at settlement. The same insurance protection on an FHA loan is called Mortgage Insurance Premium (MIP).
Principal – The employer of an agent or broker; the broker’s or
agent’s client.
Real Estate Board – An organization whose members consist primarily of real estate brokers and salespersons.
Realtor – A coined word which may only be used by an active member of a local real estate board, affiliated with the National Association of Real Estate Boards.
Recording and Transfer Charges: these charges include fees paid to the local government for filing official records of a real-estate transaction.
Sales Contract/Agreement: the contract signed by a buyer and seller stating the terms and conditions under which a property will be sold. It may also be called an “Agreement of Sale” or Purchase Contract”.
Settlement/Closing Agent: in some states, a settlement agent, or closing agent, handles the real estate transaction when you buy or sell a home. It may also be an attorney or a title agent. He or she oversees all legal documents, fee payments, and other details of transferring the property o ensure that the conditions of the contract have been met and appropriate real estate taxes have been paid.
Settlement Costs/Closing Costs: the customary costs above and beyond the sales price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and typically detailed to the borrower at the time the LE is given.
Survey Fee: a fee for obtaining a drawing of your property showing the location of the lot, any structures, any any encroachments. The survey fee is usually paid by the borrower.
Title – Evidence that owner of land is in lawful possession thereof; evidence of ownership.
Title Service Fees: title service fees include charges for title search and title insurance if required. This fee also includes the services of a title or settlement agent.
Title Insurance: insurance that protects your lender against any title dispute that may arise over the property. Through a title search, the lender verifies who the actual property-owners are and whether the property is free of liens. The title search company then issues title insurance which protects the title of the property against any unpaid mortgages and judgments. In case a claim is made against the property, the title insurance provides legal protection and pays for court fees and related costs. You may also purchase Owner’s title insurance which protects you as the homeowner.
Valuation – Estimated worth or price. The act of valuing by appraisal.
Warranty Deed – A conveyance of land in which the grantor warrants the title to the grantee.
Zone – An area set off by the proper authorities for specific use; subject to certain restrictions or restraints.
Zoning Ordinance – Act of city or county or other authorities specifying type and use to which property may be put in specific areas.