|
 |
| Glossary |
 |
| A B C D E F G H I J K L M N O P Q R S T U V W X Y Z |
|
 Acceleration
clause:
A
provision in a mortgage that gives the lender the right to demand payment of
the entire outstanding balance if a monthly payment is missed.
Adjustable-rate mortgage:
A
mortgage that permits the lender to adjust its interest rate periodically on
the basis of changes in a specified index.
Adjusted Basis:
The original cost of a property plus the value
of any capital expenditures for improvements to the property minus any
depreciation taken.
Administrator:
A person appointed by a probate court to
administer the estate of a person who died intestate.
Affordability analysis:
A detailed analysis of your ability to afford
the purchase of a home. An affordability analysis takes into consideration
your income, liabilities, and available funds, along with the type of
mortgage you plan to use, the area where you want to purchase a home, and
the closing costs that you might expect to pay.
Amortization:
The
gradual repayment of a mortgage by installments, calculated to pay off the
obligation at the end of a fixed period of time.
Amortization schedule:
A
timetable for payment of a mortgage showing the amount of each payment
applied to interest and principal and the balance remaining.
Annual Percentage Rate (APR):
This is not the Note rate for which the borrower
applied. The Annual Percentage Rate (APR) is the cost of the loan in
percentage terms taking into account various loan charges of which interest
is only one such charge. Other charges which are used in calculation of the
Annual Percentage Rate are Private Mortgage Insurance or FHA Mortgage
Insurance Premium (when applicable) and Prepaid Finance Charges (loan
discount, origination fees, prepaid interest and other credit costs). The
APR is calculated by spreading these charges over the life of the loan which
results in a rate higher than the interest rate shown on your Mortgage/Deed
of Trust Note. If interest was the only Finance Charge, then the interest
rate and the Annual Percentage Rate would be the same.
Appraisal:
A
professional opinion or estimate of the market value of a property.
Back to Top of Page
Balance sheet:
A
financial statement that
shows assets, liabilities, and net worth as of a specific date. Professional
opinion or estimate of the market value of a property
Balloon mortgage:
A mortgage that has level monthly
payments that will amortize it over a stated term but that provides for a
lump sum payment to be due at the end of an earlier specified term.
Balance payment:
The final lump sum payment that is
made at the maturity date of a balloon mortgage.
Bankrupt:
A person, firm, or corporation that,
through a court proceeding, is relieved from the payment of all debts after
the surrender of all assets to a court-appointed trustee
Business Inventories And Sales:
These figures measure the inventories and sales
of manufacturing, wholesalers, and retail establishments. These figures are
released monthly by the Bureau of Census. In most cases, an increase in
these numbers indicates an expanding economy which could be inflationary.
Bond Market Moves Down In Price.
Back to Top of Page
Call Option:
A provision in the mortgage that
gives the mortgagee the right to call the mortgage due and payable at the
end of a specified period for whatever reason.
Consumer Price Index (CPI):
The consumer price index is an indicator of the
general level of prices. Components include energy, food and beverages,
housing, apparel, transportation, medical care, and entertainment. When the
consumer price index goes up, it is a sign of an inflationary environment.
Consumers have to pay more for the same amount of goods and services. Bond
Market Moves Down In Price.
Cap:
A provision of an adjustable-rate
mortgage (ARM) that limits how much the interest rate or mortgage payments
may increase or decrease.
Capacity Utilization:
The capacity utilization rate measures the
percent of industrial output currently in use. A change in the rate
indicates a change in the direction of economic activity. As the percentage
rate moves closer to 90% the industrial output is practically at full
capacity and is inflationary. A number closer to 70% is recessionary. A
higher percentage indicates a stronger manufacturing sector and an
expanding economy which can be inflationary. Bond Market Moves Down in
Price.
Capital:
(1) Money used to create income,
either as an investment in a business or an income property. (2) The money
or property comprising the wealth owned or used by a person or business
enterprise. (3) The accumulated wealth of a person or business. (4) The net
worth of a business represented by the amount by which its assets exceed
liabilities.
Back to Top of Page
Deed:
The legal document conveying title to a
property.
Deed-in-lieu:
A deed given
by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Also called
a "voluntary
conveyance."
Deed of Trust:
The document used in some states instead of a mortgage; title is
conveyed to a trustee.
Default:
Failure to make mortgage payments on a timely
basis or to comply with other requirements of a mortgage.
Durable Goods Orders:
This gives a reading on the country's future
manufacturing activity. Durable goods include those manufactured items with
a normal life expectancy of three years or longer. An increase in the amount
of durable goods orders may indicate an expansion in the economy and, if
inflationary, the Federal Reserve could choose to tighten money by raising
interest rates. Bond Market Moves Down In Price.
Back to Top of Page
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.
Effect Of Economic Indicators On Fixed Income
Investments:
Market participants look to U.S. Government
economic releases as an indication of the economy's strength and general
direction. Overall, economic indicators reflect the rate of economic growth
and inflation which, in turn, affects interest rates. There is an inverse
relationship between interest rates and bond prices. I
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.
Back to Top of Page
Factory Orders:
Manufacturer's shipments, inventories, and
orders. Factory orders include shipments, inventories, and new and unfilled
orders. An increase in the factory order total may indicate an expansion in
the economy and could be an inflationary factor. Bond Market Moves Down In
Price.
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 (FNMA):
A congressionally chartered,
shareholder-owned company that is the nation's largest supplier of home
mortgage funds.
FED Is Easing:
Exactly the opposite of Fed tightening. The
Federal Reserve feels that the economy is not growing at the desired level
and eases credit conditions by lowering interest rates to help stimulate the
economy. Bond Market Moves Up In Price.
FED Is Tightening:
This term refers to efforts by the Federal
Reserve to curb excessive growth in the money supply. This can be
accomplished by their raising the discount rate and/or increasing the
federal funds rate. Bond Market Moves Down In Price.
Back to Top of Page
Government National Mortgage Association:
A government-owned corporation within the U.S.
Department of Housing and Urban Development (HUD). Created by Congress on
September 1, 1968, GNMA assumed responsibility for the special assistance
loan program formerly administered by Fannie Mae. Popularly known as Ginnie
Mae.
Grantee:
The person to whom an interest in real property
is conveyed.
Grantor:
The person conveying an
interest in real property.
Gross National Product (GNP):
The Gross National Product is the broadest
measure of the nation's production. It measures the market value of all
newly produced goods and services in the United States. When GNP is down, it
shows a slowing down in the economy. To counteract this, the Federal Reserve
may loosen money by lowering interest rates. Bond Market Moves Up In Prices.
Ground Rent:
The amount of money that is paid for the use of land when title to
a property is held as a leasehold estate rather than as a fee simple estate.
Back to Top of Page
Hazard Insurance:
Insurance coverage that compensates
for physical damage to a property from fire, wind, vandalism, or other
hazards.
Home Equity Conversion Mortgage (HECM:
A special type of mortgage that
enables older home owners to convert the equity they have in their homes
into cash, using a variety of payment options to address their specific
financial needs. Unlike traditional home equity loans, a borrower does not
qualify on the basis of income but on the value of his or her home. In
addition, the loan does not have to be repaid until the borrower no longer
occupies the property. Sometimes called a reverse mortgage.
Home equity line of credit:
A mortgage loan, which is usually in
a subordinate position, that allows the borrower to obtain multiple advances
of the loan proceeds at his or her own discretion, up to an amount that
represents a specified percentage of the borrower's equity in a property.
Back to Top of Page
Index:
A number used to compute the interest rate for
an adjustable-rate mortgage (ARM). The index is generally a published number
or percentage, such as the average interest rate or yield on Treasury bills.
A margin is added to the index to determine the interest rate that will be
charged on the ARM.. This interest rate is subject to any caps that are
associated with the mortgage.
Industrial Production Index:
The industrial production index measures the
monthly level of the physical output of the manufacturing, mining, and gas
and electric utility industries. When industrial production is down, it
indicates a slowing of economic growth and, therefore, the Federal Reserve
is inclined to allow interest rates to drop to stimulate the economy. Bond
Market Moves Up In Price.
In-file credit report:
An objective account, normally
computer-generated, of credit and legal information obtained from a credit
repository.
Inflation:
An increase in the amount of money or credit
available in relation to the amount of goods or services available, which
causes an increase in the general price level of goods and services. Over
time, inflation reduces the purchasing power of a dollar, making it worth
less.
Initial interest rate:
The original
interest rate of the mortgage at the time of closing. This rate changes
for an
adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."
Back to Top of Page
Judgement:
A decision made by a court of law. In judgments
that require the repayment of a debt, the court may place a lien against the
debtor's real property as collateral for the judgment's creditor.
Judgement Lien:
A lien on the property of a debtor resulting
from the decree of a court.
Judicial foreclosure:
A type of foreclosure proceeding used in some
states that is handled as a civil lawsuit and conducted entirely under the
auspices of a court.
Jumbo loan:
A loan that
exceeds Fannie Mae’s legislated
mortgage amount limits. Also called a nonconforming loan.
Back to Top of Page
Legal description:
A property description, recognized by law, that
is sufficient to locate and identify the property without oral testimony.
Liability insurance:
Insurance coverage that offers protection
against claims alleging that a property owner's negligence or inappropriate
action resulted in bodily injury or property damage to another party.
Leading Economic Indicators:
This index is a composite of 11 statistics
designed to foretell economic activity 6 to 9 months hence, (i.e. building
permits, new orders for consumer goods and materials, the average workweek,
index of consumer expectations).
Back to Top of Page
Master association:
A homeowners'
association in a large condominium or planned unit development (PUD)
project that
is made up of representatives
from associations covering specific areas within the project. In effect,
it is a "second-level" association that handles matters affecting the
entire development, while the "first-level" associations handle
matters affecting their particular portions of the project.
Maturity:
The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable.
Maximum financing:
A mortgage amount that is within 5 percent of
the highest loan-to-value (LTV) percentage allowed for a specific product.
Thus, maximum financing on a fixed-rate mortgage would be 90 percent or
higher, because 95 percent is the maximum allowable LTV percentage for that
product.
Merchandise Trade Balance:
Released monthly, this figure measures the
difference between imports and exports. When exports are higher than
imports, there is a surplus in the balance of trade. When imports are higher
than exports, there is a deficit. The import-export differential is referred
to as the trade gap.
Money Supply:
The amount of money in circulation. M1 = cash +
regular demand deposits + other check-type deposits. M2 = M1 + savings and
small denomination time-deposits. When the money supply figure is up, it is
an inflationary factor and, therefore, generates concern that the Federal
Reserve will tighten money growth by allowing short-term interest rates to
rise. Bond Market Moves Down In Price.
Back to Top of Page
Negative amortization:
A gradual increase
in mortgage debt that occurs when the monthly payment is not large enough
to cover the entire
principal and interest due. The amount of the shortfall is added to the
remaining balance to create "negative" amortization.
Net cash flow:
The income that remains for an
investment property after the monthly operating income is reduced by the
monthly housing expense, which includes principal, interest, taxes, and
insurance (PITI) for the mortgage, homeowners' association dues, leasehold
payments, and subordinate financing payments.
Net worth:
The value of all of a person's assets, including cash, minus all liabilities.
Non-Farm Payroll:
The non-farm payroll figure is a component of
total civilian employment and measures the number of people employed in all
activities except agriculture.
Back to Top of Page
Original principal balance:
The total amount of principal owed
on a mortgage before any payments are made.
Origination fee:
A fee paid to a lender for
processing a loan application. The origination fee is stated in the form of
points. One point is 1 percent of the mortgage amount.
Owner financing:
A property purchase transaction in
which the property seller provides all or part of the financing.
PITI reserves:
A cash amount that a borrower must have on hand
after making a down payment and paying all closing costs for the purchase of
a home. The principal, interest, taxes, and insurance (PITI) reserves must
equal the amount that the borrower would have to pay for PITI for a
predefined number of months.
Point:
A one-time charge by the lender for originating
a loan. A point is 1 percent of the amount of the mortgage.
Power of attorney:
A legal document
that authorizes another person to act on one’s behalf. A power of attorney
can grant complete authority or can be limited to certain acts and/or
certain periods of time.
Prearranged refinancing agreement:
A formal or informal arrangement between a
lender and a borrower wherein the lender agrees to offer special terms (such
as a reduction in the costs) for a future refinancing of a mortgage being
originated as an inducement for the borrower to enter into the original
mortgage transaction.
Producer Price Index (PPI):
The monthly producer price index measures the
level of prices for all goods produced and imported for sale in the primary
marketplace. Increase in the PPI tend to lead other measures of inflation.
Bond Market Moves Down In Price.
Back to Top of Page
Qualifying ratios:
Calculations that are used in
determining whether 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.
Quitclaim deed:
A deed that transfers without
warranty whatever interest or title a grantor may have at the time the
conveyance is made.
Rate-improvement mortgage:
A fixed-rate mortgage that includes a provision
that gives the borrower a one-time option to reduce the interest rate
(without refinancing) during the early years of the mortgage term.
Rate lock:
A commitment issued by a lender to a borrower or
other mortgage originator guaranteeing a specified interest rate for a
specified period of time.
Retail Sales:
Key components of retail sales include
automobiles, building materials, furniture, department store sales, food
stores, gasoline, clothing, restaurants and drugstores. High retail sales
are an indication of economic growth and an expanding economy. Bond Market
Moves Down In Price.
Secured loan:
A loan that is backed by collateral.
Security:
The property that will be pledged as collateral
for a loan.
Seller take-back:
An agreement in which the owner of a property
provides financing, often in combination with an assumable mortgage.
Survey:
A drawing or map showing the precise legal
boundaries of a property and the location of improvements, easements, rights
of way, encroachments, and other physical features.
Back to Top of Page
Tenancy by entirety:
A type of joint ownership of property that
provides rights of survivorship and is available only to a husband and wife.
Tenancy in common:
A type of joint ownership in a property without
rights of survivorship.
Title:
A legal document evidencing a person's right to
or ownership of a property.
Title company:
A company that specializes in examining and
insuring titles to real estate.
Title insurance:
Insurance to protect the lender (lender's
policy) or the buyer (owner's policy) against loss arising from disputes
over ownership of property.
Title search:
An examination of the public records to ensure
that the seller is the legal owner of the property and that there are no
liens or other claims outstanding.
Transfer:
tax
State or local tax payable when title passes
from one owner to another.
Truth-in-Lending Act:
A federal law that requires lenders to fully
disclose, in writing, the terms and conditions of a mortgage, including the
APR and other charges.
Back to Top of Page
Underwriting:
The process of evaluating a loan application to
determine the risk involved for the lender. It involves an analysis of the
borrower's creditworthiness and the quality of the property itself.
Unemployment Rate:
This is the percent of the civilian labor force
currently unemployed. If unemployment figures are up, it indicates a lack of
expansion within the economy and is, therefore, good for the bond market.
Conversely, a big gain in employment would be an obvious cue for the Federal
Reserve to tighten (raise) either the federal funds rate or the discount
rate. Bond Market Moves Up In Price.
VA loan:
A loan that
is guaranteed by the U.S. Department of Veteran Affairs. Also referred
to as a "government" mortgage.
What-if analysis:
An affordability analysis that is
based on a what-if scenario. A what-if analysis is useful if you do not have
complete data or if you want to explore the effect of various changes to
your income, liabilities, or available funds or to the qualifying ratios or
down payment expenses that are used in the analysis.
What-if scenario:
A change in the amounts that is used
as the basis of an affordability analysis. A what-if scenario can include
changes to monthly income, debts, or down payment funds or to the qualifying
ratios or down payment expenses that are used in the analysis. You can use a
what-if scenario to explore different ways to improve your ability to afford
a house.
Wraparound mortgage:
A mortgage that includes the
remaining balance on an existing first mortgage plus an additional amount
requested by the mortgagor. Full payments on both mortgages are made to the
wraparound mortgagee, who then forwards the payments on the first mortgage
to the first mortgagee.
Back to Top of Page |
| |
|
|
