To reduce the remaining balance on loan by paying more than the scheduled principal amount due.
A mortgage with an interest rate that changes during the loan's life according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation.
The date that the interest rate changes on an adjustable-rate mortgage (ARM).
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
An analysis of a buyer's ability to afford the purchase of a home. Reviews income, liabilities, and available funds consider the type of mortgage you plan to use, the area where you want to purchase a home, and the likely closing costs.
The gradual repayment of a mortgage loan, both principal and interest, by installments.
The length of time required to amortize the mortgage loan is expressed as several months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
The cost of credit expressed as a yearly rate, including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans; however, APR should not be confused with the actual note rate.
A written analysis prepared by a qualified appraiser and estimating the value of a property.
An opinion of a property's fair market value is based on an appraiser's knowledge, experience, and property analysis.
Anything owned of monetary value, including real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).
The transfer of a mortgage from one person to another.
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower, and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.
This is a sum of money given to bind the sale of real estate or a sum of money given to ensure payment or advance funds in processing a loan.
In an ARM with an initial rate discount, the lender gives up several percentage points in interest to reduce the rate and lower the payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate usually increases according to its index rate.
Part of the purchase price of a property is paid in cash and not financed with a mortgage.
The amount of financial interest in a property. Equity is the difference between the property's fair market value and the amount still owed on the mortgage.
An item of value, money, or documents deposited with a third party to be delivered upon a condition's fulfillment. For example, the deposit of funds or documents into an escrow account to be disbursed upon the closing of a sale of real estate.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses become due.
The part of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
FICO® scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information on your credit report. Higher FICO® scores represent lower credit risks, which typically equate to better loan terms.
The primary lien against a property.
A mortgage interest that is fixed throughout the entire term of the loan.
An adjustable-rate mortgage (ARM) with a monthly payment sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
A government-owned corporation that assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
A sum of borrowed money (principal) that is generally repaid with interest.
The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.
The guarantee of an interest rate for a specified period by a lender, including loan terms and points, if any, to be paid at closing. Short term locks (under 21 days) are usually available after lender loan approval only. However, many lenders may permit a borrower to lock a loan for 30 days or more before submitting the loan application.
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
The date on which the principal balance of a loan becomes due and payable.
That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any principal reduction and doesn't cover all of the interest. The loan balance, therefore, increases instead of decreasing.
A legal document that pledges a property to the lender as security for payment of a debt.
An individual or company that brings borrowers and lenders together for loan origination.
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency.
The amount paid by a mortgagor for mortgage insurance.
The borrower in a mortgage agreement.
Amortization means that monthly payments are large enough to pay the interest and reduce the mortgage's principal. Negative amortization occurs when the monthly payments do not cover all of the interest costs. The interest cost that isn't covered is added to the unpaid principal balance. This means that you could owe more than you did at the beginning of the loan even after making many payments. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.
An asset that cannot easily be converted into cash.
An asset that cannot easily be converted into cash.
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Calculations used to determine if a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
A real estate broker or an associate who is an active member of a local real estate board affiliated with the National Association of Real Estate Agents.
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.
Paying off one loan with the proceeds from a new loan using the same property as security.
A credit arrangement, such as a credit card, allows a customer to borrow against a pre-approved credit line when purchasing goods and services.
Where existing mortgages are bought and sold.
The property that will be pledged as collateral for a loan.
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See Owner Financing.
An organization that collects principle 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.
The method used to determine the monthly payment required to repay a mortgage's remaining balance in substantially equal installments over the remaining term of the mortgage at the current interest rate.
A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years) results in increased payments. At the end of the specified period, the rate and payments will remain constant for the loan's remainder.
When 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.