Insurance coverage that in the event of physical damage to a property
from fire, wind, vandalism, or other hazards.
Equity Conversion Mortgage (HECM)
Usually referred to as a reverse annuity mortgage, what makes this type
of mortgage unique is that instead of making payments to a lender, the
lender makes payments to you. It enables older home owners to convert
the equity they have in their homes into cash, usually in the form of
monthly payments. 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.
equity line of credit
A mortgage loan, usually in second position, that allows the borrower
to obtain cash drawn against the equity of his home, up to a predetermined
A thorough inspection by a professional that evaluates the structural
and mechanical condition of a property. A satisfactory home inspection
is often included as a contingency by the purchaser.
A nonprofit association that manages the common areas of a planned unit
development (PUD) or condominium project. In a condominium project,
it has no ownership interest in the common elements. In a PUD project,
it holds title to the common elements.
An insurance policy that combines personal liability insurance and hazard
insurance coverage for a dwelling and its contents.
A type of insurance often purchased by homebuyers that will cover repairs
to certain items, such as heating or air conditioning, should they break
down within the coverage period. The buyer often requests the seller
to pay for this coverage as a condition of the sale, but either party
Median family income for a particular county or metropolitan statistical
area (MSA), as estimated by the Department of Housing and Urban Development
A document that provides an itemized listing of the funds that were
paid at closing. Items that appear on the statement include real estate
commissions, loan fees, points, and initial escrow (impound) amounts.
Each type of expense goes on a specific numbered line on the sheet.
The totals at the bottom of the HUD-1 statement define the seller's
net proceeds and the buyer's net payment at closing. It is called a
HUD1 because the form is printed by the Department of Housing and Urban
Development (HUD). The HUD1 statement is also known as the "closing
statement" or "settlement sheet."
A form of ownership or taking title to property which means each
party owns the whole property and that ownership is not separate. In
the event of the death of one party, the survivor owns the property
in its entirety.
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.
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.
Other states use non-judicial foreclosure.
A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently
at $227,150. Also called a nonconforming loan. Freddie Mac and Fannie
Mae loans are referred to as conforming loans.
The penalty a borrower must pay when a payment is made a stated number
of days. On a first trust deed or mortgage, this is usually fifteen
A written agreement between the property owner and a tenant that stipulates
the payment and conditions under which the tenant may possess the real
estate for a specified period of time.
A way of holding title to a property wherein the mortgagor does not
actually own the property but rather has a recorded long-term lease
An alternative financing option that allows home buyers to lease a home
with an option to buy. Each month's rent payment may consist of not
only the rent, but an additional amount which can be applied toward
the down payment on an already specified price.
A property description, recognized by law, that is sufficient to locate
and identify the property without oral testimony.
A term which can refer to the institution making the loan or to
the individual representing the firm. For example, loan officers are
often referred to as "lenders."
A person's financial obligations. Liabilities include long-term and
short-term debt, as well as any
other amounts that are owed to others.
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. It is usually part of a
homeowner’s insurance policy.
A legal claim against a property that must be paid off when the property
is sold. A mortgage or first trust deed is considered a lien.
For an adjustable-rate mortgage (ARM), a limit on the amount that the
enterest rate can increase or decrease over the life of the mortgage.
An agreement by a commercial bank or other financial institution to
extend credit up to a certain amount for a certain time to a specified
A cash asset or an asset that is easily converted into cash.
A sum of borrowed money (principal) that is generally repaid with interest.
Also referred to by a variety of other terms, such as lender, loan
representative, loan "rep," account executive, and others. The loan
officer serves several functions and has various responsibilities: they
solicit loans, they are the representative of the lending institution,
and they represent the borrower to the lending institution.
How a lender refers to the process of obtaining new loans.
After you obtain a loan, the company you make the payments to is
"servicing" your loan. They process payments, send statements, manage
the escrow/impound account, provide collection efforts on delinquent
loans, ensure that insurance and property taxes are made on the property,
handle pay-offs and assumptions, and provide a variety of other services.
The percentage relationship between the amount of the loan and the appraised
value or sales price (whichever is lower).
An agreement in which the lender guarantees a specified interest rate
for a certain amount of time at a certain cost.
The time period during which the lender has guaranteed an interest rate
to a borrower.
The difference between the interest rate and the index on an adjustable
rate mortgage. The margin remains stable over the life of the loan.
It is the index which moves up and down.
The date on which the principal balance of a loan, bond, or other financial
instrument becomes due and payable.
A credit report which reports the raw data pulled from two or more of
the major credit repositories. Contrast with a Residential Mortgage
Credit Report (RMCR) or a standard factual credit report.
Occasionally, a lender will agree to modify the terms of your mortgage
without requiring you t refinance. If any changes are made, it is called
A legal document that pledges a property to the lender as security for
payment of a debt. Instead of mortgages, some states use First Trust
For a more complete discussion of mortgage banker, see "Types of Lenders."
A mortgage banker is generally assumed to originate and fund their own
loans, which are then sold on the secondary market, usually to Fannie
Mae, Freddie Mac, or Ginnie Mae. However, firms rather loosely apply
this term to themselves, whether they are true mortgage bankers or simply
mortgage brokers or correspondents.
A mortgage company that originates loans, then places those loans with
a variety of other lending institutions with whom they usually have
The lender in a mortgage agreement.
Insurance that covers the lender against some of the losses incurred
as a result of a default on a home loan. Often mistakenly referred to
as PMI, which is actually the name of one of the larger mortgage insurers.
Mortgage insurance is usually required in one form or another on all
loans that have a loan-to-value higher than eighty percent. Mortgages
above 80% LTV that call themselves "No MI" are usually a made at a higher
interest rate. Instead of the borrower paying the mortgage insurance
premiums directly, they pay a higher interest rate to the lender, which
then pays the mortgage insurance themselves. Also, FHA loans and certain
first-time homebuyer programs require mortgage insurance regardless
of the loan-to-value.
insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government
agency such as the Federal Housing Administration (FHA) or to a private
mortgage insurance (MI) company.
life and disability insurance
A type of term life insurance often bought by borrowers. The amount
of coverage decreases as the principal balance declines. Some policies
also cover the borrower in the event of disability. In the event that
the borrower dies while the policy is in force, the debt is automatically
satisfied by insurance proceeds. In the case of disability insurance,
the insurance will make the mortgage payment for a specified amount
of time during the disability. Be careful to read the terms of coverage,
however, because often the coverage does not start immediately upon
the disability, but after a specified period, sometime forty-five days.
The borrower in a mortgage agreement.
Properties that provide separate housing units for more than one family,
although they secure only a single mortgage.
Some adjustable rate mortgages allow the interest rate to fluctuate
independently of a required minimum payment. If a borrower makes the
minimum payment it may not cover all of the interest that would normally
be due at the current interest rate. In essence, the borrower is deferring
the interest payment, which is why this is called "deferred interest."
The deferred interest is added to the balance of the loan and the loan
balance grows larger instead of smaller, which is called negative amortization.
A refinance transaction which is not intended to put cash in the hand
of the borrower. Instead, the new balance is caculated to cover the
balance due on the current loan and any costs associated with obtaining
the new mortgage. Often referred to as a "rate and term refinance."
Many lenders offer loans that you can obtain at "no cost." You should
inquire whether this means there are no "lender" costs associated with
the loan, or if it also covers the other costs you would normally have
in a purchase or refinance transactions, such as title insurance, escrow
fees, settlement fees, appraisal, recording fees, notary fees, and others.
These are fees and costs which may be associated with buying a home
or obtaining a loan, but not charged directly by the lender. Keep in
mind that, like a "no-point" loan, the interest rate will be higher
than if you obtain a loan that has costs associated with it.
A legal document that obligates a borrower to repay a mortgage loan
at a stated interest rate during a specified period of time.
The interest rate stated on a mortgage note.
Almost all lenders offer loans at "no points." You will find the
interest rate on a "no points" loan is approximately a quarter percent
higher than on a loan where you pay one point.
notice of default
A formal written notice to a borrower that a default has occurred
and that legal action may be taken.
template and design of this site is copyrighted by RealtyDrive.com
It may only be used by current members of RealtyDrive.com