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Mortgage Glossary

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Term Definition
Abstract (of title)

A written summary of the title history of a particular piece of real estate.

Acceleration Clause

A provision of a mortgage or note which provides that the entire outstanding balance will become due and payable in the event of default.

AMC

Appraisal Management Company.  These firms have a panel of fee appraisers signed up with them to do appraisals throughout CA.  VA also has their own panel of VA fee appraisers.

Amortization

Repayment of loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.

Application Fee

That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.

Appraisal

A report made by a qualified person as to the value of a property as of a given date.

APR (Annual Percentage Rate)

The annual percentage rate refers to the total lender related costs of the loan, expressed as a yearly rate.  That will include PMI and 15 days prepaid interest charges.

ARM (Adjustable Rate Mortgage)

A mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index.

Assessed Value

The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.
Assumption of Mortgage: The purchaser takes over mortgage payments for the balance of the loan, assuming primary liability. Unless specifically released by the lender, the seller remains secondarily liable.

Balloon Mortgage

A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the term.

Bridge Loan

A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.

Broker/Agent

The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them on a real estate transaction.

Buydown

Money advanced by an individual (e.g. builder, seller, buyer, lender, developer) to lower monthly mortgage payments for a few years or the whole term.

Cap (interest rate)

The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative amortization.

Cap (payment rate)

The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.

Certificate Of Title

A statement that shows ownership of property, stating that the seller has clear legal title.

Closing Costs

Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called 'settlement costs'.

Closing Statement

A financial disclosure giving an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account.

Closing/COE

The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.

Commission

An agent's or broker's fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.

Commitment

An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.

Comparables

Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

Condominium

Ownership of a single unit in a multiunit building or complex of buildings. Along with this goes a share of ownership of the common areas.

Contingency

A condition that must be met for a contract or a commitment to remain binding.
Conventional Mortgage: Any mortgage loan that is not insured by FHA, guaranteed by VA, of funded by a government authorized bond sale or grant.

Convey

To transfer real estate from one person to another.

Credit Report

The report to a prospective lender on the credit standing of a prospective borrower.

Deed

A legal written document by which title to property is transferred.

Default

Failure to fulfill the terms as agreed to in the mortgage of note.

Down Payment

The difference between the sale price of a property and the mortgage amount.

DTI (Debt to income Ratio)

Most lenders would prefer that the new PITI payment and your monthly debt payments not exceed 45% when divided by your monthly gross income.

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