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Annual Percentage Rate (Apr)
The cost of a mortgage stated as a yearly rate; includes such
items as interest, mortgage insurance, and loan origination fee
(points).
Annuity An amount paid yearly or at other regular
intervals, often on a guaranteed dollar basis.
Application A form used to apply for a mortgage
loan and to record pertinent information concerning a prospective
mortgagor and the proposed security. Lenders use the information
on the loan application to evaluate whether or not they can give
the loan, and if so, the amount of money they can lend.
Appraisal A written analysis of the estimated
value of a property prepared by a qualified appraiser. Contrast
with home inspection.
Appraised Value An opinion of a property's fair market value,
based on an appraiser's knowledge, experience, and analysis of
the property.
Appraiser A person qualified by education, training,
and experience to estimate the value of real property and personal
property.
Appreciation An increase in the value of a property due to changes
in market conditions or other causes. The opposite of depreciation.
Assessed Value The valuation placed on property
by a public tax assessor for purposes of taxation.
Assessment The process of placing a value on
property for the strict purpose of taxation. May also refer to
a levy against property for a special purpose, such as a sewer
assessment.
Assessment Rolls The public record of taxable
property.
Assessor A public official who establishes the value of a property
for taxation purposes.
Asset Anything of monetary value that is owned
by a person. Assets include real property, personal property,
and enforceable claims against others (including bank accounts,
stocks, mutual funds, and so on). More
Assignment The transfer of a mortgage from one
person to another.
Assumable Mortgage A mortgage
that can be taken over ("assumed") by the buyer when
a home is sold.
Assumption The transfer of the seller's existing
mortgage to the buyer. See assumable mortgage.
Assumption Clause A provision in an assumable
mortgage that allows a buyer to assume responsibility for the
mortgage from the seller. The loan does not need to be paid in
full by the original borrower upon sale or transfer of the property.
Assumption Fee The fee paid to a lender (usually
by the purchaser of real property) resulting from the assumption
of an existing mortgage.
Attorney-In-Fact One who holds a power of attorney from another
to execute documents on behalf of the grantor of the power.
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Balance Sheet A financial
statement that shows assets, liabilities, and net worth as of
a specific date.
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. The principal and interest on the loan are amortized over
a longer period than the actual term of the mortgage.
Balloon 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.
Bankruptcy A proceeding in a federal court in
which a debtor who owes more than his or her assets can relieve
the debts by transferring his or her assets to a trustee.
Before-Tax Income Income before taxes are deducted.
Beneficiary The person designated to receive
the income from a trust, estate, or a deed of trust.
Bequeath To transfer personal property through
a will.
Betterment An improvement that increases property
value as distinguished from repairs or replacements that simply
maintain value.
Bill Of Sale A written document that transfers
title to personal property.
Binder A preliminary agreement, secured by the
payment of an earnest money deposit, under which a buyer offers
to purchase real estate.
Biweekly Payment Mortgage A mortgage that requires
payments to reduce the debt every two weeks (instead of the standard
monthly payment schedule). The 26 (or possibly 27) biweekly payments
are each equal to one-half of the monthly payment that would be
required if the loan were a standard 30-year fixed-rate mortgage,
and they are usually drafted from the borrower's bank account.
The result for the borrower is a substantial savings in interest.
Blanket Insurance Policy A single policy that
covers more than one piece of property (or more than one person).
Blanket Mortgage The mortgage that is secured
by a cooperative project, as opposed to the share loans on individual
units within the project.
Bona Fide In good faith, without fraud.
Bond An interest-bearing certificate of debt
with a maturity date. An obligation of a government or business
corporation. A real estate bond is a written obligation usually
secured by a mortgage or a deed of trust.
Breach A violation of any legal obligation.
Bridge Loan A form of second trust that is collateralized
by the borrower's present home (which is usually for sale) in
a manner that allows the proceeds to be used for closing on a
new house before the present home is sold. Also known as "swing
loan."
Broker A person who, for a commission
or a fee, brings parties together and assists in negotiating contracts
between them.
Budget A detailed plan of income and expenses
expected over a certain period of time. A budget can provide guidelines
for managing future investments and expenses.
Budget Category A category of income or expense
data that you can use in a budget. You can also define your own
budget categories and add them to some or all of the budgets you
create. "Rent" is an example of an expense category.
"Salary" is a typical income category.
Building Code Local regulations that control
design, construction, and materials used in construction. Building
codes are based on safety and health standards.
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.
Buydown Mortgage A temporary buydown is a mortgage
on which an initial lump sum payment is made by any party to reduce
a borrower's monthly payments during the first few years of a
mortgage. A permanent buydown reduces the interest rate over the
entire life of a mortgage.
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Call Option A provision
in the mortgage that gives the mortgagee (the lender) the right
to call the mortgage due and payable at the end of a specified
period for whatever reason.
Cap A provision of an adjustable-rate mortgage
(ARM) that limits how much the interest rate or mortgage payments
may increase or decrease. See lifetime payment cap, lifetime rate
cap, periodic payment cap, and periodic rate cap.
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.
Capital Expenditure The cost of an improvement
made to extend the useful life of a property or to add to its
value.
Capital Improvement Any structure or component
erected as a permanent improvement to real property that adds
to its value and useful life.
Cash-Out Refinance A refinance transaction in
which the amount of money received from the new loan exceeds the
total of the money needed to repay the existing first mortgage,
closing costs, points, and the amount required to satisfy any
outstanding subordinate mortgage liens. In other words, a refinance
transaction in which the borrower receives additional cash that
can be used for any purpose.
Certificate Of Deposit A document written by
a bank or other financial institution that is evidence of a deposit,
with the issuer's promise to return the deposit plus earnings
at a specified interest rate within a specified time period. See
adjustable rate mortgage (ARM).
Certificate Of Deposit Index An index that is
used to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weekly average of secondary
market interest rates on six-month negotiable certificates of
deposit. See adjustable-rate mortgage.
Certificate Of Eligibility A document issued
by the federal government certifying a veteran's eligibility for
a Department of Veterans Affairs (VA) mortgage.
Certificate Of Reasonable Value (CRV) A document
issued by the Department of Veterans Affairs (VA) that establishes
the maximum value and loan amount for a VA mortgage.
Certificate Of Title A statement provided by
an abstract company, title company, or attorney stating that the
title to real estate is legally held by the current owner.
Chain Of Title The history of all of the documents
that transfer title to a parcel of real property, starting with
the earliest existing document and ending with the most recent.
Change Frequency The frequency (in months) of
payment and/or interest rate changes in an adjustable-rate mortgage
(ARM).
Chattel Another name for personal property.
Clear Title A title that is
free of liens or legal questions as to ownership of the property.
Closing A meeting at which a
sale of a property is finalized by the buyer signing the mortgage
documents and paying closing costs. Also called "settlement."
At this meeting, ownership of the property is transferred from
the seller to the buyer.
Closing Cost Item A fee or amount that a home
buyer must pay at closing for a single service, tax, or product.
Closing costs are made up of individual closing cost items such
as origination fees and attorney's fees. Many closing cost items
are included as numbered items on the HUD-1 statement.
Closing Costs Expenses (over and above the price
of the property) incurred by buyers and sellers in transferring
ownership of a property. Closing costs normally include an origination
fee, an attorney's fee, taxes, an amount placed in escrow, and
charges for obtaining title insurance and a survey. Closing costs
percentage will vary according to the area of the country; lenders
or Realtor® often provide estimates of closing costs to prospective
homebuyers.
Closing Statement See HUD-1 statement.
Cloud On Title Any conditions revealed by a title
search that adversely affect the title to real estate. Usually
clouds on title cannot be removed except by a quitclaim deed,
release, or court action.
Coinsurance A sharing of insurance risk between
the insurer and the insured. Coinsurance depends
on the relationship between the amount of the policy and a specified
percentage of the actual value of the property insured at the
time of the loss.
Coinsurance Clause A provision in a hazard insurance
policy that states the amount of coverage that must be maintained
-- as a percentage of the total value of the property -- for the
insured to collect the full amount of a loss.
Collateral An asset (such as a car or a home)
that guarantees the repayment of a loan. The borrower risks losing
the asset if the loan is not repaid according to the terms of
the loan contract.
Collection The efforts used to bring a delinquent
mortgage current and to file the necessary notices to proceed
with foreclosure when necessary.
Co-Maker A person who signs
a promissory note along with the borrower. A co-maker's signature
guarantees that the loan will be repaid, because the borrower
and the co-maker are equally responsible for the repayment. See
endorser.
Commission The fee charged by a broker or agent
for negotiating a real estate or loan transaction. A commission
is generally a percentage of the price of the property or loan.
Commitment Letter A formal offer
by a lender stating the terms under which it agrees to lend money
to a home buyer. Also known as a "loan commitment."
Common Area Assessments Levies against individual
unit owners in a condominium or planned unit development (PUD)
project for additional capital to defray homeowners' association
costs and expenses and to repair, replace, maintain, improve,
or operate the common areas of the project.
Common Areas Those portions of a building, land,
and amenities owned (or managed) 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.
Common Law An unwritten body of law based on
general custom in England and used to an extent in the United
States.
Community Land Trust Mortgage Option An alternative financing
option that enables low- and moderate-income home buyers to purchase
housing that has been improved by a nonprofit Community Land Trust
and to lease the land on which the property stands.
Community Property In some western and southwestern
states, a form of ownership under which property acquired during
a marriage is presumed to be owned jointly unless acquired as
separate property of either spouse.
Community Seconds® An alternative financing
option for low- and moderate-income households under which an
investor purchases a first mortgage that has a subsidized second
mortgage behind it. The second mortgage may be issued by a state,
county, or local housing agency, foundation, or nonprofit organization.
Payment on the second mortgage is often deferred and carries a
very low interest rate (or no interest rate at all). Part of the
debt may be forgiven incrementally for each year the buyer remains
in the home.
Comparables An abbreviation for "comparable
properties"; used for comparative purposes in the appraisal
process. Comparables are properties like the property under consideration;
they have reasonably the same size, location, and amenities and
have recently been sold. Comparables help the appraiser determine
the approximate fair market value of the subject property.
Compound Interest Interest paid on the original
principal balance and on the accrued and unpaid interest.
Condemnation The determination that a building
is not fit for use or is dangerous and must be destroyed; the
taking of private property for a public purpose through an exercise
of the right of eminent domain.
Condominium A real estate project in which each
unit owner has title to a unit in a building, an undivided interest
in the common areas of the project, and sometimes the exclusive
use of certain limited common areas.
Condominium Conversion Changing the ownership
of an existing building (usually a rental project) to the condominium
form of ownership.
Condominium Hotel A condominium project that
has rental or registration desks, short-term occupancy, food and
telephone services, and daily cleaning services and that is operated
as a commercial hotel even though the units are individually owned.
Construction Loan A short-term,
interim loan for financing the cost of construction. The lender
makes payments to the builder at periodic intervals as the work
progresses.
Contingency A condition that must be met before
a contract is legally binding. For example, home purchasers often
include a contingency that specifies that the contract is not
binding until the purchaser obtains a satisfactory home inspection
report from a qualified home inspector.
Contract An oral or written agreement to do or
not to do a certain thing.
Conventional Mortgage A mortgage that is not
insured or guaranteed by the federal government. Contrast with
government mortgage.
Convertibility Clause A provision in some adjustable-rate
mortgages (ARMs) that allows the borrower to change the ARM to
a fixed-rate mortgage at specified timeframes after loan origination.
Convertible ARM An adjustable-rate mortgage (ARM)
that can be converted to a fixed-rate mortgage under specified
conditions.
Cooperative (Co-Op) A type of multiple ownership
in which the residents of a multiunit housing complex own shares
in the cooperative corporation that owns the property, giving
each resident the right to occupy a specific apartment or unit.
Cooperative Corporation A business trust entity
that holds title to a cooperative project and grants occupancy
rights to particular apartments or units to shareholders through
proprietary leases or similar arrangements.
Cooperative Mortgages Mortgages related to a
cooperative project. This usually refers to the multifamily mortgage
covering the entire project but occasionally describes the share
loans on the individual units.
Cooperative Project A residential or mixed-use
building wherein a corporation or trust holds title to the property
and sells shares of stock representing the value of a single apartment
unit to individuals who, in turn, receive a proprietary lease
as evidence of title.
Corporate Relocation Arrangements under which
an employer moves an employee to another area as part of the employer's
normal course of business or under which it transfers a substantial
part or all of its operations and employees to another area because
it is relocating its headquarters or expanding its office capacity.
Cost Of Funds Index (COFI) An index that is used
to determine interest rate changes for certain adjustable-rate
mortgage (ARM) plans. It represents the weighted-average cost
of savings, borrowings, and advances of the 11th District members
of the Federal Home Loan Bank of San Francisco. See adjustable-rate
mortgage (ARM).
Covenant A clause in a mortgage
that obligates or restricts the borrower and that, if violated,
can result in foreclosure.
Credit An agreement in which a borrower receives
something of value in exchange for a promise to repay the lender
at a later date.
Credit History A record of an individual's open
and fully repaid debts. A credit history helps a lender to determine
whether a potential borrower has a history of repaying debts in
a timely manner.
Credit Life Insurance A type of insurance often
bought by mortgagors because it will pay off the mortgage debt
if the mortgagor dies while the policy is in force.
Creditor A person to whom money is owed.
Credit Report A report of an individual's credit
history prepared by a credit bureau and used by a lender in determining
a loan applicant's creditworthiness.
Credit Reporting Agency (Or Bureau) An organization
that prepares reports that are used by lenders to determine a
potential borrower's credit history. The agency obtains data for
these reports from a credit repository as well as from other sources.
Credit Repository An organization that gathers,
records, updates, and stores financial and public records information
about the payment records of individuals who are being considered
for credit.
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Debt An amount owed to another. See installment
loan and revolving liability.
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.
Delinquency Failure to make mortgage payments
when mortgage payments are due.
Deposit A 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. See earnest money
deposit.
Depreciation A decline in the value of property;
the opposite of appreciation.
Discount Points See point.
Dower The rights of a widow in the property of
her husband at his death.
Down Payment The part of the purchase price of
a property that the buyer pays in cash and does not finance with
a mortgage.
Due-On-Sale Provision A 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.
Due-On-Transfer Provision This terminology is
usually used for second mortgages. See due-on-sale provision.
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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.
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.
Eminent Domain The 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.
Employer-Assisted Housing A special housing initiative
that offers several different ways for employers to work with
local lenders to develop plans to assist their employees in purchasing
homes.
Encroachment An improvement that intrudes illegally
on another's property.
Encumbrance Anything that affects or limits the
fee simple title to a property, such as mortgages, leases, easements,
or restrictions.
Endorser A person who signs ownership interest
over to another party. Contrast with co-maker.
Equal Credit Opportunity Act (Ecoa) A 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.
Equity A homeowner's financial interest in a
property. Equity is the difference between the fair market value
of the property and the amount still owed on its mortgage.
Escrow An item of value, money, or documents
deposited with a third party to be delivered upon the fulfillment
of a condition. For example, the deposit by a borrower with the
lender of funds to pay taxes and insurance premiums when they
become due, or the deposit of funds or documents with an attorney
or escrow agent to be disbursed upon the closing of a sale of
real estate.
Escrow Account The account in which a mortgage
servicer holds the borrower's escrow payments prior to paying
property expenses.
Escrow Analysis The periodic examination of escrow
accounts to determine if current monthly deposits will provide
sufficient funds to pay taxes, insurance, and other bills when
due.
Escrow Collections Funds 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 The use of escrow funds
to pay real estate taxes, hazard insurance, mortgage insurance,
and other property expenses as they become due.
Escrow Payment The 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. Known as "impounds" or "reserves"
in some states.
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.
Eviction The lawful expulsion of an occupant
from real property.
Examination Of Title The report on the title of a property from
the public records or an abstract of the title.
Exclusive Listing A 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
a commission.
Executor A person named in a will to administer
an estate. The court will appoint an administrator if no executor
is named. "Executrix" is the feminine form.
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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 A New York Stock Exchange company
and the largest non-bank financial services company in the world.
It operates pursuant to a federal charter and is the nation's
largest source of financing for home mortgages.
Fannie Mae Properties Fannie
Mae owns, manages, and has available for sale, single-family detached
homes, two- to four-unit properties, condominiums, and townhouses
in a variety of neighborhoods. The number, type, and sales price
may vary substantially. The homes vary in age and may require
repairs. Fannie Mae homes are sold through local real estate brokers
whose contact information is provided in the Fannie Mae
Properties for Sale search results on homepath.com.
Fannie Mae's Community Home Buyer's Programsm
An income-based community lending model, under which mortgage
insurers and Fannie Mae offer flexible underwriting guidelines
to increase a low- or moderate-income family's buying power and
to decrease the total amount of cash needed to purchase a home.
Borrowers who participate in this model are required to attend
pre-purchase home-buyer education sessions.
Fannie 97® A financing option
for a fixed-rate mortgage that offers home buyers a 3 percent
down payment loan with a term between 15 and 30 years. The mortgage
features a loan-to-value (LTV) percentage of 97 percent, and is
designed to expand homeownership opportunities for people with
modest incomes. Borrowers must take a pre-purchase home-buyer
education session to qualify for a Fannie 97 mortgage.
Federal Housing Administration (FHA) An agency
of the U.S. Department of Housing and Urban Development (HUD).
Its main activity is the insuring of residential mortgage loans
made by private lenders. The FHA sets standards for construction
and underwriting but does not lend money or plan or construct
housing.
Fee Simple The greatest possible interest a person
can have in real estate.
Fee Simple Estate An 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
the property.
FHA Coinsured Mortgage A mortgage (under FHA
Section 244) for which the Federal Housing Administration (FHA)
and the originating lender share the risk of loss in the event
of the mortgagor's default.
FHA Mortgage A mortgage that is insured by the
Federal Housing Administration (FHA). Also known as a government
mortgage.
Finder's Fee A fee or commission paid to a mortgage
broker for finding a mortgage loan for a prospective borrower.
Firm Commitment A lender's agreement
to make a loan to a specific borrower on a specific property.
First Mortgage A mortgage that is the primary
lien against a property.
Fixed Installment The monthly payment due on
a mortgage loan. The fixed installment includes payment of both
principal and interest.
Fixed-Rate Mortgage (FRM) A mortgage in which
the interest rate does not change during the entire term of the
loan.
Fixture Personal property that becomes real property
when attached in a permanent manner to real estate.
Flood Insurance Insurance that compensates for
physical property damage resulting from flooding. It is required
for properties located in federally designated flood areas.
Foreclosure The legal process by which a borrower
in default under a mortgage is deprived of his or her interest
in the mortgaged property. This usually involves a forced sale
of the property at public auction with the proceeds of the sale
being applied to the mortgage debt.
Forfeiture The loss of money, property, rights, or privileges
due to a breach of legal obligation.
401(K)/403(B) An employer-sponsored investment
plan that allows individuals to set aside tax-deferred income
for retirement or emergency purposes. 401(k) plans are provided
by employers that are private corporations. 403(b) plans are provided
by employers that are not for profit organizations.
401(K)/403(B) Loan Some administrators of 401(k)/403(b)
plans allow for loans against the monies you have accumulated
in these plans -- monies must be repaid to avoid serious penalty
charges.
Fully Amortized ARM An adjustable-rate mortgage
(ARM) with a monthly payment that is sufficient to amortize the
remaining balance, at the interest accrual rate, over the amortization
term.
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Government Mortgage A mortgage
that is insured by the Federal Housing Administration (FHA) or
guaranteed by the Department of Veterans Affairs (VA) or the Rural
Housing Service (RHS). Contrast with conventional mortage.
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.
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.
Group Home A single-family residential structure
designed or adapted for occupancy by unrelated developmentally
disabled persons. The structure provides long-term housing and
support services that are residential in nature.
Growing-Equity Mortgage (GEM) A fixed-rate mortgage
that provides scheduled payment increases over an established
period of time, with the increased amount of the monthly payment
applied directly toward reducing the remaining balance of the
mortgage.
Guarantee Mortgage A mortgage
that is guaranteed by a third party.
Guaranteed Loan Also known as a government mortgage.
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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.
Home Inspection A thorough inspection that evaluates
the structural and mechanical condition of a property. A satisfactory
home inspection is often included as a contingency by the purchaser.
Contrast with appraisal.
Homekeepersm Fannie Mae's adjustable-rate conventional
reverse mortgage, which allows older homeowners to borrow against
the value of their homes and receive the proceeds according to
the payment option they select. The amount available is based
on the number of borrowers and their ages and the adjusted property
value. Anyone 62 years or older who either owns his or her own
home free and clear or has very low mortgage debt is eligible.
Homeowners' Association 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.
Homeowner's Insurance An insurance policy that
combines personal liability insurance and hazard insurance coverage
for a dwelling and its contents.
Homeowner's Warranty (HOW) A type of insurance that covers repairs
to specified parts of a house for a specific period of time. It
is provided by the builder or property seller as a condition of
the sale.
Homestyle® Mortgage Loan
A mortgage that enables eligible borrowers to obtain financing
to remodel, repair, and upgrade their existing homes or homes
that they are purchasing. See also HomeStyle Standard Mortgage,
HomeStyle Remodeler, HomeStyle Community Mortgage
and HomeStyle Consumer Energy Loan.
Housing Expense Ratio The percentage of gross
monthly income that goes toward paying housing expenses.
HUD Median Income Median family income for a
particular county or metropolitan statistical area (MSA), as estimated
by the Department of Housing and Urban Development (HUD).
HUD-1 Statement A document
that provides an itemized listing of the funds that are payable
at closing. Items that appear on the statement include real estate
commissions, loan fees, points, and initial escrow amounts. Each
item on the statement is represented by a separate number within
a standardized numbering system. The totals at the bottom of the
HUD-1 statement define the seller's net proceeds and the buyer's
net payment at closing. The blank form for the statement is published
by the Department of Housing and Urban Development (HUD). The
HUD-1 statement is also known as the "closing statement"
or "settlement sheet."
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Income Property Real estate
developed or improved to produce income.
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.
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."
Installment The regular periodic payment that
a borrower agrees to make to a lender.
Installment Loan Borrowed money that is repaid
in equal payments, known as installments. A furniture loan is
often paid for as an installment loan.
Insurable Title A property title that a title
insurance company agrees to insure against defects and disputes.
Insurance A 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.
Insurance Binder A 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.
Insured Mortgage A 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.
Interest The fee charged for borrowing money.
Interest Accrual Rate The 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.
Interest Rate The rate of interest in effect
for the monthly payment due.
Interest Rate Buydown Plan An arrangement wherein
the property seller (or any other party) deposits money to an
account so that it can be released each month to reduce the mortgagor's
monthly payments during the early years of a mortgage. During
the specified period, the mortgagor's effective interest rate
is "bought down" below the actual interest rate.
Interest Rate Ceiling For an
adjustable-rate mortgage (ARM), the maximum interest rate, as
specified in the mortgage note.
Interest Rate Floor For an adjustable-rate
mortgage (ARM), the minimum interest rate, as specified in the
mortgage note.
Investment Property A property that is not occupied by the owner.
Ira (Individual Retirement Account) A 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.
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J -
Joint Tenancy A form of co-ownership that gives
each tenant equal interest and equal rights in the property, including
the right of survivorship.
Judgment 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.
Judgment 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 mortgage
amount limits. Also called a nonconforming loan.
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L -
Late Charge The penalty
a borrower must pay when a payment is made a stated number of
days (usually 15) after the due date.
Lease A 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.
Leasehold Estate 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 on it.
Lease-Purchase Mortgage Loan An alternative financing
option that allows low- and moderate-income home buyers to lease
a home from a nonprofit organization with an option to buy. Each
month's rent payment consists of principal, interest, taxes and
insurance (PITI) payments on the first mortgage plus an extra
amount that is earmarked for deposit to a savings account in which
money for a downpayment will accumulate.
Legal Description A property description, recognized
by law, that is sufficient to locate and identify the property
without oral testimony.
Liabilities A person's financial obligations.
Liabilities include long-term and short-term debt, as well as
any other amounts that are owed to others.
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.
Lien A legal claim against a property that must
be paid off when the property is sold.
Lifetime Payment Cap For an adjustable-rate mortgage
(ARM), a limit on the amount that payments can increase or decrease
over the life of the mortgage. See cap.
Lifetime Rate Cap For an adjustable-rate mortgage
(ARM), a limit on the amount that the interest rate can increase
or decrease over the life of the loan. See cap, interest rate
ceiling and interest rate floor.
Line Of Credit 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 borrower. See home equity
line of credit.
Liquid Asset A cash asset or an asset that is
easily converted into cash.
Loan A sum of borrowed money (principal) that
is generally repaid with interest.
Loan Commitment See commitment letter.
Loan Origination The process by which a mortgage
lender brings into existence a mortgage secured by real property.
Loan-To-Value (LTV) Percentage The relationship
between the principal balance of the mortgage and the appraised
value (or sales price if it is lower) of the property. For example,
a $100,000 home with an $80,000 mortgage has a LTV percentage
of 80 percent.
Lock-In A written agreement in which the lender
guarantees a specified interest rate if a mortgage goes to closing
within a set period of time. The lock-in also usually specifies
the number of points to be paid at closing.
Lock-In Period The time period during which the lender has guaranteed
an interest rate to a borrower. See lock-in.
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M -
Margin For an adjustable-rate mortgage
(ARM), the amount that is added to the index to establish
the interest rate on each adjustment date, subject to any limitations
on the interest rate change.
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.
Merged Credit Report A 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.
Modification The act of changing any of the terms
of the mortgage.
Money Market Account A 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.
Money Market Fund A mutual fund that allows individuals
to participate in managed investments in short-term debt securities,
such as certificates of deposit and Treasury bills.
Monthly Fixed Installment That portion of the
total monthly payment that is applied toward principal and interest.
When a mortgage negatively amortizes, the monthly fixed installment
does not include any amount for principal reduction.
Monthly Payment Mortgage A mortgage
that requires payments to reduce the debt once a month.
Mortgage A legal document that pledges a property
to the lender as security for payment of a debt.
Mortgage Banker A company that originates mortgages
exclusively for resale in the secondary mortgage market.
Mortgage Broker An individual or company that brings borrowers
and lenders together for the purpose of loan origination. Mortgage
brokers typically require a fee or a commission for their services.
Mortgagee The lender in a mortgage agreement.
Mortgage Insurance A contract
that insures the lender against loss caused by a mortgagor's default
on a government mortgage or conventional mortgage. Mortgage insurance
can be issued by a private company or by a government agency such
as the Federal Housing Administration (FHA). Depending on the
type of mortgage insurance, the insurance may cover a percentage
of or virtually all of the mortgage loan. See private mortgage
insurance.
Mortgage 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.
Mortgage Life Insurance A 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.
Mortgagor The borrower in a mortgage agreement.
Multidwelling Units Properties that provide separate
housing units for more than one family, although they secure only
a single mortgage.
Multifamily Mortgage A residential mortgage on
a dwelling that is designed to house more than four families,
such as a high-rise apartment complex.
Multifamily Properties Fannie Mae provides financing
for multifamily (buildings with five or more units) rental properties
through a nationwide network of mortgage lenders.
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N -
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.
No Cash-Out Refinance A 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).
Nonliquid Asset An asset that cannot easily be
converted into cash.
Note A legal document that obligates a borrower
to repay a mortgage loan at a stated interest rate during a specified
period of time.
Note Rate The interest rate stated on a mortgage
note.
Notice Of Default A formal written notice to
a borrower that a default has occurred and that legal action may
be taken.
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O -
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.
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Partial Payment A payment
that is not sufficient to cover the scheduled monthly payment
on a mortgage loan.
Payment Change Date The date when a new monthly
payment amount takes effect on an adjustable-rate mortgage (ARM)
or a graduated-payment adjustable-rate mortgage (GPARM). Generally,
the payment change date occurs in the month immediately after
the adjustment date.
Periodic Payment Cap For an adjustable-rate mortgage
(ARM), a limit on the amount that payments can increase or decrease
during any one adjustment period.
Periodic Rate Cap For an adjustable-rate mortgage
(ARM), a 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.
Personal Property Any property that is not real
property.
Piti See principal, interest, taxes and insurance (PITI) below.
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.
Planned Unit Development See PUD below.
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.
Preforeclosure Sale A procedure in which the
investor allows a mortgagor to avoid foreclosure by selling the
property for less than the amount that is owed to the investor.
Prepayment Any amount paid to reduce the principal
balance of a loan before the due date. Payment in full on a mortgage
that may result from a sale of the property, the owner's decision
to pay off the loan in full, or a foreclosure. In each case, prepayment
means payment occurs before the loan has been fully amortized.
Prepayment Penalty A fee that may be charged
to a borrower who pays off a loan before it is due.
Pre-Qualification The process of determining
how much money a prospective home buyer will be eligible to borrow
before he or she applies for a loan.
Prime Rate The interest rate that banks charge
to their preferred customers. Changes in the prime rate influence
changes in other rates, including mortgage interest rates.
Principal The amount borrowed or remaining unpaid.
The part of the monthly payment that reduces the remaining balance
of a mortgage. More
Principal Balance The outstanding balance of
principal on a mortgage. The principal balance does not include
interest or any other charges. See remaining balance.
Principal, Interest, Taxes, And Insurance (PITI) The four components
of a monthly mortgage payment. Principal refers to the part of
the monthly payment that reduces the remaining balance of the
mortgage. Interest is the fee charged for borrowing money. Taxes
and insurance refer to the amounts that are paid into an escrow
account each month for property taxes and mortgage and hazard
insurance.
Private Mortgage Insurance (MI) Mortgage insurance that is provided
by a private mortgage insurance company to protect lenders against
loss if a borrower defaults. Most lenders generally require MI
for a loan with a loan-to-value (LTV) percentage in excess of
80 percent.
Promissory Note A written promise
to repay a specified amount over a specified period of time.
Public Auction A meeting in an announced public
location to sell property to repay a mortgage that is in default.
PUD (Planned Unit Development) A 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
owners.
Purchase And Sale Agreement A written
contract signed by the buyer and seller stating the terms and
conditions under which a property will be sold.
Purchase Money Transaction The acquisition of property through
the payment of money or its equivalent.
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Q -
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.
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Radon A radioactive gas
found in some homes that in sufficient concentrations can cause
health problems.
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. See lock-in.
Real Estate Agent A person licensed
to negotiate and transact the sale of real estate on behalf of
the property owner.
Real Estate Settlement Procedures Act (Respa) A consumer protection
law that requires lenders to give borrowers advance notice of
closing costs.
Real Property Land and appurtenances, including anything of a
permanent nature such as structures, trees, minerals, and the
interest, benefits, and inherent rights thereof.
Realtor® A real estate broker or an associate
who holds active membership in a local real estate board that
is affiliated with the National Association of Realtor®s.
Recission The cancellation or annulment of a
transaction or contract by the operation of a law or by mutual
consent. Borrowers usually have the option to cancel a refinance
transaction within three business days after it has closed.
Recorder The public official who keeps records
of transactions that affect real property in the area. Sometimes
known as a "Registrar of Deeds" or "County Clerk."
Recording The 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.
Refinance Transaction The process of paying off
one loan with the proceeds from a new loan using the same property
as security.
Rehabilitation Mortgage A mortgage created to
cover the costs of repairing, improving, and sometimes acquiring
an existing property.
Remaining Balance The amount of principal that has not yet been
repaid. See principal balance.
Remaining Term The original
amortization term minus the number of payments that have been
applied.
Rent Loss Insurance Insurance that protects a
landlord against loss of rent or rental value due to fire or other
casualty that renders the leased premises unavailable for use
and as a result of which the tenant is excused from paying rent.
Rent With Option To Buy See lease-purchase mortgage
loan.
Repayment Plan An arrangement made to repay delinquent
installments or advances. Lenders' formal repayment plans are
called "relief provisions."
Replacement Reserve Fund A 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.
Revolving Liability A credit arrangement, such as a credit card,
that allows a customer to borrow against a preapproved line of
credit when purchasing goods and services. The borrower is billed
for the amount that is actually borrowed plus any interest due.
Right Of First Refusal A 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.
Right Of Ingress Or Egress The right to enter
or leave designated premises.
Right Of Survivorship In joint tenancy, the right
of survivors to acquire the interest of a deceased joint tenant.
Rural Housing Service (Rhs) An agency within
the Department of Agriculture, which operates principally under
the Consolidated Farm and Rural Development Act of 1921 and Title
V of the Housing Act of 1949. This agency provides financing to
farmers and other qualified borrowers buying property in rural
areas who are unable to obtain loans elsewhere. Funds are borrowed
from the U.S. Treasury.
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S -
Sale-Leaseback
A technique
in which a seller deeds property to a buyer for a consideration,
and the buyer simultaneously leases the property back to the seller.
Second Mortgage A mortgage that has a lien position
subordinate to the first mortgage.
Secondary Mortgage Market The buying and selling
of existing mortgages.
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. See owner financing.
Servicer An organization that collects principal
and interest payments from borrowers and manages borrowers' escrow
accounts. The servicer often services mortgages that have been
purchased by an investor in the secondary mortgage market.
Servicing The collection of mortgage payments
from borrowers and related responsibilities of a loan servicer.
Settlement See closing.
Settlement Sheet See HUD-1 statement.
Single-Family Properties One- to four-unit properties
including detached homes, townhomes, condominiums, and cooperatives.
Special Deposit Account An account that is established
for rehabilitation mortgages to hold the funds needed for the
rehabilitation work so they can be disbursed from time to time
as particular portions of the work are completed.
Standard Payment Calculation The method used
to determine the monthly payment required to repay the remaining
balance of a mortgage in substantially equal installments over
the remaining term of the mortgage at the current interest rate.
Step-Rate Mortgage A mortgage that allows for
the interest rate to increase according to a specified schedule
(i.e., seven years), resulting in increased payments as well.
At the end of the specified period, the rate and payments will
remain constant for the remainder of the loan.
Subdivision A housing development that is created by dividing
a tract of land into individual lots for sale or lease.
Subordinate Financing Any mortgage or other lien
that has a priority that is lower than that of the first mortgage.
Subsidized Second Mortgage An alternative financing
option known as the Community Seconds® mortgage for low- and
moderate-income households. An investor purchases a first mortgage
that has a subsidized second mortgage behind it. The second mortgage
may be issued by a state, county, or local housing agency, foundation,
or nonprofit corporation. Payment on the second mortgage is often
deferred and carries a very low interest rate (or no interest
rate). Part of the debt may be forgiven incrementally for each
year the buyer remains in the home.
Survey A drawing or map showing the precise legal
boundaries of a property, the location of improvements, easements,
rights of way, encroachments, and other physical features.
Sweat Equity Contribution to the construction
or rehabilitation of a property in the form of labor or services
rather than cash.
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T -
Tenancy
By The Entirety A 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.
Tenancy In Common A type of joint tenancy in
a property without right of survivorship. Contrast with tenancy
by the entirety and with joint tenancy.
Tenant-Stockholder The 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 occupancy
agreement.
Third-Party Origination A rocess
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. See mortgage
broker.
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 that protects the lender
(lender's policy) or the buyer (owner's policy) against loss arising
from disputes over ownership of a property.
Title Search A check of the
title records to ensure that the seller is the legal owner of
the property and that there are no liens or other claims outstanding.
Total Expense Ratio Total obligations as a percentage
of gross monthly income. The total expense ratio includes monthly
housing expenses plus other monthly debts.
Trade Equity Equity 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.
Transfer Of Ownership Any 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 of ownership.
Transfer Tax State or local tax payable when
title passes from one owner to another.
Treasury Index An index that is used to determine
interest rate changes for certain adjustable-rate mortgage (ARM)
plans. It is based on the results of auctions that the U.S. Treasury
holds for its Treasury bills and securities or
is derived from the U.S. Treasury's daily yield curve, which is
based on the closing market bid yields on actively traded Treasury
securities in the over-the-counter market. See adjustable-rate
mortgage (ARM).
Truth-In-Lending A federal law
that requires lenders to fully disclose, in writing, the terms
and conditions of a mortgage, including the annual percentage
rate (APR) and other charges.
Two-Step Mortgage An adjustable-rate mortgage
(ARM) that has one interest rate for the first five or seven years
of its mortgage term and a different interest rate for the remainder
of the amortization term.
Two- To Four-Family Property A 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.
Trustee A fiduciary who holds or controls property
for the benefit of another.
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U -
Underwriting The 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.
Unsecured Loan A loan that is not backed by collateral.
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VA Mortgage A mortgage that
is guaranteed by the Department of Veterans Affairs (VA).
Also known as a government mortgage.
Vested Having the right to use a portion of a
fund such as an individual retirement fund. For example, individuals
who are 100 percent vested can withdraw all of the funds that
are set aside for them in a retirement fund. However, taxes may
be due on any funds that are actually withdrawn.
Department Of Veterans Affairs (VA) An 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.
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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.
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