On a government loan the loan origination fee is one percent of the loan
amount, but additional points may be charged which are called "discount points."
One point equals one percent of the loan amount. On a conventional loan, the loan
origination fee refers to the total number of points a borrower pays.
A payment that is not sufficient to cover the scheduled monthly payment on a
mortgage loan. Normally, a lender will not accept a partial payment, but in times of
hardship you can make this request of the loan servicing collection department.
The date when a new monthly payment amount takes effect on an adjustable-rate
mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date
occurs in the month immediately after the interest rate adjustment date.
For an adjustable-rate mortgage where the interest rate and the minimum
payment amount fluctuate independently of one another, this is a limit on the amount that
payments can increase or decrease during any one adjustment period.
For an adjustable-rate mortgage, a limit on the amount that the interest rate
can increase or decrease during any one adjustment period, regardless of how high or low
the index might be.
This stands for principal, interest, taxes and insurance. If you have an
"impounded" loan, then your monthly payment to the lender includes all of these
and probably includes mortgage insurance as well. If you do not have an impounded account,
then the lender still calculates this amount and uses it as part of determining your
debt-to-income ratio.
A cash amount that a borrower must have on hand after making a down payment
and paying all closing costs for the purchase of a home. The principal, interest, taxes,
and insurance (PITI) reserves must equal the amount that the borrower would have to pay
for PITI for a predefined number of months.
A type of ownership where individuals actually own the building or unit they
live in, but common areas are owned jointly with the other members of the development or
association. Contrast with condominium, where an individual actually owns the airspace of
his unit, but the buildings and common areas are owned jointly with the others in the
development or association.
A legal document that authorizes another person to act on one's behalf.
A power of attorney can grant complete authority or can be limited to certain acts and/or
certain periods of time.
A loosely used term which is generally taken to mean that a borrower has
completed a loan application and provided debt, income, and savings documentation which an
underwriter has reviewed and approved. A pre-approval is usually done at a certain loan
amount and making assumptions about what the interest rate will actually be at the time
the loan is actually made, as well as estimates for the amount that will be paid for
property taxes, insurance and others. A pre-approval applies only to the borrower. Once a
property is chosen, it must also meet the underwriting guidelines of the
lender. Contrast with pre-qualification
Any amount paid to reduce the principal balance of a loan before the due
date. Payment in full on a mortgage that may result from a sale of the property, the
owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment
means payment occurs before the loan has been fully amortized.
This usually refers to the loan officer's written opinion of the ability
of a borrower to qualify for a home loan, after the loan officer has made inquiries about
debt, income, and savings. The information provided to the loan officer may have been
presented verbally or in the form of documentation, and the loan officer may or may not
have reviewed a credit report on the borrower.
The interest rate that banks charge to their preferred customers. Changes in
the prime rate are widely publicized in the news media and are used as the indexes in some
adjustable rate mortgages, especially home equity lines of credit. Changes in the prime
rate do not directly affect other types of mortgages, but the same factors that influence
the prime rate also affect the interest rates of mortgage loans.
The four components of a monthly mortgage payment on impounded loans.
Principal refers to the part of the monthly payment that reduces the remaining balance of
the mortgage. Interest is the fee charged for borrowing 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.
Mortgage insurance that is provided by a private mortgage insurance company
to protect lenders against loss if a borrower defaults. Most lenders generally require MI
for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
A project or subdivision that includes common property that is owned and
maintained by a homeowners' association for the benefit and use of the individual PUD unit
owners.
Calculations that are used in determining whether a borrower can qualify for a
mortgage. There are two ratios. The "top" or "front" ratio is a
calculation of the borrower's monthly housing costs (principle, taxes, insurance,
mortgage insurance, homeowner's association fees) as a percentage of monthly income.
The "back" or "bottom" ratio includes housing costs as will as all
other monthly debt. [Top]
A commitment issued by a lender to a borrower or other mortgage originator
guaranteeing a specified interest rate for a specified period of time at a specific cost.
Land and appurtenances, including anything of a permanent nature such as structures,
trees, minerals, and the interest, benefits, and inherent rights thereof.
A real estate agent, broker or an associate who holds active membership in a local
real estate board that is affiliated with the National Association of Realtors.
The public official who keeps records of transactions that affect real property in the
area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
The noting in the registrar's office of the details of a properly executed legal
document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of
mortgage, thereby making it a part of the public record.
Insurance that protects a landlord against loss of rent or rental value due to fire or
other casualty that renders the leased premises unavailable for use and as a result of
which the tenant is excused from paying rent.
A fund set aside for replacement of common property in a condominium, PUD, or
cooperative project -- particularly that which has a short life expectancy, such as
carpeting, furniture, etc.
A credit arrangement, such as a credit card, that allows a customer to borrow against
a preapproved line of credit when purchasing goods and services. The borrower is billed
for the amount that is actually borrowed plus any interest due.
A provision in an agreement that requires the owner of a property to give another
party the first opportunity to purchase or lease the property before he or she offers it
for sale or lease to others.
An organization that collects principal and interest payments from borrowers and
manages borrowers' escrow accounts. The servicer often services mortgages that have
been purchased by an investor in the secondary mortgage market.
A drawing or map showing the precise legal boundaries of a property, the location of
improvements, easements, rights of way, encroachments, and other physical features.
As opposed to joint tenancy, when there are two or more individuals on title to a
piece of property, this type of ownership does not pass ownership to the others in the
event of death.
A process by which a lender uses another party to completely or partially originate,
process, underwrite, close, fund, or package the mortgages it plans to deliver to the
secondary mortgage market.
Any means by which the ownership of a property changes hands. Lenders consider all of
the following situations to be a transfer of ownership: the purchase of a property
"subject to" the mortgage, the assumption of the mortgage debt by the property
purchaser, and any exchange of possession of the property under a land sales contract or
any other land trust device.
An index that is used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds
for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield
curve, which is based on the closing market bid yields on actively traded Treasury
securities in the over-the-counter market. [Top]
A federal law that requires lenders to fully disclose, in writing, the terms and
conditions of a mortgage, including the annual percentage rate (APR) and other charges.
An adjustable-rate mortgage (ARM) that has one interest rate for the first five or
seven years of its mortgage term and a different interest rate for the remainder of the
amortization term.
A property that consists of a structure that provides living space (dwelling units)
for two to four families, although ownership of the structure is evidenced by a single
deed.
Having the right to use a portion of a fund such as an individual retirement fund. For
example, individuals who are 100 percent vested can withdraw all of the funds that are set
aside for them in a retirement fund. However, taxes may be due on any funds that are
actually withdrawn.
An agency of the federal government that guarantees residential mortgages made to
eligible veterans of the military services. The guarantee protects the lender against loss
and thus encourages lenders to make mortgages to veterans.
