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A-B Terms

July 23, 2010 By Leave a Comment

Adjustable Rate Mortgage (ARM): A mortgage loan with payments usually lower than a fixed rate initially, but is subject to changes in interest rates. There are a variety of ARMs that can have an initial interest rate that lasts three to 10 years, adjusting annually thereafter. They are described as 3/1, 5/1, 7/1 and 10/1. A 3/1 ARM starts out with a low rate that lasts three years, then is adjusted annually. A 5/1 ARM has an introductory rate that lasts five years, and 7/1 and 10/1 ARMs have intro rates that last seven and 10 years. The monthly payment amount is usually subject to a cap.

Amortization: Repayment of a mortgage loan through regular monthly installments of principal and interest. At the end of the scheduled payments (e.g., monthly payments for 15 or 30 years), you will own your home. [Read more...]

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C, D, E, F Terms

July 23, 2010 By Leave a Comment

Cap: A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.

COFI: Acronym for 11th District Cost of Funds Index, a common index to which loans are tied. The COFI is tied to interest paid on savings accounts.

Collateral: In real estate, property offered to secure [or offered as security for] repayment of a loan, though not with the intention of transferring property ownership. [Read more...]

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G, H, I , J, L, M Terms

July 23, 2010 By Leave a Comment

Ginnie Mae: A government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment. Like Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders. Ginnie Mae stands for Government National Mortgage Association (GNMA).

Good faith estimate (GFE): A written estimate of all expected closing fees including pre-paid and escrow items as well as lender charges. It must be given to the borrower, by a potential lender, within three days after submission of a mortgage loan application. By law, brokers and lenders are required to make as accurate an estimate as possible.

Homeowner’s insurance: Provides damage protection for your home and personal property from a variety of events, including fire, lightning, burglary, vandalism, storms, explosions, and more. All homeowner’s insurance policies contain personal liability coverage, which protects against lawsuits involving injuries that occur on and off your property. It is required by most lenders. [Read more...]

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N, O, P Terms

July 23, 2010 By Leave a Comment

Negative amortization: When the payment on a loan is less than the interest that accrues on the principal. The balance of interest owed is added to the total loan.

Origination: The process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Origination fee: The fee a lender charges for processing a loan. This includes the cost to prepare loan documents, check a borrower’s credit history, and inspect the property.

Par rate: A rate of interest on a loan for which the lender does not charge (nor pay) points. An interest rate lower than the par rate would cost the broker money; an interest rate higher than the par rate would pay the broker a commission. [The par rate can vary, depending on the qualifications of a particular borrower.] [Read more...]

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Q-Z Terms

July 23, 2010 By Leave a Comment

Refinancing: The act of paying off one loan by obtaining another. Refinancing is generally done to secure better loan terms, such as a lower interest rate.

RESPA: The Real Estate Settlement Procedures Act is a 1974 law aimed at protecting consumers by requiring disclosures (including a Good Faith Estimate) and forbidding kickbacks for referrals among the service providers involved in the sale of a home. For example, a real estate agent may not receive a payment for referring the client to a particular title insurance company.

Seller’s market: When the demand for homes in a given marketplace exceeds the supply of properties on the market. [Read more...]

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