Financing Glossary
Here is a glossary of
Mortgage and Real Estate Financing terms.
Adjustable Rate Mortgage (ARM): A mortgage whose interest rate is adjusted
according to an index over a specific time period.
Annual Cap: Highest or lowest amount that the interest rate of an ARM can increase
or decrease in a year.
Assessed Value: The value of land and improvements to a property used to determine
property taxes.
Balloon Mortgage: A mortgage that requires a large portion of the principal to
be paid in one lump sum.
Bridge Loan: An interim loan that enables a buyer to purchase a home when the
current home has not yet been sold.
Certificate of Title: A document issued by a title company that certifies that the
owner of a property is entitled to sell it.
Closing: The final stage of the home buying process, during which the buyer signs
the mortgage, closing costs are paid, and the real estate transaction is consummated.
Closing Costs: Costs associated with the purchase of a home that must be paid at
the closing. See also Closing Costs Defined.
Contract of Sale: The written and signed agreement specifying the terms and
conditions of a real estate transaction.
Conventional Mortgage: A fixed-rate, fixed-term and fixed-payement loan by a bank
or other lending institution.
Deed: The officially recorded document that transfers real estate from one person
to another.
Discount Points: Amount payable to the lending institution to increase the lenders'
effective yield. Each point is equal to 1% of the mortgage. The borrower can often secure
a lower mortgage interest rate by paying more points.
Earnest Money: A deposit given by the buyer as a sign of good faith in support of
the promised purchase of the home.
FHA Mortgage: A mortgage loan insured by the Federal Housing Administration.
Fixed Rate Mortgage: A loan with one interest rate that lasts the entire term of
the mortgage.
Good Faith Estimates: An estimate provided by the lender that details probable
settlement charges
Lien: A claim on property owned by someone else due to money owed.
Loan Application Fee: A charge paid by the buyer to the lender when applying for a
mortgage.
Loan Origination Fee: A charge paid by the buyer to the lender for processing the
mortgage. Usually 1% of the loan.
Mortgage: A lien or claim against real property given by the buyer to the lender
as security for money borrowed.
Mortgagee: The lender in a mortgage agreement.
Mortgagor: The borrower in a mortgage agreement.
Origination Fee: Usually 1% of the mortgage amount.
PITI: The main components of a mortgage payment including Principal, Interest, Taxes,
and Insurance.
Point: an amount equal to one percent of the principal amount of a mortgage. Points
are often called "discount points."
Prepayables: Several adjustments made to escrow accounts from the date of Closing to
the date of the first payment.
Pre-qualification: A loan application that is submitted for credit approval before the
home to be purchased has been selected.
Principal: Amount of a loan excluding interest or other charges.
Processing Fee: Charged by the processor for services performed from the time the
contract is signed to the date of Closing.
Recording Fee: Charged by the state or municipality to officially record the deed
and mortgage, and to transfer taxes.
Refinancing: The process by which a borrower pays off one loan with the proceeds
from another loan.
Survey: A map that indicates the boundaries, measurements, and improvements of the
property being purchased.
Title Company: The company that performs and insures title searches.
Title Insurance: Charge for insurance that protects the lender by guaranteeing that
the property's title is without legal defects.
Title Search: An examination of title records to be sure the buyer is purchasing a
home that does not have liens, overdue assessments, or other claims that would affect the
value of the title.
VA Mortgage: A loan offered to eligible veterans and guaranteed by the Veteran's
Administration.
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| The purchase of a home
is likely the single largest purchase that you will make. Since there are few people that
can pay cash for a home, it is generally necessary to finance this cost. What is involved?
What steps do you need to take to qualify for and receive the
financing that you need? |
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The Hollee Jo Vail
Advantage |
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