deed given by a mortgagor to the mortgagee to satisfy
a debt and avoid foreclosure. Also called a "voluntary
a mortgage, a security instrument whereby real property
is given as security for a debt. However, in a deed
of trust there are three parties to the instrument:
the borrower, the trustee, and the lender, (or beneficiary).
In such a transaction, the borrower transfers the
legal title for the property to the trustee who
holds the property in trust as security for the
payment of the debt to the lender or beneficiary.
If the borrower pays the debt as agreed, the deed
of trust becomes void. If, however, he defaults
in the payment of the debt, the trustee may sell
the property at a public sale, under the terms of
the deed of trust. In most jurisdictions where the
deed of trust is in force, the borrower is subject
to having his property sold without benefit of legal
proceedings. A few States have begun in recent years
to treat the deed of trust like a mortgage.
to make mortgage payments on a timely basis or to
comply with other conditions of a mortgage.
court order to pay the balance owed on a loan if
the proceeds from the sale of the security are insufficient
to pay off the loan. Deficiency judgments are not
allowed in all states.
loan in which a payment is overdue but not yet in
sum of money given to bind the sale of real estate,
or a sum of money given to ensure payment or an
advance of funds in the processing of a loan.
decline in the value of property; the opposite of
State tax, in the forms of stamps, required on deeds
and mortgages when real estate title passes from
one owner to another. The amount of stamps required
varies with each State.
rights of a widow in the property of her husband
at his death.
part of the purchase price, which the buyer pays
in cash and does not finance with a mortgage
provision in a mortgage that allows the lender to
demand repayment in full if the borrower sells the
property that serves as security for the mortgage.
terminology is usually used for second mortgages.
deposit money given to the seller or his agent by
the potential buyer upon the signing of the agreement
of sale to show that he is serious about buying
the house. If the sale goes through, the earnest
money is applied against the down payment. If the
sale does not go through, the earnest money will
be forfeited or lost unless the binder or offer
to purchase expressly provides that it is refundable.
right-of-way granted to a person or company authorizing
access to or over the owner's land. An electric
company obtaining a right-of-way across private
property is a common example.
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
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
right of a government to take private property for
public use upon payment of its fair market value.
Eminent domain is the basis for condemnation proceedings.
special Fannie Mae housing initiative that offers
several different ways for employers to work with
local lenders to develop plans to assist their employees
in purchasing homes.
obstruction, building, or part of a building that
intrudes beyond a legal boundary onto neighboring
private or public land, or a building extending
beyond the building line.
legal right or interest in land that affects a good
or clear title, and diminishes the land's value.
It can take numerous forms, such as zoning ordinances,
easement rights, claims, mortgages, liens, charges,
a pending legal action, unpaid taxes, or restrictive
covenants. An encumbrance does not legally prevent
transfer of the property to another. A title search
is all that is usually done to reveal the existence
of such encumbrances, and it is up to the buyer
to determine whether he wants to purchase with the
encumbrance, or what can be done to remove it.
person who signs ownership interest over to another
party. Contrast with co-maker.
Credit Opportunity Act (ECOA)
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.
difference between the market value of a property
and the homeowner's outstanding mortgage balance.
loan based on the borrower's equity in his or her
home. Prior to closing; also, an account held by
the lender into which a homeowner pays money for
taxes and insurance.
account in which a mortgage servicer holds the borrower’s
escrow payments prior to paying property expenses.Escrow
periodic examination of escrow accounts to determine
if current monthly deposits will provide sufficient
funds to pay taxes, insurance, and other bills when
collected by the servicer and set aside in an escrow
account to pay the borrower’s property taxes, mortgage
insurance, and hazard insurance. Escrow disbursements.
use of escrow funds to pay real estate taxes, hazard
insurance, mortgage insurance, and other property
expenses as they become due.
portion 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. Estate. The
ownership interest of an individual in real property.
The sum total of all the real property and personal
property owned by an individual at time of death.
lawful expulsion of an occupant from real property.
report on the title of a property from the public
records or an abstract of the title.
written contract that gives a licensed real estate
agent the exclusive right to sell a property for
a specified time, but reserving the owner’s right
to sell the property alone without the payment of
person named in a will to administer an estate
Credit Reporting Act
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.
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.
Deposit Insurance Corporation). Provides insurance
of accounts for institutions whose deposits were
formerly covered by the Federal Savings & Loan
Insurance Corporation. (FSLIC).
greatest possible interest a person can have in
unconditional, unlimited estate of inheritance that
represents the greatest estate and most extensive
interest in land that can be enjoyed. It is of perpetual
duration. When the real estate is in a condominium
project, the unit owner is the exclusive owner only
of the air space within his or her portion of the
building (the unit) and is an owner in common with
respect to the land and other common portions of
Housing Administration). A division of the Department
of Housing and Urban Development. The FHA's main
activity is the insuring of residential mortgage
loans made by private lenders. It sets standards
for construction and underwriting. FHA neither lends
money, nor plans, nor constructs housing.
loans are loans that are guaranteed or purchased
by government organizations. Two of the most popular
Government Loans are the Federal Housing Administration
(FHA) and the Department of Veterans Affairs (VA).
Housing Finance Board). It oversees the credit functions
of the twelve regional Federal Home Loan Banks.
Home Loan Bank Board). A regulatory and supervisory
agency for federally charted savings institutions,
which oversees the operations of the FSLIC and FHLMC.
This agency was abolished by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989. (See
Home Loan Mortgage Corporation, Freddie Mac). A
private corporation authorized by Congress, which
became an independent, stockholder-owned government
corporation with the passage of FIRREA. FHLMC promotes
the flow of funds into the housing markets by purchasing
conventional mortgages in the secondary market and
selling securities backed by those mortgages in
the capital market.
total dollar amount your loan will cost you. It
includes all interest payments for the life of the
loan, any interest paid at closing, your origination
fee and any other charges paid to the lender and/or
broker. Appraisal, credit report and title search
fees are not included in the finance charge calculation.
fee or commission paid to a mortgage broker for
finding a mortgage loan for a prospective borrower.
Institutions Reform, Recovery and Enforcement Act
of 1989). An act signed into law in August 1989,
by President Bush that restructured the thrift regulatory
an insurance system.
lender’s agreement to make a loan to a specific
borrower on a specific property.
mortgage that has first claim in the event of default.
monthly payment due on a mortgage loan.
A mortgage in which the interest rate does not change
during the entire term of the loan.
National Mortgage Association, Fannie Mae). A government-sponsored
corporation, owned solely by private investors,
created to provide support to the secondary market
for FHA and VA mortgages and conventional mortgages.
property that becomes real property when attached
in a permanent manner to real estate.
that compensates for physical property damage resulting
from flooding. It is required for properties located
in federally designated flood areas.
loss of money, property, rights, or privileges due
to a breach of legal obligation.
process by which a mortgage property may be sold
when a mortgage is in default.
adjustable-rate mortgage (ARM) with a monthly payment
that is sufficient to amortize the remaining balance,
at the interest accrual rate, over the amortization
the P&I payments to the level that will fully
amortize the loan's outstanding balance over the
remaining term using the fully indexed accrual rate
at the recasting point.
Indexed Accrual Rate
interest (accrual) rate resulting from the index
at closing (or at another point in the loan) plus
the lender's full spread, rounded as prescribed
in the loan documents (often to the nearest 1/8th
deed which conveys not only all the grantor's interests
in and title to the property to the grantee, but
also warrants that if the title is defective or
has a "cloud" on it (such as mortgage claims, tax
liens, title claims, judgments, or mechanic's liens
against it) the grantee may hold the grantor liable.
estimate of charges, which a borrower is likely
to incur in connection with a loan closing.
A mortgage where the payments are scheduled to increase,
usually annually, for a set number of years, and
then level off. GPM can be used with either a fixed
or adjustable interest rate, and usually has a 30-year
party in the deed who is the buyer or recipient.
party in the deed who is the seller or giver.
total amount the borrower earns per month, not counting
any taxes or expenses. Often used in calculations
to determine whether a borrower qualifies for a
A fixed rate, graduated payment mortgage with small
initial payments that increase each year so that
the loan pays off in a shortened term, usually 15
to protect the homeowner and the lender against
physical damage to a property from fire, wind, vandalism,
or other hazards.
insurance policy that combines liability coverage
and hazard insurance.
type of insurance that covers repairs to specified
parts of a house for a specific period of time.
ratio of the monthly housing payment to total gross
monthly income. Also called Payment-to-Income Ratio
or Front-End Ratio.
of Housing and Urban Development). A cabinet department
responsible for the implementation and administration
of government housing and urban development programs.
estate developed or improved to produce income.
called "Rate Index"). A regularly published rate,
independent of the lending institution, that measures
the prevailing cost of funds, and is used periodically
with the margin to set AML accrual rates.
Borrower Interest Rate
rate on which the borrower's first payment is calculated.
Borrower Payment Rate
annual interest rate used to calculate the borrower's
initial cash payment.
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
original interest rate of the mortgage at the time
regular periodic payment that a borrower agrees
to make to a lender.
money that is repaid in equal payments, known as
installments. A furniture loan is often paid for
as an installment loan.
property title that a title insurance company agrees
to insure against defects and disputes.
contract that provides compensation for specific
losses in exchange for a periodic payment. An individual
contract is known as an insurance policy, and the
periodic payment is known as an insurance premium.
document that states that insurance is temporarily
in effect. Because the coverage will expire by a
specified date, a permanent policy must be obtained
before the expiration date.
mortgage that is protected by the Federal Housing
Administration (FHA) or by private mortgage insurance
(MI). If the borrower defaults on the loan, the
insurer must pay the lender the lesser of the loss
incurred or the insured amount
fee charged for borrowing money.
percentage rate at which interest accrues on the
mortgage. In most cases, it is also the rate used
to calculate the monthly payments, although it is
not used for an adjustable-rate mortgage (ARM) with
payment change limitations.
percentage of an amount of money, which is paid
for its use for a specified time.
provision of an ARM limiting how much interest rates
may increase per adjustment period.
an adjustable-rate mortgage (ARM), the maximum interest
rate, as specified in the mortgage note.
an adjustable-rate mortgage (ARM), the minimum interest
rate, as specified in the mortgage note.
property that is not occupied by the owner.
(Individual Retirement Account)
retirement account that allows individuals to make
tax-deferred contributions to a personal retirement
fund. Individuals can place IRA funds in bank accounts
or in other forms of investment such as stocks,
bonds, or mutual funds.
form of co-ownership that gives each tenant equal
interest and equal rights in the property, including
the right of survivorship.
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.
lien on the property of a debtor resulting from
the decree of a court.
type of foreclosure proceeding used in some states
that is handled as a civil lawsuit and conducted
entirely under the auspices of a court.
or non-conforming, is a term used to describe a
loan that does not conform to Fannie Mae or Freddie
Mac guidelines. The typical Jumbo loan exceeds the
maximum loan amounts described above.
penalty a borrower must pay when a payment is made
a stated number of days (usually 15) after the due
written agreement between the property owner and
a tenant that stipulates the conditions under which
the tenant may possess the real estate for a specified
period of time and rent.
way of holding title to a property wherein the mortgagor
does not actually own the property but rather has
a recorded long-term lease on it.
property description, recognized by law that is
sufficient to locate and identify the property without
institution that makes loans to borrowers on real
person's financial obligations. Liabilities include
long-term and short-term debt, as well as any other
amounts that are owed to others.
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.
legal claim against a property that must be paid
when the property is sold.
provision of an ARM that limits the total increase
in interest rates over the life of the loan.
an adjustable-rate mortgage (ARM), a limit on the
amount that payments can increase or decrease over
the life of the mortgage.
agreement by a commercial bank or other financial
institution to extend credit up to a certain amount
for a certain time to a specified borrower.
cash asset or an asset that is easily converted
sum of borrowed money (principal) that is generally
repaid with interest.
offer by a lender stating the terms under which
it agrees to loan money to a homebuyer.
process by which a mortgage lender brings into existence
a mortgage secured by real property.
collection of mortgage payments from borrowers and
related responsibilities of a loan servicer.
The loan-to-value ratio (LTV) is the original loan
amount divided by the lower of the sales price or
the appraised value.
period, expressed in days, during which a lender
will guarantee a rate.
time period during which the lender has guaranteed
an interest rate to a borrower.
title that is free and clear of objectionable liens,
clouds, or other title defects. A title which enables
an owner to sell his property freely to others and
which others will accept without objection.
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.
date on which the principal balance of a loan, bond,
or other financial instrument becomes due and payable.
credit report that contains information from three
credit repositories. When the report is created,
the information is compared for duplicate entries.
Any duplicates are combined to provide a summary
of a your credit.
called "Spread"). The amount the lender adds to
the index to determine the Fully Indexed Accrual
savings account that provides bank depositors with
many of the advantages of a money market fund. Certain
regulatory restrictions apply to the withdrawal
of funds from a money market account.
mutual fund that allows individuals to participate
in managed investments in short-term debt securities,
such as certificates of deposit and Treasury bills.
principal, interest, taxes, and insurance paid by
the borrower on a monthly basis. Used with gross
income to determine affordability.
mortgage that requires payments to reduce the debt
once a month.
legal document that pledges a property to the lender
as security for a payment of a debt.
company that originates mortgages exclusively for
resale in the secondary market.
company that for a fee matches borrowers with lenders.
The fee paid to FHA or a private insurer for mortgage
lender in a mortgage agreement.
written notice from the bank or other lending institution
saying it will advance mortgage funds in a specified
amount to enable a buyer to purchase a house.
payment made by a borrower to the lender for transmittal
to HUD to help defray the cost of the FHA mortgage
insurance program and to provide a reserve fund
to protect lenders against loss in insured mortgage
transactions. In FHA insured mortgages this represents
an annual rate of one-half of one percent paid by
the mortgagor on a monthly basis.
type of term life insurance often bought by mortgagors.
The amount of coverage decreases as the principal
balance declines. In the event that the borrower
dies while the policy is in force, the debt is automatically
satisfied by insurance proceeds.
written agreement to repay a loan. The agreement
is secured by a mortgage, serves as proof of indebtedness,
and states the manner in which it shall be paid.
The note states the actual amount of the debt that
the mortgage secures and renders the mortgagor personally
responsible for repayment.
borrower in a mortgage agreement.
that provide separate housing units for more than
one family, although they secure only a single mortgage.
residential mortgage on a dwelling that is designed
to house more than four families, such as a high-rise
called "Deferred Interest"). If the payments are
too small to cover the interest due on a loan, the
remaining interest owed is added to the outstanding
loan balance, causing negative amortization.
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
income less federal income tax.
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
value of all assets, including cash, less total
refinance transaction in which the new mortgage
amount is limited to the sum of the remaining balance
of the existing first mortgage, closing costs (including
prepaid items), points, the amount required to satisfy
any mortgage liens that are more than one year old
(if the borrower chooses to satisfy them), and other
funds for the borrower's use (as long as the amount
does not exceed 1 percent of the principal amount
of the new mortgage).
asset that cannot easily be converted into cash.
legal document that obligates a borrower to repay
a mortgage loan at a stated interest rate during
a specified period of time.
interest rate stated on a mortgage note.
formal written notice to a borrower that a default
has occurred and that legal action may be taken.
total amount of principal owed on a mortgage before
any payments are made.
fee paid to a lender for processing a loan Application.
Office of Thrift Supervision). Charters federal
thrifts, serves as the primary federal examiner
and regulator of federal and state-chartered savings
associations, and administers laws governing savings
and loan holding companies.
property purchase transaction in which the property
seller provides all or part of the financing.
Occupied" means the property is the owner's primary
length of time (typically a year) between changes
to the AML borrower's P&I payment.
buy downs occur when a third party, typically a
builder, pays part of the initial P&I payments
for a year or two, so that the borrower has smaller
payments and can qualify for the loan.
limit on the amount the payment can be changed at
the end of each Payment Adjustment Period.
a payment discount, the lender reduces the first
year's interest rate to make the mortgagor more
attractive to borrowers.
limit on the amount that payments can increase or
decrease during any one-adjustment period.
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.
property that is not real property.
Interest, Taxes and Insurance are components of
a mortgage payment.
map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines, buildings,
improvements on the land, and easements.
one-time charge by the lender to increase the yield
of the loan; a point is 1 percent of the amount
of the mortgage.
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.
of mortgage loan, or part of it, before due date.
process of determining how much money a prospective
homebuyer will be eligible to borrow before application.
interest rates that banks charge to their preferred
amount borrowed or remaining unpaid, also, that
part of the monthly payment that reduces the outstanding
balance of a mortgage.
provided by nongovernmental insurers that protect
lenders against loss if a borrower defaults.
written promise to repay a specified amount over
a specified period of time.
meeting in an announced public location to sell
property to repay a mortgage that is in default.
Unit Development (PUD)
project or subdivision that includes common property
that is owned and maintained by a homeowners' association
for the benefit and use of the individual PUD unit
Agreement of Sale.
acquisition of property through the payment of money
or its equivalent.
applied by lenders to determine how large a loan
to grant a homebuyer.
deed, which transfers whatever interest, the maker
of the deed may have in the particular parcel of
land. A quitclaim deed is often given to clear the
title when the grantor's interest in a property
is questionable. By accepting such a deed the buyer
assumes all the risks. Such a deed makes no warranties
as to the title, but simply transfers to the buyer
whatever interest the grantor has. (See Deed.)
radioactive gas found in some homes that in sufficient
concentrations could cause health problems.
called "Interest Rate Caps"). A limit on the amount
of which the interest rate charged to the borrower
can be changed.
commitment issued by a lender to a borrower or other
mortgage originator guaranteeing a specified interest
rate for a specified period of time.
middleman or agent who buys and sells real estate
for a company, firm, or individual on a commission
basis. The broker does not have title to the property,
but generally represents the owner.
A term frequently used by lending institution as
applied to ownership of real property acquired for
investment or as a result of foreclosure.
Estate Settlement Procedures Act). A Federal law
that requires lenders to provide home mortgage borrowers
with information about known or estimated settlement
and appurtenances, including anything of a permanent
nature such as structures, trees, minerals, and
the interest, benefits, and inherent rights thereof.
real estate broker or an associate who holds active
membership in a local real estate board that is
affiliated with the National Association of Realtors.
cancellation or annulment of a transaction or contract
by the operation of a law or by mutual consent.
public official who keeps records of transactions
that affects real property in the area.
noting in the registrar’s office of the details
of a properly executed legal document, such as a
deed, a mortgage note, a satisfaction of mortgage,
or an extension of mortgage, thereby making it a
part of the public record. Refinancing
process of the same mortgagor paying off one loan
with the proceeds from another loan.
mortgage created to cover the costs of repairing,
improving, and sometimes acquiring an existing property.
amount of principal that has not yet been repaid.
original amortization term minus the number of payments
that have been applied.
arrangement made to repay delinquent installments
or advances. Lenders' formal repayment plans are
called "relief provisions."
fund set aside for replacement of common property
in a condominium, PUD, or cooperative project --
particularly that which has a short life expectancy,
such as carpeting, furniture, etc.
restrictions limiting the use of real property.
Restrictive covenants are created by deed and may
"run with the land," binding all subsequent purchasers
of the land, or may be "personal" and binding only
between the original seller and buyer. The determination
whether a covenant runs with the land or is personal
is governed by the language of the covenant, the
intent of the parties, and the law in the State
where the land is situated. Restrictive covenants
that run with the land are encumbrances and may
affect the value and marketability of title. Restrictive
covenants may limit the density of buildings per
acre, regulate size, style or price range of buildings
to be erected, or prevent particular businesses
from operating or minority groups from owning or
occupying homes in a given area. (This latter discriminatory
covenant is unconstitutional and has been declared
unenforceable by the U.S. Supreme Court.)
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.
The borrower is billed for the amount that is actually
borrowed plus any interest due.
of first refusal
provision in an agreement that requires the owner
of a property to give another party the first opportunity
to purchase or lease the property before he or she
offers it for sale or lease to others.
of ingress or egress
right to enter or leave designated premises.
joint tenancy, the right of survivors to acquire
the interest of a deceased joint tenant.
Trust Corporation). Formed to resolve thrift failures
over the next three years and dispose of their assets
Agreement of sale.
mortgage that has rights that are subordinate to
the rights of the first mortgage holders.
buying and selling of existing mortgages.
called "Seller Contributions"). Seller-provided
funds include all transaction cost paid by the seller
except the real estate agent's (or brokers) fee.
party who has entered into an agreement with the
insured to service a loan.
premium, which provides coverage for more than a
special tax imposed on property, individual lots
or all property in the immediate area, for road
construction, sidewalks, sewers, streetlights, etc.
lien that binds a specified piece of property, unlike
a general lien, which is levied against all one's
assets. It creates a right to retain something of
value belonging to another person as compensation
for labor, material, or money expended in that person's
behalf. In some localities it is called "particular"
lien or "specific" lien. (See Lien.)
deed in which the grantor conveys title to the grantee
and agrees to protect the grantee against title
defects or claims asserted by the grantor and those
persons whose right to assert a claim against the
title arose during the period the grantor held title
to the property. In a special warranty deed the
grantor guarantees to the grantee that he has done
nothing during the time he held title to the property
which has, or which might in the future, impair
the grantee's title.
map or plat made by a licensed surveyor showing
the results of measuring the land with its elevations,
improvements, boundaries, and its relationship to
surrounding tracts of land. A survey is often required
by the lender to assure him that a building is actually
sited on the land according to its legal description.
applied to real estate, an enforced charge imposed
on persons, property or income, to be used to support
the State. The governing body in turn utilizes the
funds in the best interest of the general public.
claim against real estate for the amount of its
to a Payment Discount, but implies either an unusually
large initial rate discount or an attempt by the
lender to lure an otherwise unqualified borrower
into the mortgage.
by the entirety
type of joint tenancy of property that provides
right of survivorship and is available only to a
husband and wife. Contrast with tenancy in common.
type of joint tenancy in a property without right
of survivorship. Contrast with tenancy by the entirety
and with joint tenancy.
obligee for a cooperative share loan, who is both
a stockholder in a cooperative corporation and a
tenant of the unit under a proprietary lease or
process by which 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.
generally used, the rights of ownership and possession
of particular property. In real estate usage, title
may refer to the instruments or documents by which
a right of ownership is established (title documents),
or it may refer to the ownership interest one has
in the real estate.
company that specializes in examining and insuring
titles to real estate.
lenders or homeowners against loss of their interest
in property due to legal defects in title. Title
insurance may be issued to a "mortgagee's title
policy." Insurance benefits will be paid only to
the "named insured" in the title policy, so it is
important that an owner purchase an "owner's title
policy", if he desires the protection of title insurance.
Search or Examination
check of the title records, generally at the local
courthouse, to make sure the buyer is purchasing
a house from the legal owner and there are no liens,
overdue special assessments, or other claims or
outstanding restrictive covenants filed in the record,
which would adversely affect the marketability or
value of title.
debt and housing payments divided by gross monthly
income. Also known as Back-End Ratio.
obligations as a percentage of gross monthly income.
The total expense ratio includes monthly housing
expenses plus other monthly debts.
that results from a property purchaser giving his
or her existing property (or an asset other than
real estate) as trade as all or part of the down
payment for the property that is being purchased.
means by which the ownership of a property changes
hands. Lenders consider all of the following situations
to be a transfer of ownership: the purchase of a
property "subject to" the mortgage, the assumption
of the mortgage debt by the property purchaser,
and any exchange of possession of the property under
a land sales contract or any other land trust device.
In cases in which an inter vivos revocable trust
is the borrower, lenders also consider any transfer
of a beneficial interest in the trust to be a transfer
or local tax payable when title passes from one
owner to another.
index that is used to determine interest rate changes
for certain adjustable-rate mortgage (ARM) plans.
party who is given legal responsibility to hold
property in the best interest of or "for the benefit
of" another. The trustee is one placed in a position
of responsibility for another, a responsibility
enforceable in a court of law.
A federal law that requires lenders to fully disclose,
in writing, the terms and conditions of a mortgage,
including the APR and other charges.
to four-family property
property that consists of a structure that provides
living space (dwelling units) for two to four families,
although ownership of the structure is evidenced
by a single deed.
process of evaluating a loan application to determine
the risk involved for the lender. Underwriting involves
an analysis of the borrower's creditworthiness and
the quality of the property itself.
loan that is not backed by collateral.
Loans FHA / VA
loans are loans that are guaranteed or purchased
by government organizations. Two of the most popular
Government Loans are the Federal Housing Administration
(FHA) and the Department of Veterans Affairs (VA).
the right to use a portion of a fund such as an
individual retirement fund.
of Veterans Affairs (VA)
agency of the federal government that guarantees
residential mortgages made to eligible veterans
of the military services. The guarantee protects
the lender against loss and thus encourages lenders
to make mortgages to veterans.
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.
acts of an authorized local government establishing
building codes, and setting forth