| |
| 30 Year Fixed Rate |
| 5.5
- Rate |
5.676
- APR | | 15
Year Fixed Rate | | 5.375
- Rate | 5.595
- APR |
| 5 Year Fixed Rate |
| 4.875
- Rate |
4.778 - APR | | | |
|
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| |
| Click
here to access downloadable loan forms for loan
applicants and loan officers. |
|
| |
We work to get you the best loan possible. Our qualification process is simple and fast.
Fill out our easy online loan
application! |
|
| |
| To see
what possibilities are available for you at Western Pacific Mortgage,
please submit your cover letter and resumé by email. |
|
|
 |
|
Dictionary
of Terms Used In Mortgage Loan Financing
We have assembled these terms
to help you to have a better understanding of mortgage financing.
Please feel free to call on us for more information as well
as a competitive array of real estate financing plans.
|
| 7/23
and 5/25 Mortgages |
Mortgages
with a one time rate adjustment after seven years and
five years respectively. |
| 3/1,
5/1, 7/1 and 10/1 ARMs |
Adjustable
rate mortgages in which rate is fixed for three year,
five year, seven year and 10-year periods, respectively,
but may adjust annually after that. |
| -
A - |
|
| Acceleration |
The right of the mortgagee
(lender) to demand the immediate repayment of the mortgage
loan balance upon the default of the mortgagor (borrower),
or by using the right vested in the Due on Sale Clause. |
| Adjustable Rate Mortgage
(ARM) |
A mortgage in which the
interest rate is adjusted periodically based on a pre-selected
index. Also sometimes known as a renegotiable rate mortgage,
variable rate mortgage or Canadian rollover mortgage. |
| Adjusted Basis |
The cost of a property
plus the value of any capital expenditures for improvements
to the property minus any depreciation taken. |
| 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. |
| Adjustment Date |
The date that the interest
rate changes on an adjustable rate mortgage (ARM). |
| Adjustment Interval
|
On an adjustable rate
mortgage, the time between changes in the interest rate
and/or monthly payment, typically one, three or five years
depending on the index. |
| Adjustment Period
|
The period elapsing between
adjustment dates for an adjustable rate mortgage (ARM). |
| Affordability Analysis
|
An analysis of a buyer’s
ability to afford the purchase of a home. Reviews income,
liabilities, and available funds, and considers the type
of mortgage you plan to use, the area where you want to
purchase a home, and the closing costs that are likely.
|
| Amortization |
Loan payment divided into
equal periodic payments calculated to pay off the debt
at the end of a fixed period, including accrued interest
on the outstanding balance. |
Amortization Term
|
The length of time required
to amortize the mortgage loan expressed as a number of
months. For example, 360 months is the amortization term
for a 30-year fixed rate mortgage. |
| Annual Percentage Rate
(APR) |
The measurement of the
full cost of a loan including interest and loan fees expressed
as a yearly percentage rate. Because all lenders apply
the same rules in calculating the annual percentage rate,
it provides consumers with a good basis for comparing
the cost of different loans. |
Appraisal |
An estimate of the value
of property made by a qualified professional called an
"appraiser.” |
| Appraised Value |
An opinion of a property's
fair market value, based on an appraiser's knowledge,
experience, and analysis of the property. |
Assessment |
A local tax levied against
a property for a specific purpose, such as a sewer or
street lights. |
Assignment |
The transfer of a mortgage
from one person to another. |
Assumability |
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.
|
Assumption |
The agreement between
buyer and seller where the buyer takes over the payments
on an existing mortgage from the seller. Assuming a loan
can usually save the buyer money since this is an existing
mortgage debt, unlike a new mortgage where closing cost
and new, probably higher, market rate interest charges
will apply. |
| Assumption Fee |
The fee paid to a lender
(usually by the purchaser of real property) when an assumption
takes place. |
|
| -
B - |
|
Balloon Mortgage |
A loan which is amortized
for a longer period than the term of the loan. Usually
this refers to a thirty year amortization and a five or
seven year term. At the end of the term of the loan, the
remaining outstanding principal on the loan is due. This
final payment is known as a balloon payment. |
| Balloon Payment |
The final lump sum paid
at the maturity date of a balloon mortgage. |
| Biweekly Payment Mortgage
|
A plan to reduce the
debt every two weeks (instead of the standard monthly
payment schedule). The 26 (or possibly 27) biweekly payments
are each equal to one half of the monthly payment required
if the loan were a standard 30-year fixed rate mortgage.
The result for the borrower is a substantial savings in
interest. |
Blanket Mortgage |
A mortgage covering at
least two pieces of real estate as security for the same
mortgage. |
| Borrower (Mortgagor)
|
One who applies for and
receives a loan in the form of a mortgage with the intention
of repaying the loan in full. |
| Bridge Loan |
A second trust that is
collateralized by the borrower's present home allowing
the proceeds to be used to close on a new house before
the present home is sold. Also known as "swing loan."
|
| Broker |
An individual in the
business of assisting in arranging funding or negotiating
contracts for a client but who does not loan the money
himself. Brokers usually charge a fee or receive a commission
for their services. |
| Buy Down |
When the lender and/or
the home builder subsidized the mortgage by lowering the
interest rate during the first few years of the loan.
While the payments are initially low, they will increase
when the subsidy expires. |
|
| -
C - |
|
| Cash Flow |
The amount of cash derived
over a certain period of time from an income producing
property. The cash flow should be large enough to pay
the expenses of the income producing property (mortgage
payment, maintenance, utilities, etc...). |
| Caps (interest) |
Consumer safeguards which
limit the amount of change to the interest rate for an
adjustable rate mortgage. |
| Caps (payment) |
Consumer safeguards which
limit the amount of change to the monthly payments for
an adjustable rate mortgage. |
| Certificate of Eligibility |
The document given to
qualified veterans which entitles them to VA guaranteed
loans for homes, business and mobile homes. Certificates
of eligibility may be obtained by sending form DADA (Separation
Paper) to the local VA office with VA form 1880 (Request
for Certificate of Eligibility). |
| Certificate of Reasonable
Value (CRV) |
An appraisal issued by
the Veterans Administration showing the property's current
market value. |
| Certificate of Veteran
Status |
The document given to
veterans or reservists who have served 90 days of continuous
active duty (including training time). It may be obtained
by sending DD 214 to the local VA office with form 26-8261a
(Request for Certificate of Veteran Status). This document
enables veterans to obtain lower down payments on certain
FHA insured loans. |
| Change Frequency |
The frequency (in months)
of payment and/or interest rate changes in an adjustable
rate mortgage (ARM). |
| Closing |
The meeting between the
buyer, seller and lender or their agents where the property
and funds legally change hands, also called settlement.
Closing costs usually include an origination fee, discount
points, appraisal fee, title search and insurance, survey,
taxes, deed recording fee, credit report charge and other
costs assessed at settlement. The cost of closing usually
are about 3 percent to 6 percent of the mortgage amount. |
| Closing Costs |
Expenses over and above
the price of the property that are incurred by buyers
and sellers when transferring ownership of a property.
Closing costs normally include an origination fee, property
taxes, charges for title insurance and escrow costs, appraisal
fees, etc. Closing costs will vary according to the area
country and the lenders used. |
| COFI |
An adjustable-rate mortgage
with a rate that adjusts based on a cost-of-funds index,
often the 11th District Cost of Funds. |
| Construction Loan |
A short term interim loan
to pay for the construction of buildings or homes. These
are usually designed to provide periodic disbursements
to the builder as he or she progresses. |
| Consumer Reporting Agency
(or Bureau) |
An organization that handles
the preparation of reports used by lenders to determine
a potential borrower's credit history. The agency gets
data for these reports from a credit repository and other
sources. |
| Contract Sale or Deed |
A contract between purchaser
and a seller of real estate to convey title after certain
conditions have been met. It is a form of installment
sale. |
| Conventional Loan |
A mortgage not insured
by FHA or guaranteed by VA. |
| Conversion Clause |
A provision in an ARM
allowing the loan to be converted to a fixed-rate at some
point during the term. Usually conversion is allowed at
the end of the first adjustment period. The conversion
feature may cost extra. |
| Credit Report |
A report documenting
the credit history and current status of a borrower's
credit standing. |
| Credit Risk Score |
A credit risk score is
a statistical summary of the information contained in
a consumer's credit report. The most well known type of
credit risk score is the Fair Isaac or FICO score. This
form of credit scoring is a mathematical summary calculation
that assigns numerical values to various pieces of information
in the credit report. The overall credit risk score is
highly relative in the credit underwriting process for
a mortgage loan. |
|
| -
D - |
|
| Debt-to-Income Ratio |
The ratio, expressed as
a percentage, which results when a borrower's monthly
payment obligation on long term debts is divided by his
or her gross monthly income. See housing expenses-to-income
ratio. |
| Deed of Trust |
In many states, this document
is used in place of a mortgage to secure the payment of
a note. |
| Default |
Failure to meet legal
obligations in a contract, specifically, failure to make
the monthly payments on a mortgage. |
| Deferred Interest |
When a mortgage is written
with a monthly payment that is less than required to satisfy
the note rate, the unpaid interest is deferred by adding
it to the loan balance. See negative amortization. |
| Delinquency |
Failure to make payments
on time. This can lead to foreclosure. |
| Department of Veterans
Affairs (VA) |
An independent agency
of the federal government which guarantees long term,
low-or-no-down payment mortgages to eligible veterans.
|
| Discount Point |
See point |
| Down Payment |
Money paid to make up
the difference between the purchase price and the mortgage
amount. |
| Due-on-Sale-Clause |
A provision in a mortgage
or deed of trust that allows the lender to demand immediate
payment of the balance of the mortgage if the mortgage
holder sells the home. |
|
| -
E - |
|
| Earnest Money |
Money given by a buyer
to a seller as part of the purchase price to bind a transaction
or assure payment. |
| Entitlement |
The VA home loan benefit
is called an entitlement (i.e. entitlement for a VA guaranteed
home loan). This is also known as eligibility. |
| 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 |
The difference between
the fair market value and current indebtedness, also referred
to as the owner's interest. The value an owner has in
real estate over and above the obligation against the
property. |
| Escrow |
An account held by the
lender into which the home buyer pays money for tax or
insurance payments. Also earnest deposits held pending
loan closing. |
| 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 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. |
|
| -
F - |
|
| Fannie Mae |
See Federal National
Mortgage Association. |
| Farmers Home Administration
(FmHA) |
Provides financing to
farmers and other qualified borrowers who are unable to
obtain loans elsewhere. |
| Federal Home Loan Bank
Board (FHLBB) |
The former name for the
regulatory and supervisory agency for federally chartered
savings institutions. The agency is now called the Office
of Thrift Supervision. |
| Federal Home Loan Mortgage
Corporation (FHLMC) also called "Freddie Mac"
|
A government sponsored
entity that purchases conventional mortgage from insured
depository institutions and HUD-approved mortgage bankers.
|
| Federal Housing Administration
(FHA) |
A division of the Department
of Housing and Urban Development. Its main activity is
the insuring of residential mortgage loans made by private
lenders. FHA also sets standards for underwriting mortgages. |
| Federal National Mortgage
Association (FNMA) also know as "Fannie Mae"
|
A government sponsored
entity that purchases and sells conventional residential
mortgages as well as those insured by FHA or guaranteed
by VA. |
| FHA Loan |
A loan insured by the
Federal Housing Administration open to all qualified home
purchasers. While there are limits to the size of FHA
loans, they are generous enough to handle moderately priced
homes almost anywhere in the country. |
FHA Mortgage Insurance |
Requires a fee (up to
2.25 percent of the loan amount) paid at closing to insure
the loan with FHA. In addition, FHA mortgage insurance
requires an annual fee of up to 0.5 percent of the current
loan amount, paid in monthly installments. The lower the
down payment, the more years the fee must be paid. |
| FHLMC |
The Federal Home Loan
Mortgage Corporation provides a secondary market for savings
and loans by purchasing their conventional loans. Also
known as "Freddie Mac." |
| Firm Commitment |
A promise by FHA to insure
a mortgage loan for a specified property and borrower.
A promise from a lender to make a mortgage loan. |
| First Mortgage |
The primary lien against
a property. |
| Fixed Installment |
The monthly payment due
on a mortgage loan including payment of both principal
and interest. |
| Fixed Rate Mortgage |
The mortgage interest
rate will remain the same on these mortgages throughout
the term of the mortgage for the original borrower. |
| 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. |
| FNMA |
The Federal National
Mortgage Association is a secondary mortgage institution.
FNMA buys VA, FHA, and conventional mortgages from primary
lenders. Also known as "Fannie Mae." |
| Foreclosure |
A legal process by which
the lender or the seller forces a sale of a mortgaged
property because the borrower has not met the terms of
the mortgage. Also known as a repossession of property.
|
| Freddie Mac |
See Federal Home Loan
Mortgage Corporation |
|
| -
G - |
|
| Ginnie Mae |
See Government National
Mortgage Association. |
| Government National Mortgage
Association (GNMA) |
Also known as "Ginnie
Mae." Provides sources of funds for residential mortgages,
insured or guaranteed by FHA or VA. |
| Graduated Payment Mortgage
(GPM) |
A type of flexible payment
mortgage where the payments increase for a specified period
of time and then level off. This type of mortgage has
negative amortization built into it. |
| Growing Equity Mortgage
(GEM) |
A fixed rate mortgage
that provides scheduled payment increases over an established
period of time. The increased amount of the monthly payment
is applied directly toward reducing the remaining balance
of the mortgage. |
| Guaranty |
A promise by one party
to pay a debt or perform an obligation contracted by another
if the original party fails to pay or perform according
to a contract. |
| Guarantee Mortgage |
A mortgage that is guaranteed
by a third party. |
|
| -
H - |
|
| Hazard Insurance |
A form of insurance in
which the insurance company protects the insured from
specified losses, such as fire, windstorm and the like.
|
| Housing Expenses-to-Income
Ratio |
The ratio, expressed
as a percentage, which results when a borrower's housing
expenses are divided by his/her gross monthly income.
See debt-to-income ratio. |
| HUD-1 Statement |
A document that provides
an itemized listing of the funds that are payable at closing.
Items that appear on the statement include real estate
commissions, loan fees, points and initial escrow amounts.
Each item on the statement is represented by a separate
number within a standardized numbering system. The totals
at the bottom of the HUD-1 statement define the seller's
net proceeds and the buyer's net payment at closing. |
 |
| -
I - |
|
| Impound |
The portion of a borrower's
monthly payments held by the lender or servicer to pay
for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known
as reserves. |
| Index |
A published interest rate
against which lenders measure the difference between the
current interest rate on an adjustable rate mortgage and
that earned by other investments (such as one, three,
and five year U.S. Treasury security yields, the monthly
average interest rate on loans closed by savings and loan
institutions, and the monthly average costs-of-funds incurred
by savings and loans), which is then used to adjust the
interest rate on an adjustable mortgage up or down. |
| Indexed Rate |
The sum of the published
index plus the margin. For example if the index is 4%
and the margin is 2.75%, the indexed rate would be 6.75%.
Often, lenders charge less than the indexed rate the first
year of an adjustable rate mortgage. |
| Initial Interest Rate
|
This refers to the original
interest rate of the mortgage at the time of closing.
This rate changes for an adjustable rate mortgage (ARM).
It's also known as "start rate" or "teaser."
|
| Installment |
The regular periodic
payment that a borrower agrees to make to a lender. |
| Insured Mortgage |
A mortgage that is protected
by the Federal Housing Administration (FHA) or by private
mortgage insurance (MI). |
| Interest |
The fee charged for borrowing
money. |
| Interest Accrual Rate
|
The percentage rate at
which interest accrues on the mortgage. In most cases,
it is also the rate used to calculate the monthly payments.
|
| Interest Rate Buydown
Plan |
An arrangement that allows
the property seller to deposit money to an account. That
money is then released each month to reduce the mortgagor's
monthly payments during the early years of a mortgage.
|
| Interest Rate Ceiling
|
For an adjustable rate
mortgage (ARM), the maximum interest rate, as specified
in the mortgage note. |
| Interest Rate Floor |
For an adjustable rate
mortgage (ARM), the minimum interest rate, as specified
in the mortgage note. |
| Interim Financing |
A construction loan made
during completion of a building or a project. A permanent
loan usually replaces this loan after completion. |
| Investor |
A money source for a
lender. |
|
| -
J - |
|
| Jumbo Loan |
A loan which is larger
than the limits set by the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation. Because
jumbo loans cannot be funded by these two agencies, they
usually carry a higher interest rate. |
|
| -
L - |
|
| Late Charge |
The penalty a borrower
must pay when a payment is made a stated number of days
after the due date. |
| Lease-Purchase Mortgage
Loan |
An alternative financing
option that allows low and moderate income home buyers
to lease a home with an option to buy. Each month's rent
payment consists of principal, interest, taxes and insurance
(PITI) payments on the first mortgage plus an extra amount
that accumulates in a savings account for a down payment. |
| Liabilities |
A person's financial obligations.
Liabilities include long term and short term debt. |
| Lien |
A claim upon a piece
of property for the payment or satisfaction of a debt
or obligation. |
| Lifetime Payment Cap
|
For an adjustable rate
mortgage (ARM), a limit on the amount that payments can
increase or decrease over the life of the mortgage. |
| Lifetime Rate Cap |
For an adjustable rate
mortgage (ARM), a limit on the amount that the interest
rate can increase or decrease over the life of the loan.
See cap. |
| Loan |
A sum of borrowed money
(principal) that is generally repaid with interest. |
| Loan to Value Ratio |
The relationship between
the amount of the mortgage loan and the appraised value
of the property expressed as a percentage. |
| Lock |
A lender's guarantee
that the mortgage rate quoted will be good for a specific
number of days from the day of application. |
|
| -
M - |
|
| Margin |
The amount a lender adds
to the index on an adjustable rate mortgage to establish
the adjusted interest rate. |
| Market Value |
The highest price that
a buyer would pay and the lowest price a seller would
accept on a property. Market value may be different from
the price a property could actually be sold for at a given
time. |
| Maturity |
The date on which the
principal balance of a loan becomes due and payable. |
| MIP (Mortgage Insurance
Premium) |
Insurance from FHA to
the lender against incurring a loss on account of the
borrower's default. |
| Monthly Fixed Installment |
The 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 amount for principal
reduction and doesn't cover all of the interest. The loan
balance therefore increases instead of decreasing. |
| Mortgage |
A legal document that
pledges a property to the lender as security for payment
of a debt. |
| Mortgage Banker |
A company that originates
mortgages for resale in the secondary mortgage market.
|
| Mortgage Broker |
An individual or company
that charges a service fee to bring borrowers and lenders
together for the purpose of loan origination. |
| Mortgagee |
The lender. |
| Mortgage Insurance |
Money paid to insure
the mortgage when the down payment is less than 20 percent.
See private mortgage insurance, FHA mortgage insurance.
|
| Mortgage Life Insurance
|
A type of term life insurance.
In the event that the borrower dies while the policy is
in force, the mortgage debt is automatically paid by insurance
proceeds. |
| Mortgagor |
The borrower or homeowner.
|
|
| -
N - |
|
| Negative Amortization |
When your monthly payments
are not large enough to pay all the interest due on the
loan. This unpaid interest is added to the unpaid balance
of the loan. The home buyer ends up owing more than the
original amount of the loan. |
| Net Effective Income
|
The borrower's gross
income minus federal income tax. |
| Non Assumption Clause
|
A statement in a mortgage
contract forbidding the assumption of the mortgage without
the prior approval of the lender. |
| Note |
A legal document that
obligates a borrower to repay a mortgage loan at a stated
interest rate during a specified period of time. |
|
| -
O - |
|
| Office of Thrift Supervision
(OTS) |
The regulatory and supervisory
agency for federally chartered savings institutions. Formally
known as Federal Home Loan Bank Board. |
| One Year Adjustable Rate
Mortgage |
Mortgage where the annual
rate changes yearly. The rate is usually based on movements
of a published index plus a specified margin, chosen by
the lender. |
| Origination Fee |
The fee charged by a lender
to prepare loan documents, make credit checks, inspect
and sometimes appraise a property; usually computed as
a percentage of the face value of the loan. |
| Owner Financing |
A property purchase transaction in
which the party selling the property provides all or part
of the financing. |
|
| -
P - |
|
| Payment Change Date |
The date when a new monthly
payment amount takes effect on an adjustable rate mortgage
(ARM) or a graduated-payment mortgage (GPM). Generally,
the payment change date occurs in the month immediately
after the adjustment date. |
| Periodic Payment Cap |
A limit on the amount
that payments can increase or decrease during any one
adjustment period. |
| Point |
A fee paid to the lender
on closing day to increase the effective yield of the
mortgage. A point is one percent of the amount of the
mortgage loan. Also called a discount point. |
| Periodic Rate Cap |
A limit on the amount
that the interest rate can increase or decrease during
any one adjustment period, regardless of how high or low
the index might be. |
| Permanent Loan |
A long term mortgage,
usually ten years or more. Also called an "end loan."
|
| PITI |
Principal, interest, taxes
and insurance. Also called monthly housing expense. |
| Pledged Account Mortgage
(PAM) |
Money is placed in a pledged
savings account and this fund plus earned interest is
gradually used to reduce mortgage payments. |
| Points (Loan Discount
Points) |
Prepaid interest assessed
at closing by the lender. Each point is equal to 1 percent
of the loan amount (e.g., two points on a $100,000 mortgage
would cost $2,000). |
| Power of Attorney |
A legal document authorizing
one person to act on behalf of another. |
| Preapproval |
The process of determining
how much money you will be eligible to borrow before you
apply for a loan. |
| Prepaid Expenses |
Necessary to create an
escrow account or to adjust the seller's existing escrow
account. Can include taxes, hazard insurance, private
mortgage insurance and special assessments. |
| Prepayment |
A privilege in a mortgage
permitting the borrower to make payments in advance of
their due date. |
| Prepayment Penalty |
Money charged for an
early repayment of debt. Prepayment penalties are allowed
in some form (but not necessarily imposed) in many states.
|
| Primary Mortgage Market
|
Lenders, such as savings
and loan associations, commercial banks, and mortgage
companies, who make mortgage loans directly to borrowers.
These lenders sometimes sell their mortgages to the secondary
mortgage markets such as FNMA or GNMA, etc… |
| Principal |
The amount borrowed or
remaining unpaid. The part of the monthly payment that
reduces the remaining balance of a mortgage. |
| Principal Balance |
The outstanding balance
of principal on a mortgage not including interest or any
other charges. |
| Principal, Interest,
Taxes, and Insurance (PITI) |
The four components of
a monthly mortgage payment. Principal refers to the part
of the monthly payment that reduces the remaining balance
of the mortgage. Interest is the fee charged for borrowing
money. Taxes and insurance refer to the monthly cost of
property taxes and homeowners insurance, whether these
amounts are paid into an escrow account each month or
not. |
| Private Mortgage Insurance
(PMI) |
In the event that you
do not have a 20 percent down payment, lenders will allow
a smaller down payment - as low as 3 percent in some cases.
With the smaller down payment loans, however, borrowers
are usually required to carry private mortgage insurance.
Private mortgage insurance will usually require an initial
premium payment and may require an additional monthly
fee depending on your loan's structure. |
|
| -
Q - |
|
| Qualifying Ratios |
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. |
|
| -
R - |
|
| Rate Lock |
A commitment issued by
a lender to a borrower or another mortgage originator
guaranteeing a specified interest rate and lender costs
for a specified period of time. |
| Realtor |
A real estate broker or
an associate holding active membership in a local real
estate board affiliated with the National Association
of Realtors. |
| Real Estate Agent |
A person licensed to negotiate
and transact the sale of real estate on behalf of the
property owner. |
| Real Estate Settlement
Procedures Act (RESPA) |
A consumer protection
law that requires lenders to give borrowers advance notice
of closing costs. |
| Recission |
The cancellation of a
contract. With respect to mortgage refinancing, the law
that gives the homeowner three days to cancel a contract
in some cases once it is signed if the transaction uses
equity in the home as security. |
| Recording Fees |
Money paid to the lender
for recording a home sale with the local authorities,
thereby making it part of the public records. |
| Refinance |
Obtaining a new mortgage
loan on a property already owned often to replace existing
loans on the property. |
| Renegotiable Rate Mortgage
|
A loan in which the interest
rate is adjusted periodically. See adjustable rate mortgage.
|
| RESPA |
Short for the Real Estate
Settlement Procedures Act. RESPA is a federal law that
allows consumers to review information on known or estimated
settlement costs once after application and once prior
to or at settlement. The law requires lenders to furnish
the information after application only. |
| Reverse Annuity Mortgage
(RAM) |
A form of mortgage in
which the lender makes periodic payments to the borrower
using the borrower's equity in the home as collateral
for and repayment of the loan. |
| Revolving Liability |
A credit arrangement,
such as a credit card, that allows a customer to borrow
against a pre-approved line of credit when purchasing
goods and services. |
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| Satisfaction of Mortgage |
The document issued by
the mortgagee when the mortgage loan is paid in full.
Also called a "release of mortgage." |
| Second Mortgage |
A mortgage made subsequent
to another mortgage and subordinate to the first one. |
| Secondary Mortgage Market |
The place where primary
mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans. It provides liquidity
for the lenders. |
| Security |
The property that will be pledged
as collateral for a loan. |
| Seller Carry Back |
An agreement in which the owner of
a property provides financing, often in combination with
an assumable mortgage. See owner financing. |
| Servicer |
An organization that collects principal
and interest payments from borrowers and manages borrower
escrow accounts. The servicer often services mortgages
that have been purchased by an investor in the secondary
mortgage market. |
| Servicing |
All the steps and operations a lender
performs to keep a loan in good standing, such as collection
of payments, payment of taxes, insurance, property inspections
and the like. |
| Settlement/Settlement Costs |
See closing/closing costs |
| Shared Appreciation Mortgage (SAM)
|
A mortgage in which a borrower receives
a below market interest rate in return for which the lender
(or another investor such as a family member or other
partner) receives a portion of the future appreciation
in the value of the property. May also apply to mortgage
where the borrowers shares the monthly principal and interest
payments with another party in exchange for part of the
appreciation. |
| Simple Interest |
Interest which is computed only on
the principle balance. |
| Standard Payment Calculation |
The method used to determine the
monthly payment required to repay the remaining balance
of a mortgage in substantially equal installments over
the remaining term of the mortgage at the current interest
rate. |
| Step Rate Mortgage |
A mortgage that allows for the interest
rate to increase according to a specified schedule (i.e.,
seven years), resulting in increased payments as well.
At the end of the specified period, the rate and payments
will remain constant for the remainder of the loan. |
| Survey |
A measurement of land, prepared by
a registered land surveyor, showing the location of the
land with reference to known points, its dimensions, and
the location and dimensions of any buildings. |
| Sweat Equity |
Equity created by a purchaser performing
work on a property being purchased. |
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| Third Party Origination |
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. |
| Title |
A document that gives
evidence of an individual's ownership of property. |
| Title Insurance |
A policy, usually issued
by a title insurance company, which insures a home buyer
against errors in the title search. The cost of the policy
is usually a function of the value of the property, and
is often borne by the purchaser and/or seller. Policies
are also available to protect the lender's interests. |
| Title Search |
An examination of municipal
records to determine the legal ownership of property.
Usually is performed by a title company. |
| Total Expense Ratio |
Total obligations as a
percentage of gross monthly income including monthly housing
expenses plus other monthly debts. |
| Truth in Lending |
A federal law requiring
disclosure of the Annual Percentage Rate to home buyers
shortly after they apply for the loan. Also known as Regulation
Z. |
| Two Step Mortgage |
A mortgage in which the
borrower receives a-below-market interest rate for a specified
number of years (most often seven or 10), and then receives
a new interest rate adjusted (within certain limits) to
market conditions at that time. The lender sometimes has
the option to call the loan due with 30 days notice at
the end of seven or 10 years. Also called "Super
Seven" or "Premier" mortgage. |
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| Underwriting |
The decision whether to
make a loan to a potential home buyer based on credit,
employment, assets, and other factors and the matching
of this risk to an appropriate rate and term or loan amount. |
| Usury |
Interest charged in excess of the
legal rate established by law. |
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| VA Loan |
A long term, low-or-no
down payment loan guaranteed by the Department of Veterans
Affairs. Restricted to individuals qualified by military
service or other entitlements. |
| VA Mortgage Funding Fee |
A premium of up to 1-7/8 percent
(depending on the size of the down payment) paid on a
fixed rate loan. On a $75,000 fixed-rate mortgage with
no down payment, this would amount to $1,406 either paid
at closing or added to the amount financed. |
| Variable Rate Mortgage (VRM) |
See adjustable rate mortgage |
| Verification of Deposit (VOD) |
A document signed by the borrower's
financial institution verifying the status and balance
of his/her financial accounts. |
| Verification of Employment (VOE)
|
A document signed by the borrower's
employer verifying his/her position and salary. |
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| Warehouse Fee |
Many mortgage firms must
borrow funds on a short term basis in order to originate
loans which are to be sold later in the secondary mortgage
market (or to investors). When the prime rate of interest
is higher on short term loans than on mortgage loans,
the mortgage firm has an economic loss which is offset
by charging a warehouse fee. |
| Wraparound Mortgage |
Results when an existing assumable
loan is combined with a new loan, resulting in an interest
rate somewhere between the old rate and the current market
rate. The payments are made to a second lender or the
previous homeowner, who then forwards the payments to
the first lender after taking the additional amount off
the top. |
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