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Diane Hunter
1800 N. Clybourn
Chicago, IL 60614
(Lincoln Park)
Phone: (312) 475-7791
Mobile: (312) 446-8300
Email:
dianehunter@rcn.com
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Use this form to quickly
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mortgage payments. |
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Current Mortgage Rates |
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Glossary of Terms |
Home >>
Mortgage Center >>
Glossary of Terms
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Acceleration Clause
A provision in a mortgage note that gives a lender the
right to demand repayment of the entire balance of the
loan under certain conditions, such as the failure to
make timely payments or a transfer of the property.
Additional Principal Payment
An amount paid by a borrower of more than the scheduled
principal amount due. This type of payment reduces the
remaining balance and shortens the term of the loan.
Also called a "principal curtailment."
Adjustable-Rate Mortgage (ARM)
A mortgage that permits the lender to periodically
adjust the interest rate on the basis of changes in a
specified index.
Adjustment Date
The date on which the interest rate changes for an
adjustable-rate mortgage (ARM).
Adjustment Period
For an adjustable rate mortgage, the time period between
interest rate change dates, as stated in the mortgage
note.
Amortization
The gradual reduction of the mortgage debt through
regularly scheduled payments over the term of the loan.
Amortization Schedule
A timetable for payment of a mortgage loan. An
amortization schedule shows: the amount of each payment;
the amount to be applied to principal and interest; and
the remaining principal balance after each payment is
made.
Annual Percentage Rate (APR)
The measure of the cost of credit stated as a yearly
rate; includes such items as the stated interest rate,
plus certain charges.
Annuity
An amount paid yearly or at other regular intervals,
often at a guaranteed minimum amount. Also, a type of
insurance policy in which the policy holder makes
payments for a fixed period or until a stated age, and
then receives annuity payments from the insurance
company.
Appraisal
A written estimate or opinion of a property's value
prepared by a qualified appraiser.
Appreciation
An increase in the value of an item (e.g., the increase
in the market value of real estate).
Assessed Value
Typically the value placed on property for the purpose
of taxation.
Assignment of Mortgage
A document evidencing the transfer of ownership of a
mortgage from one person to another.
Assumable Mortgage
A mortgage loan that can be taken over (assumed) by the
buyer when a home is sold. An assumption of a mortgage
is a transaction in which the buyer of real property
takes over the seller's existing mortgage; the seller
remains liable unless released by the lender from the
obligation. If the mortgage contains a due-on-sale
clause, the loan may not be assumed without the lender's
consent.
Assumption Fee
A fee a lender charges a buyer who will assume the
seller's existing mortgage.
Balance Sheet
A financial statement that shows assets, liabilities,
and net worth as of a specific date.
Balloon Mortgage
A mortgage in which the borrower's monthly payments are
amortized over a longer period than the actual term of
the mortgage. As a result, at the end of the loan term,
the borrower must pay off the remaining balance with a
single lump sum payment or refinance the loan.
Balloon Payment
The final lump sum payment that is made at the maturity
date of a balloon mortgage.
Bankruptcy
A legal proceeding that allows debtors to eliminate or
restructure debts when they have financial difficulties.
Before-Tax Income
Income before taxes are deducted. Also known as "gross
income."
Biweekly Payment Mortgage
A mortgage with payments due every two weeks (instead of
monthly).
Bridge Loan
A short-term loan secured by the borrower's current home
(which is usually for sale) that allows the proceeds to
be used for building or closing on a new house before
the current home is sold. Also known as a "swing loan."
Broker
An individual or firm that acts as an agent between
providers and users of products or services, such as a
mortgage broker or real estate broker.
Buydown
An arrangement whereby the property developer or another
third party provides an interest subsidy to reduce the
borrower's monthly payments typically in the early years
of the loan.
Buydown Account
An account in which funds are held so that they can be
applied as part of the monthly mortgage payment as each
payment comes due during the period that an interest
rate buydown plan is in effect.
Cap
For an adjustable-rate mortgage (ARM), a limitation on
the amount the interest rate or mortgage payments may
increase or decrease.
Cash-out Refinance
A refinance transaction in which the borrower receives
additional funds over and above the amount needed to
repay the existing mortgage, closing costs, points, and
any subordinate liens.
Chain of Title
The history of all of the documents that have
transferred title to a parcel of real property, starting
with the earliest existing document and ending with the
most recent.
Clear Title
Ownership that is free of liens, defects, or other legal
encumbrances.
Closing
The process of completing a financial transaction. For
mortgage loans, the process of signing mortgage
documents, disbursing funds, and, if applicable,
transferring ownership of the property. In some
jurisdictions, closing is referred to as "escrow," a
process by which a buyer and seller deliver legal
documents to a third party who completes the transaction
in accordance with their instructions.
Closing Agent
The person or entity that coordinates the various
closing activities, including the preparation and
recordation of closing documents and the disbursement of
funds. (May be referred to as an escrow agent or
settlement agent in some jurisdictions.) Typically the
closing is conducted by title companies, escrow
companies or attorneys.
Closing Costs
The fees charged in connection with a mortgage loan
transaction. Money paid by a buyer (and/or seller or
other third party, if applicable) to effect the closing
of a mortgage loan, generally including, but not limited
to a loan origination fee, title examination and
insurance, survey, attorney???s fee, and prepaid items,
such as escrow deposits for taxes and insurance.
Co-borrower
Any borrower other than the first borrower whose name
appears on the application and mortgage note, even when
that person owns the property jointly with the first
borrower and shares liability for the note.
Collateral
An asset that is pledged as security for a loan. The
borrower risks losing the asset if the loan is not
repaid according to the terms of the loan agreement.
Commission
The fee charged for services performed, usually based on
a percentage of the price of the items sold (such as the
fee a real estate agent earns on the sale of a house).
Commitment Letter
A binding offer by a lender to loan money at a future
date subject to the borrower's compliance with stated
conditions.
Common Areas
Those portions of a building, land, or improvements and
amenities owned by a planned unit development (PUD) or
condominium project's homeowners' association (or a
cooperative project's cooperative corporation) that are
used by all of the unit owners, who share in the common
expenses of their operation and maintenance. Common
areas include swimming pools, tennis courts, and other
recreational facilities, as well as common corridors of
buildings, parking areas, means of ingress and egress,
etc.
Construction Loan
A loan for financing the cost of construction or
improvements to a property; the lender disburses
payments to the builder at periodic intervals during
construction.
Conventional Mortgage
A mortgage loan that is not insured or guaranteed by the
federal government or one of its agencies, such as FHA,
VA or RHS. Contrast with "Government Mortgage."
Conversion Option
A provision of some adjustable-rate mortgage (ARM) loans
that allows the borrower to change the ARM to a
fixed-rate mortgage at specified times after loan
origination.
Convertible ARM
An adjustable-rate mortgage (ARM) that allows the
borrower to convert the loan to a fixed-rate mortgage
under specified conditions.
Cost of Funds Index (COFI)
An index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans. It is
based on the weighted monthly average cost of deposits,
advances, and other borrowings of members of the Federal
Home Loan Bank of San Francisco. |
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