Columbus Homes For Sale | Mortgage Glossary

Earnest money deposit

A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Easement

A right of way giving persons other than the owner access to or over a property.

Effective age

An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its

effective age.

Effective gross income

Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary

is generally

the principal source, but

other income may qualify if it is significant and stable.

Encumbrance

Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Endorser

A person who signs ownership interest over to another party. Contrast with co-maker.

Equal Credit Opportunity Act (ECOA

)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race,

color, religion,

national origin, age, sex,

marital status, or receipt of income from public assistance programs.

Equity

A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the

amount still

owed on its mortgage.

Escrow

An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For

example, the

deposit by a borrower with

the lender of funds to pay taxes and insurance premiums when they become due, or

the deposit of funds or

documents with an attorney or escrow agent to be

disbursed upon the closing of a sale of real estate.

Escrow account

The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.

Escrow analysis

The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes,

insurance,

and other bills when due.

Escrow collections

Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance,

and hazard

insurance.

Escrow disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they

become due.

Escrow payment

The portion 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. Known as "impounds" or "reserves" in some states.

Estate

The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by

an individual

at time of death.

Eviction

The lawful expulsion of an occupant from real property.

Examination of title

The report on the title of a property from the public records or an abstract of the title.

Fair Credit Reporting Act

A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and

establishes

procedures for

correcting mistakes on one's credit record.

Fair market value

The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to

sell, would

accept.

Fannie Mae

A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.

Fannie Mae's Community Home Buyer's Program

An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting

guidelines to increase

a low- or

moderate-income family's buying power and to decrease the total amount of cash needed to

purchase a home. Borrowers who

participate in this model are required

to attend prepurchase home-buyer education sessions.

Federal Housing Administration (FHA)

An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential

mortgage loans

made by private lenders.

The FHA sets standards for construction and underwriting but does not lend money

or plan or construct housing.

Fee simple

The greatest possible interest a person can have in real estate.

FHA mortgage

A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

Finder's fee

A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

First mortgage

A mortgage that is the primary lien against a property.

Fixed-rate mortgage (FRM)

A mortgage in which the interest rate does not change during the entire term of the loan.

Flood insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in

federally designated

flood areas.

Foreclosure

The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property.

This usually

involves a forced sale

of the property at public auction with the proceeds of the sale being applied to the mortgage

debt.

Fully amortized ARM

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest

accrual rate,

over the amortization

term.

Good faith estimate

An estimate of charges which a borrower is likely to incur in connection with a settlement.

Insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms

of the policy.

Housing ratio

The ratio of the monthly housing payment in total (PITI - Principal, Interest, Taxes, and Insurance) divided by the gross

monthly income.

This ratio is sometimes

referred to as the top ratio or front end ratio.

HUD

The U.S. Department of Housing and Urban Development.

Index

A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used

indeces include the

1 Year Treasury Bill, 6

Month LIBOR, and the 11th District Cost of Funds (COFI).

Lien

An encumbrance against property for money due, either voluntary or involuntary.

Lifetime cap

A provision of an ARM that limits the highest rate that can occur over the life of the loan.

Loan to value ratio (LTV)

The ratio of the amount of your loan to the appraised value of the home. The LTV will affect programs available to the borrower

and

generally, the lower the LTV

the more favorable the terms of the programs offered by lenders.

Lock-in

A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of

time. The lock-in

also usually specifies

the number of points to be paid at closing.

Margin

The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.

representative margin would be

2.75%.

Mortgage

A legal document that pledges a property to the lender as security for payment of a debt

Mortgage disability insurance

A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured

borrower for a

specified period of time.

Mortgage insurance (MI)

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a

mortgage

default. Usually required for

loans with an LTV of 80.01% or higher.

Mortgagee

The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.

Mortgagor

The mortgage borrower who gives the mortgage as a pledge to repay.

Non-conforming loan

Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie

Mac (FHLMC)

because of various

reasons, including loan amount, loan characteristics or underwriting guidelines. Non-

conforming loans usually incur a rate

and origination fee premium. The current

non-conforming loan limit is ,601 and above.

Note

A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money

at a

specified date or on demand.

Origination fee

A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a

percentage of the

amount loaned, such as

one percent.

Owner financing

A property purchase transaction in which the property seller provides all or part of the financing.

Planned Unit Developments (PUD)

A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights

in one or

more other parcels.

PITI

Principal, interest, taxes and insurance, the components of a monthly mortgage payment.

Points

Charges levied by the mortgage lender and usually payable at closing. One point represents 1% of the face value of the

mortgage loan.

Prepayment penalty

A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of

schedule.

Principal

Amount of debt, not including interest. The face value of a note or mortgage.

Private mortgage insurance (PMI)

Insurance provided by non-government insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally

requires

private mortgage

insurance for loans with loan-to-value (LTV) percentages greater than 80%.

Qualifying ratios

The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to

borrow. The fixed

monthly expenses would

include PITI along with other obligations such as student loans, car loans, or credit

card payments.

Rate cap

A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.

Rate lock-in

A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set

period of

time.

Rebate

Compensation received from a wholesale lender which can be used to cover closing costs or as a refund to the borrower. Loans

with rebates

often carry higher

interest rates than loans with "points" (see above).

Refinancing

The process of paying off one loan with the proceeds from a new loan using the same property as security.

Residential mortgage credit report (RMCR)

A report requested by your lender that utilizes information from at least two of the three national credit bureaus and

information provided

on your loan application.

Seller carry back

An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.

Survey

A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the

land and

sometimes its area and

topography.

Tenants-uncommon

An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more

persons, there

is no right of

survivorship.

Title

The evidence one has of right to possession of land.

Title insurance

Insurance against loss resulting from defects of title to a specifically described parcel of real property.

Title search

An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove

that the

seller can transfer free and

clear ownership.

Total debt ratio

Monthly debt and housing payments divided by gross monthly income. Also known as Obligations-to-Income Ratio or Back-End

Ratio.

Truth-in-Lending Act

A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between

the lending

terms of different

financial institutions.

Veterans Administration (VA)

A government agency guaranteeing mortgage loans with no down payment to qualified veterans.

Mortgage Glossary

The Anders Team
614-527-0811

Real Estate Essentials for Home Buyers!

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