831.684.9646
bradfield@cruzio.com

Resources


Glossary

Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in a particular index.

Adjustment Period: The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.

Amortization: Repayment of a loan in equal installments of principal and interest over a set period of time.

Annual Percentage Rate (APR): The total finance charge (interest, loan fees, and points) expressed as a percentage of the loan amount.

Assumption of Mortgage: A buyer's agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

Balloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.

Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

C,C&R's: Covenants,  Conditions and Restrictions. A document that controls the use, requirements and restrictions of a property. Normally C,C&R's are associated with  condominiums.

Closing Statement: The financial disclosure statement that accounts for all of the funds received and disbursed at closing.

Community Property: In certain states, such as California , an equal, undivided ownership  of property by two individuals who are legally married.

Condominium: A form of real estate ownership where the owner receives title to a  particular unit and has a percentage interest in the common areas.

Contingency: A condition that must be satisfied before a contract is binding.

Conversion Clause: A provision in some ARMs that enables you to change an ARM to a fixed-rate  loan. The new fixed rate is generally set at the prevailing interest rate for fixed-rate mortgages. There is normally a conversion fee.

Due-On-Sale Clause: An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Earnest Money: The portion of the down payment made by the purchaser with a written offer as evidence of good faith.

Escrow: A procedure in which a third party acts as a neutral party for the buyer and seller,  carrying out the parties' instructions and assuming responsibility for handling all of the paperwork and distribution of funds.

FHA Loan: A loan  insured by the FHA, or more specifically, the Office of the Department  of Housing and Urban Development.

Federal National Mortgage  Association (FNMA): Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Fee Simple: An  estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It  is the greatest interest a person can have in real estate.

Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain  credit according to Regulation Z.

Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed  appliances.

Index: A measure used to determine changes in an ARM's interest rate over the term of the loan.

Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest  in the property.

Lien: A legal hold  or claim on property as security for a debt or charge.

Loan Commitment: A written promise to make a loan for a specified amount on specified terms.

Loan-To-Value Ratio: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised  value.

Margin: The number  of percentage points the lender adds to the index rate to calculate  the ARM interest rate at each adjustment.

Mortgage Insurance (MI): see Private Mortgage Insurance.

Negative Amortization: Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that is not paid is added to the unpaid  principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest.

Origination fee: A fee or charge for work involved in evaluating, preparing, and submitting  a proposed mortgage loan.

PITI: Principal,  Interest, Taxes and Insurance.

Point: An amount equal to 1 percent of the principal amount of the investment or note.

Prepayment Penalty: A fee charged to a mortgagor (borrower) who pays a loan before it is due.

Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender  against loss if the borrower defaults on the mortgage. Also known as Mortgage Insurance (MI).

Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

Realtor®: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®.

Regulation Z: The set of rules governing consumer lending issued by the Federal Reserve  Board of Governors in accordance with the Consumer Protection Act.

Severalty: A type  of ownership of property owned by a sole individual and not shared with any other.

Tenancy in Common: A type of joint ownership of property by two or more persons with  no right of survivorship.

Title Insurance Policy: A policy that protects the purchaser, lender or other party against  losses due to defects or clouds in the chain of title.

 © 2006 Agent Image, Inc. All rights reserved. | Terms | Login Design by Agent Image - Real Estate Web Site Design