Mortgage Glossary O-T

February 3, 2009
Matt Isleib

 

Open house- A selling tool in which a real-estate agent advertises a property for sale and invites people to visit without making an appointment.

Origination fee- A fee that the lender or mortgage broker charges to process the loan

Owner financing- Financing that is all or partly arranged by the seller and not by a lender or bank

Option ARM mortgage- A potentially negatively amortizing mortgage that is adjustable and offers several payment options. Typically a principal and interest 30 or 15 year payment, an interest only payment and a minimum payment that is less than interest only and negatively amortizes the loan. 

Per Diem interest- Daily interest amount based on your note rate and the amount of your loan

Piggyback loan- A first and second mortgage taken out simultaneously. In most instances it would be done to avoid mortgage insurance or to stay at a conforming loan limit

PITI- Principal,interest,taxes and insurance

PITI reserves- Monthly reserves in either a bank or investment account to cover the  principal,interest,taxes and insurance of a property

Points- 1 percent of the loan amount. It can be “origination” points that are charged to process a loan or “discount” points that are charged to buy down the interest rate

Portfolio lender- A company that underwrites mortgage loans and keeps them on the books instead of selling them on the secondary market.

Pre approved- Your credit has been pulled and based upon your said income and assets you have an approved loan through an investor pending sending in the supporting documentation like pay stubs, assets etc.

Prequalification- Another term used for pre approved except it may be based solely on a credit report and not actually looked at by an investor

Preapproval letter- A letter given by investor to real estate agent confirming that they can qualify to purchase a home. It is typically a requirement to have one to even place an offer on a home

Prepayment penalty- A penalty that is enforced if you pre pay a large amount of the outstanding principal balance or refinance within a certain time frame. The penalty can sometimes be as much as 5 percent of the loan amount

Prepaids- Are referring to your odd days interest, taxes and insurance

Prime rate- A common benchmark for consumer and business loans set by banks, usually at a level 3 percentage points higher than the Fed Funds rate. The rate given to consumers on their loans is often determined as the prime rate plus a certain percentage, which represents the lender’s assessment of the risk in lending, plus its profit margin.

Principal- The balance of your loan outstanding excluding any interest or charges

Private mortgage insurance- A policy that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Although PMI protects the lender, it is paid monthly by the borrower. Private mortgage insurance usually is required if the down payment is less than 20 percent of the sale price.

Probate sale- Sale of property after the death of the owner, supervised by a court, with proceeds divided among creditors and heirs

Promissory note- A written promise to repay a loan by a specified time

Property taxes- Taxes figured on the value of property you own

Property values- The given market value or worth of one’s property

Purchase agreement- A document in which a property’s buyer and seller approve the price and other terms of the transfer of title. Also known as an agreement of sale, a purchase contract or a sale contract

Purchase contract- A document in which a property’s buyer and seller approve the price and other terms of the transfer of title. Also known as an agreement of sale, a purchase contract or a sale contract

Qualifying ratios- As calculated by lenders, the percentage of income that is spent on housing debt and combined household debt. The first qualifying ratio, called the front ratio, is the percentage of monthly before-tax income that goes toward a house payment. The back ratio is the sum of the house payment and all other monthly debt — credit cards, car payments, student loans and the like — divided by before-tax income

Quitclaim deed- A document that transfers the grantor’s interest in a title to property and is filed with a county recorder. It often is used among family members and can be used to clear up a gap in the chain of title

Rate lock-  A guarantee by the lender or mortgage broker that the agreed upon interest rate will remain for a said period of time.

Real estate agent- An individual who is licensed to assist a buyer or seller in purchasing or selling real estate

Real estate attorney- An attorney that specializes mainly in the transfer of property as well as housing, tax or land disputes. They may also specialize in foreclosure protection as well as any judgments or liens involved with a property or piece of land

Real estate broker- A person who is licensed to represent a buyer or seller of land and the buildings and other improvements on it and collect commissions for the work. Most brokers have agents working for them and collect a portion of their commissions in exchange for providing office space, marketing and other overhead

Real property- Permanent, non movable property, such as land and buildings

Recording fee- cost incurred by buyers and sellers of real estate. It is usually referring to the recording of the transaction at their town or city

Refinancing - Taking a new mortgage to pay off an existing one. One would refinance to lower their payment, the term of the loan or to take cash out or consolidate debt

Regulation Z- A rule, enforced by the Federal Reserve Board and implementing the Truth-in-Lending Act, that requires lenders to disclose all credit-related costs including the annual percentage rate

Rehabilitation loan- Financing obtained to cover any costs or building expenses to take a dilapidated property and fix it up

Relocation company- A business that specializes in providing help to employees who move for their employer. Typically the help is the sale and purchase of their existing and new homes

Remaining balance- The amount that is left to pay your loan off in full

Remaining term- The amount of time that is left on your loan

Rent loss insurance- Hazard insurance that pays for a loss in rental value or rental income if damage causes the property to become unfit for habitat

 

 

 

 

 

RESPA- Real Estate Settlement Procedures Act. Known as RESPA. A consumer protection law that requires lenders to give homebuyers advance notice of closing costs, which are payable at the closing or settlement meeting. It outlaws kickbacks and illegal markups in costs

Reverse mortgage- A special type of mortgage, sometimes called a reverse mortgage, that enables older homeowners to convert the equity in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans or mortgages, a borrower does not qualify on the basis of income but on the value of the home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property

Right of first refusal- An agreement by an owner to give another party an opportunity to buy the property before it is offered to anyone else

Right of rescission- The time period that a borrower has to rescind or decide not to go through with their refinance. That time period is three days after the initial closing date of a refinance

Sale contract- A written agreement between buyer and seller that details price and other terms and conditions of sale

Second mortgage- A loan taken on a property that is in addition to their first mortgage. Typically HELOC’s or home equity lines of credit are the most common examples of second mortgages

 

 

 

Sellers market- A real estate market where there are more buyers than sellers of real estate. Usually during this period the top asking price is the accepted offer taken on a sale 

Servicer- An organization that collects monthly mortgage principal and interest payments from homeowners and manages escrow accounts for paying taxes and homeowners’ insurance premiums. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market

Settlement statement- A document that details who has paid how much to whom

Short sale- A short sale, in real estate terms, is a sale of a house in which the sale price is less than what the owner still owes on the mortgage. It is a procedure sometimes agreed to by lenders, who would often would rather take a small loss than go through the lengthy and costly foreclosure process

Simple interest- Interest computed only by the principal balance. Not taking any principal payments into the equation

Spec or speculation home-  A home built as an investment. One that is built with no buyer in mind and just as an investment to hopefully profit from. It can be extremely speculative and risky

Starter home- A home that is usually lower in price and purchased by a first time home buyer.

Subordinate loan-  A mortgage whose priority is below that of another mortgage, for example a second or third mortgage or a home equity loan

Subprime mortgage- A mortgage granted to a borrower considered subprime, that is, a person with a less-than-perfect credit report. Subprime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default

 

Tenants in common- Ownership by two or more people in which each person owns an undivided interest in the entire property and all have equal rights to use the property. When one tenant in common dies, that person’s interest may be sold, mortgaged or transferred to another in a will

Term- the length of time of your loan. For example a 30 year or 15 year term

 

Title - Ownership of real property to the exclusion of anyone else’s right to claim the property. Evidence of title is recorded in a deed and held in a county recorder’s office. The terms “title” and “deed” often are used interchangeably; strictly speaking, the deed is the document and the title is the ownership right that is recorded in the deed

 

Company that checks a property’s title for liens and other obstacles to sale, fixes any clouds to title, supervises the closing transaction, and makes sure that money transfers in a purchase are processed correctly

Title insurance- A policy that guarantees that an owner properly has title to a property and can legally transfer title to someone else. Should a problem arise, the title insurer pays any legal damages

Title search- The actual search of a property title and its chain of owners at city or town hall of records

Total expense ratio- The percentage of monthly debt payments compared to total before-tax income

Trade line- An account listed on a credit report. Each separate account is a different trade line

Transfer tax- A levy by a state or local government on the change of ownership of real estate

TransUnion- One of the three major credit-reporting agencies, along with Experian and Equifax

Truth in lending act- A federal law that requires lenders to provide certain information so borrowers can compare one loan to another. The most important facts lenders must provide are: finance charges in dollars and as an annual percentage rate (APR); the credit issuer or company providing the credit line and the size of the credit line; length of grace period, if any, before payment must be made; minimum payment required; any annual fees; and fees for credit insurance, if any