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A
Summary
of public records relating to the title to a
particular piece of land. An attorney or title
insurance company searcher reviews an abstract
of title to determine whether there are any
title defects which must be cleared before a
buyer can purchase clear, marketable, and
insurable title.
Standard
clause in a mortgage that requires the balance of
the loan to become due immediately, if regular
mortgage payments are not made or for breach of
other conditions of the mortgage.
Adjustable-Rate
Mortgage (ARM)
Interest
rate is not fixed, but changes during the life
of the loan in line with movements in an index
rate. You may also see ARMs referred to as
AMLs (adjustable mortgage loans) or VRMs
(variable-rate mortgages).
Adjustment
Period
Length
of time for which the interest rate is fixed
on an ARM. After that period it will be
adjusted. Typically once (T-Bill) or twice a
year (LIBOR), depending on the index.
Agreement
of Sale
A.K.A.
Purchase Agreement or Sales Agreement. Contract
in which a seller agrees to sell and a buyer
agrees to buy, under certain specific terms and
conditions spelled out in writing and signed by
both parties.
Alienation
Clause/Due on Sale Clause
Provision
in a mortgage document stating that the loan
must be paid in full if ownership is
transferred.
Amortization
A
payment plan which enables the borrower to
reduce his debt gradually through monthly
payments of principal.
Annual
Percentage Rate (APR)
Measure
of the cost of credit, expressed as a yearly
rate. It includes interest as well as other loan
charges (points, PMI, etc). Since
all lenders follow the same (complex and
sometimes error prone) rules to ensure the
accuracy of the annual percentage rate, it
provides consumers with a good basis for
comparing the cost of loans, including mortgage
plans. Only a zero point, zero closing
cost loan would have an APR equal to the actual
Note rate. The APR is almost always
greater than the Note Rate.
Appraisal
Expert's
estimate of the quality or value of real estate
as of a given date.
Assessed
Value
Figure
in dollars determined for tax purposes by
an assessor which reflects a property's worth
and which, unless exempt, is used to compute a
tax dollar obligation by multiplying it by a tax
rate. This is often confused with the term
appraisal.
Assumability
When
a home is sold, the seller may be able to
transfer the mortgage to the new buyer.
Lenders generally require a credit review of the
new borrower and may charge a fee for the
assumption. Some mortgages contain a due-on-sale
clause, which means that the mortgage may not be
transferable to a new buyer. Instead, the lender
may make you pay the entire balance that is due
when you sell the home. Assumability can help
you attract buyers if you sell your home.
It is common for FHA an VA Loans.
Attached
Home
A
home that has one or more common walls adjoining
another home. Condominiums, town homes and
row houses are attached homes.
Balloon
Mortgage
Short-term
fixed-rate loan which involves smaller payments
for a certain period of time and one large
payment for the entire amount of the outstanding
principal. Usually they have terms of 5
and 7 years.
Biweekly
Mortgage
A
mortgage which requires a payment for half the
monthly amount every two weeks. As a result the
loan amortizes much faster than a loan with
normal monthly payments. The result is as if one
extra monthly payment were made each year.
With this, 30 year fixed rate loan will be
paid off in approximately 22.7 years. You
may achieve the same affect by making extra
monthly principal payments.
Blanket
Mortgage
A
mortgage covering at least two pieces of real
estate as collateral.
Bridge
Loan
Interim
loan to finance a buyers new residence if the
buyer is unable to sell his/her current
residence first.
Broker
Real
estate broker
Building
Line or Setback
Buffer
distances from the ends and/or sides of the lot
beyond which construction may not extend. The
building line may be established by a filed plat
of subdivision, by restrictive covenants in
deeds or leases, by building codes, or by zoning
ordinances.
Buy
down
The
seller pays an amount to the lender so that the
lender can give you a lower rate and lower
payments, usually for an early period in an ARM.
The seller may increase the sales price to cover
the cost of the buy downs
can occur in all types of mortgages, not just
ARMs.
Caps
Limit
on how much the interest rate or the monthly
payment can change, either at each adjustment or
during the life of the mortgage. All ARMs have
interest rate caps to protect you from enormous
increases in monthly payments.
A lifetime cap limits the
interest rate increase over the life of the
loan. Lifetime caps can vary by lender, but most
ARMs have caps of 5% or 6%.
A
periodic or adjustment cap
limits how much your interest rate can rise at
one time. Generally, a 6 month ARM will have a
cap of 1% while a 1 year ARM will have a 2% cap.
Periodic
and lifetime caps are quoted as two numbers as
in 2/6 which would mean that periodic cap is 2%
and the lifetime cap is 6%. Examples:
1. The initial interest rate is 5.5%, the index
is 8%, and the margin is 2.875%,
then the new interest rate = 8% + 2.875% =
10.875%.
If the lifetime cap is 5% then
the actual new interest rate will be 5.5% + 5% =
9.5%.
2.
The initial interest rate is 6%, the index is
7%, and the margin is 3%,
then the new interest rate = 7% + 3% = 10%.
But, If the periodic cap is 1% then
the actual new interest rate will be 6% + 1% =
7%.
ARMs
which have an initial fixed period -- 30/3/1,
30/5/1, 30/7/1 and 30/10/1 -- can have also first
adjustment cap. It limits the interest
rate you will pay the first time your rate is
adjusted. These ARMs are quoted as three numbers
as in 5/2/5 which would mean that the first
adjustment cap is 5%, adjustment cap thereafter
is 2%, and the lifetime cap is 5%.
Two-Step
loans -- 5/25 and 7/23 -- have only one
adjustment after the first five or seven years
of its term. They are quoted with a single first
adjustment cap.
Capital
Gains
Profit
earned from the sale of real estate. The new tax
code may not tax the the first $500,000 of
profits from the sale of a home (married filing
jointly, $250,000 single) if you have occupied
the home for at least 2 years. Consult
your tax advisor.
Certificate
of Eligibility
A
document issued by the U.S. Department of
Veterans Affairs. It is required when applying
for VA loans.
Certificate
of Occupancy
Document
which is issued by local governments that states
a property meets the local building standards
for occupancy. Required for new
construction and sometimes also for the sale of
an existing property.
Certificate
of Reasonable Value
An
appraisal by a VA approved appraiser which
estimates the property's current market value.
Clear
Title
A
title/deed that free of clouds
and disputed interests.
Closing
Costs
The
numerous expenses which buyers and sellers
normally incur to complete a transaction in
the transfer of ownership of real estate.
These costs are in addition to price of the
property and are items prepaid at the
closing day. This is a typical list:
-
BUYER'S EXPENSES
Recording Deed and Mortgage
Escrow Fees
Attorney's Fee (optional)
Title Insurance
Appraisal
Endorsements to Title
1% PA Transfer Tax
Pre-Paid Property tax, sewer, water, trash, adjustments
Points and other loan fees
Homeowners/Hazard Insurance Policy for 1st year
The
agreement of sale negotiated previously between
the buyer and the seller may state in writing
who will pay each of the above costs.
Closing
Day
The
day on which the formalities of a real
estate sale are concluded. The deed is
generally prepared for the closing by an
attorney and this cost charged to the
buyer. The buyer signs the mortgage, and
closing costs are paid. The final closing
merely confirms the original agreement
reached in the agreement of sale.
Cloud
(On Title)
An
outstanding claim or encumbrance which
adversely affects the marketability of
title.
Commission
Fee
paid to a real estate agent or broker by
the seller as compensation for finding a
buyer and completing the sale. Usually it
is a percentage of the sale price--6 to 7
percent on houses, 10 percent on land.
Commitment
A
written agreement between a lender and a
borrower to loan money on specific terms
or conditions.
Condominium
Individual
ownership of a dwelling unit and an
individual interest in the common areas
and facilities which serve the multi-unit
project.
Construction
loan
A
short term loan to pay for the
construction of buildings or homes. These
loans usually provide periodic
disbursements to the builder as each stage
of the building is completed. Generally
followed by long term financing called a
"take out" loan issued upon
completion of construction.
Contingency
A
condition put on an offer to buy a home;
such as the perspective buyer making an
offer contingent on his or her sale of a
present home, or being approved for a
mortgage.
Conventional
Mortgage
Any
mortgage loan not insured by HUD or
guaranteed by the Veterans'
Administration. It is subject to
conditions established by the lending
institution, Fannie Mae, Freddie Mac, and
State statutes
Conversion
Option
Some
ARMs come with options to convert them to
a fixed rate mortgage during a given time
period without having to
go through a refinancing, which could cost
up to 5 percent or 6 percent of the loan
amount. For example popular conversion
options for 1 year treasury-indexed ARMs
include:
1.
option to convert on the third, fourth, or
fifth adjustment date, i.e. during the
37th, 49th and 61st months of the loan.
2.
option to convert during the first five
years on the adjustment date, i.e. during
the 13th, 25th, 37th, 49th and 61st months
of the loan.
The
interest rate or points may be somewhat
higher for a convertible ARM. Also, a
convertible ARM may require a small fee at
the time of conversion.
Conveyance
The
transfer of title to the property from one
party to another.
Cooperative
Housing
An
apartment building or a group of dwellings
owned by a corporation, the stockholders
of which are the residents of the
dwellings. It is operated for their
benefit by their elected board of
directors. In a cooperative, the
corporation or association owns title to
the real estate. A resident purchases
stock in the corporation which entitles
him to occupy a unit in the building or
property owned by the cooperative. While
the resident does not own his unit, he has
an absolute right to occupy his unit for
as long as he owns the stock.
Credit
Report
A
report documenting the history of how you
paid back the companies you have borrowed
money from, or how you have met other
financial obligations.
Deed
A
formal written instrument by which title to real
property is transferred from one owner to
another. The deed should contain an accurate
description of the property being conveyed,
should be signed and witnessed according to the
laws of the State where the property is located,
and should be delivered to the purchaser at
closing day. There are two parties to a deed:
the grantor and the grantee. (See also Deed
of Trust, General
Warranty Deed, Quitclaim Deed, and Special
Warranty Deed)
Deed
of Trust
Like
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.
Default
Failure
to make mortgage payments as agreed to in a
commitment based on the terms and at the
designated time set forth in the mortgage or
deed of trust. It is the mortgagor's
responsibility to remember the due date and send
the payment prior to the due date, not after.
Generally, thirty days after the due date if
payment is not received, the mortgage is in
default. In the event of default, the mortgage
may give the lender the right to accelerate
payments, take possession and receive rents, and
start foreclosure. Defaults may also come about
by the failure to observe other conditions in
the mortgage or deed of trust.
Deferred
interest
When
the monthly payments do not cover all of the
interest cost, the unpaid interest is deferred
by adding it to the loan balance.
Deficiency
Judgment
Personal
claim against the debtor when the sale of
foreclosed property does not yield sufficient
proceeds to pay off the mortgages.
Depreciation
Decline
in value of a house due to wear and tear,
adverse changes in the neighborhood, or any
other reason.
Discount
In
an ARM with an initial rate discount, the lender
gives up a number of percentage points in
interest to give you a lower rate and lower
payments for part of the mortgage term (usually
for one year or less). After the discount
period, the ARM rate will probably go up
depending on the index rate.
A
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.
Down
Down payment
The
amount of money to be paid by the purchaser to
the seller upon the signing of the agreement of
sale. The agreement of sale will refer to the
down payment
amount and will acknowledge receipt of the down
payment and
to pay interest and expenses incurred by the
purchaser.
Due-on-Sale
Clause
A
clause in the Deed of Trust or Mortgage that
states that the entire loan is due upon the sale
of the property.
Earnest
Money
The
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
-
12-Month
Treasury Average (MTA)
-
11th
District Cost of Funds Index (COFI)
-
London
Inter Bank Offering Rates (LIBOR)
-
Certificates
of Deposit (CD) Indexes
-
Prime
Rate Interest
A
charge paid for borrowing money. See Mortgage
Note
Joint
Tenancy
Joint
tenancy is one of the methods available for two
or more people to hold title to real estate or
personal property. It includes a right of
survivorship, meaning that on the death of one
joint tenant, his/her interests transfer to the
remaining joint tenants.
Jumbo
Loan
A
loan that exceeds the conforming loan limits
established by Fannie Mae
or Freddie Mac. It
has interest rates a little higher than
conforming loan.
Lender
Paid Mortgage insurance (LPMI)
An
alternative to PMI. The lender will
increase the interest rate instead of charging
PMI on loans with LTV's greater than 80%.
Lien
A
claim by one person on the property of another
as security for money owed. Such claims may
include obligations not met or satisfied,
judgments, unpaid taxes, materials, or labor.
See also Special Lien
Loan-to-Value
Ratio (LTV)
The
relationship between the amount of the mortgage
loan and the value of the real property
expressed as a percentage. For purchase loans
the value of the property is the appraised value
or the purchase price, whichever is less. For
refinance loans the value is the appraised value
on seasoned properties (owned more than one
year).
A
LTV of 90% means that you are borrowing 90% of
the property value. If a LTV exceeds 80%,
Private Mortgage Insurance (PMI) -- that insures
the lender in the event a borrower defaults --
is generally required.
Down
payment is the difference between the purchase
price and the mortgage amount.
Lock
A
lender's promise to hold a certain interest rate
and points for you, for a given number of days,
while your loan application is processed. If not
locked, the interest rates quoted to you may
stay the same, decrease, or increase from the
day you apply for your mortgage. Lock-ins on
rates remove the risk of rising rates.
However,
a locked-in rate could also prevent you from
taking advantage of rate decreases. If you think
that rates will remain level or even go down,
you may choose to bet on interest rates
decreasing by electing to float until you go to
closing. It is a gamble.
Lock-ins
of 30-60 days are common. If your lock-in period
expires before you go to closing, you might lose
the interest rate and the number of points you
had locked-in. You may ask lender for a longer
lock-in period. But bear in mind that lenders
may charge you a fee for extending the lock-in
period. Request information from the lender
regarding lock procedures.
Marketable
Title
A
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.
Margin The
number of percentage points the lender adds to
the index rate to calculate
the ARM interest rate at each adjustment.
It is typically between 2.5 to 3% on a
conforming loan. Sub-prime
loans may have margins of 5% to 6%.
Mortgage A
lien or claim against real property given by the
buyer to the lender as security for money
borrowed. Under government-insured or
loan-guarantee provisions, the payments may
include escrow amounts covering taxes, hazard
insurance, PUD
association fees, and special assessments.
Mortgages generally run from 10 to 30 years,
during which the loan is to be paid off.
Mortgage
Banker A
company who is a direct lender but does not
retain loans they have made. They use a
line of credit to fund loans and immediately
sell the mortgage, at closing or within a matter
of days, to another lender at which time the
borrower will receive a "Goodbye
Letter" announcing who they will be sending
payments to. Mortgage Bankers do not service
loans.
Mortgage
Broker A
person (not an employee of a lender) who brings
a borrower and a lender together to obtain a
federally-related mortgage loan. A mortgage
broker has access to a variety of lenders and
offers the most choice in loan programs. 1999 saw Mortgage Brokers with a 70% market
share of all originations. Mortgage
Commitment
A
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 by a certain date.
Mortgage
Insurance Premium (MIP)
The
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 1/2% paid by the mortgagor on a
monthly basis.
Mortgage
Note
A
written agreement to repay a loan. The agreement
is secured by a mortgage, serves as proof of an
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.
Mortgage
(Open-End)
Line
of Credit. A mortgage with a provision
that permits borrowing additional money in the
future without refinancing the loan or paying
additional financing charges. Open-end
provisions often limit such borrowing to no more
than would raise the balance to the original
loan figure.
Mortgagee The
lender in a mortgage agreement.
Mortgagor The
borrower in a mortgage agreement.
Multiple
Listing Service (MLS)
A
service offered to participating real estate
brokers that lists available homes for sale. The
listings are published and distributed among the
member brokers to assist in sales efforts.
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- Negative
Amortization
Negative
amortization typically only occurs when an ARM
has a payment cap that results in monthly
payments not high enough to cover the interest
due. Negative amortization occurs
when the monthly payments do not cover all of
the interest cost. The interest cost that isn't
covered is added to the unpaid principal
balance. This means that even after making many
payments, you could owe more than you did at the
beginning of the loan.
Non-conforming
loan
Loans
that do not comply with Fannie
Mae or Freddie Mac
guidelines. These guidelines establish the
maximum loan amount, down payment, borrower
credit and income requirements, and suitable
properties. Loans that does conform to these
guidelines may be sold to Fannie Mae or Freddie
Mac.
Open
End Mortgage
See
Mortgage
(Open-End)
Owner
Financing
A
property purchase transaction in which the
property sellers provide all or part of the
financing by means of holding a second mortgage.
Minimum duration for this "seller
second" is 5 years with most lenders.
P
Parcel
A
separately assessed for tax purposes lot or
piece of real property.
PITI
Principal,
Interest, Taxes
and Insurance. These components
are usually all included in the monthly mortgage
payment unless escrows are waived.
Planned
Unit Development (PUD) 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.
Plat A
map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines,
buildings, improvements on the land, and
easements.
Points Sometimes
called "discount points".
A point is one percent of the amount of the
mortgage loan amount. (eg: For a $50,000 loan,
one point is $500). Points are interest paid in
advance and allow a borrower to buy a lower
mortgage rate, which results in a lower payment.
For borrowers who are not able to cover the cost
of points in addition to the other costs of
buying a home, or for those who do not plan to
stay in the house for long, 0 points are
preferred. Buyers are prohibited from
paying points on HUD or VA guaranteed loans
(sellers can pay, however). On a conventional
mortgage, points may be paid by either buyer or
seller or split between them.
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.
Prepayment
Payment
of mortgage loan, or part of it, before due
date. Mortgage agreements sometimes restrict the
right of prepayment either by limiting the
amount that can be prepaid in any one year or
charging a penalty for prepayment. Lenders who
impose prepayment penalties will charge
borrowers a fee if they wish to repay part or
all of their loan in advance of the regular
schedule. The Federal Housing Administration
does not permit such restrictions in FHA insured
mortgages. Prepayment penalties are
typically only found on bad credit mortgage
loans.
Principal
The
basic element of the loan as distinguished from
interest and mortgage insurance premium. In
other words, principal is the amount upon which
interest is paid.
Private
Mortgage Insurance (PMI)
An
insurance policy the borrower buys to protect
the lender from non-payment of the loan.
This is required for loans where the borrower
puts less than 20% down. With a new law
that took effect in 1999, PMI will automatically
be removed when the loan is paid down to 78%
LTV, subject to the borrowers good credit
history.
Pro-rations
The
allocation of expenses, such as taxes between
buyer and seller at closing based on the number
of days the property is owned during the month
of closing. The seller has prepaid taxes
for a year, and is reimbursed for that part of
the year he will not own the house.
Processing,
Underwriting, Courier and Document Fees
Charges
for the lender's services associated with making
the loan.
Purchase
Agreement
See
Representation
Agreement
Q
Quitclaim
Deed A
deed which transfers whatever interest the maker
of the deed may have in the particular parcel of
land typically for no sales price. A quitclaim
deed is often given after a divorce to remove
one person from the deed or for family
transactions. 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
Qualifying
Ratios Lenders
use certain guidelines to determine a potential
borrower's credit-worthiness. The two guidelines
used are the housing and debt ratios. They are
expressed as two numbers like 28/38 where 28
would be the housing ratio and 36 would be the
debt ratio. It means that:
1.
Your
housing expenses (PITI)
should not exceed 28 percent of your gross
monthly income and
2. Housing expenses plus long-
term debt should not exceed 38 percent of your
gross monthly income.
The
housing expenses include monthly mortgage
principal, interest payments, property taxes and
homeowner’s insurance. There may be other
expenses, such as condominium fees, homeowners
fees, special assessments, etc., that are
included. Long-term debt is defined as monthly
expenses extending more than 10 months into the
future. The qualifying ratios may vary but 40%
is common (40/40 ratio).
Please
note that qualifying ratios are only a rough
guidelines and underwriters consider many
variables in their analysis. Many times,
borrowers fall outside the guidelines, but have
strong compensating factors that reflect low
credit risk. Some compensating factors are
history of savings, long-term job stability, a
substantial down payment or excellent credit
history will influence the decision to approve
or deny a particular loan with ratios up to
30/50% common.
R
Real
Estate Broker A
middle person 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.
Real
Estate Settlement Procedures Act (RESPA)
A
consumer protection law designed to help
consumers be more informed with the home buying
process. It requires that borrowers receive
disclosures at various times. RESPA also
prohibits referral fees and similar acts that
increase the cost of settlement services.
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."
Refinancing
The
process of the same mortgagor paying off one
loan with the proceeds from another loan.
Rescission
The
cancellation of a contract. When you use your
home as collateral for a refinance or second
mortgage, you generally have the right to cancel
the credit transaction within three business
days.
Reserves The
amount of money left in a borrowers possession
after settlement. Typically the guidelines
call for 2 months PITI to be
in reserves. 401K type plans count towards
reserves. The borrower needs to show they
have funds in an account in the event of an
emergency (furnace breaks). These funds
can remain in vested in a 401k or stocks and
still be counted to qualify.
Restrictive
Covenants Private
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. 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.
Reverse
Mortgage A
special type of home loan that lets elderly
homeowners convert the equity in their home into
regular payments of cash.
Right
of Survivorship In
joint tenancy, the right of survivors to acquire
the interest of a deceased joint tenant.
S
Sales
Agreement See
Representation
Agreement
Second
Home (or Vacation Home) This
home is not rented and is occupied occasionally
by the owners. It is typically in a resort
area not in close proximity to the borrowers
primary residence.
Second
mortgage A
mortgage in addition to the first mortgage. Home
equity loans, credit lines, home improvement
loans are second mortgage loans. Second
mortgages are subordinate to the first one.
Second mortgage loans are non-conforming loans,
so they usually carry a higher interest rate,
and they often are for a shorter time.
Secondary
(subordinate) financing Borrowing
additional money toward the down payment. If it
is acceptable, usually subject to a maximum
combined LTV.
Secondary financing is used as an alternative to
obtaining Private Mortgage Insurance and to
avoid Jumbo loan rates.
Servicing
The
collection of payments, handling your escrow
accounts and management of operational
procedures that a lender performs.
Set
Back Ordinance Regulates
the distance from the lot line to the point
where improvements may be constructed.
Settlement
(Closing) The
meeting between the related parties of the
mortgage where the mortgage documents are
executed. Here the property ownership is
transferred to the buyer on a purchase
transaction.
Shared
Appreciation Mortgage Residential
loan in which a borrower receives a below-market
interest rate in return for which the lender
receives a specified share of the future
appreciation in the value of the property.
Special
Assessments A
special tax imposed on property, individual lots
or all property in the immediate area, for road
construction, sidewalks, sewers, street lights,
etc.
Special
Lien A
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.)
Special
Warranty Deed A
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.
Sub-prime
loan A
mortgage for someone who does not meet
conventional guidelines. The borrower may
have damaged credit, own too many properties, of
have a debt-to-income ratio that exceeds the
conforming loan guidelines. These loans
are considered to have a higher risk of default
and hence carry a higher interest rate than
conforming loans.
Survey A
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 for
construction loans to assure them that a
building is actually sited on the land according
to its legal description.
T
Taxable
Assessed Value The
assessed value of a parcel against which the tax
rate is applied to compute the tax due. In case
of a partial exemption, the exempt amount is
subtracted from the assessed value in order to
determine the taxable assessed value.
Teaser
Rate A
low initial interest rate on a mortgage.
Title 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.
Title
Insurance Protects
lenders or homeowners against loss of their
interest in property due to legal defects in
title. 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.
Title
Insurance Binder Written
commitment of a title insurance company to
insure title to the property under the
conditions stated in the binder.
Title
Search or Examination A
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, or other claims or
outstanding restrictive covenants filed in the
record, which would adversely affect the
marketability or value of title.
Transfer
Tax In
PA the buyer and seller each pay 1% state tax on
the sales price of the real estate, unless
stated otherwise in the sales contract. In
Philadelphia County, the tax rate is 2% for each
the buyer and seller.
Trustee A
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. See Deed of
Trust
Truth-In-Lending
Act ( TIL, also called Regulation Z) Under
this act a lender is required to provide you
with a disclosure estimating the costs of the
loan you have applied for, including your total
finance charge and the Annual Percentage Rate
(APR) within three business days of your
application for a loan.
Two-Step
Mortgage With
this type of loan homebuyers get a fixed rate
loan at a slightly lower interest rate for a
fixed period of time (most often for 5, 7, or 10
years) and then the interest rate is adjusted to
fit market conditions at that time. After that
adjustment, the mortgage maintains a fixed rate
for the remaining years.
U
Underwriting A
process of deciding whether to make a loan based
on your credit reputation, income, debt,
appraised value of the house and other factors.
V
VA
Loan A
mortgage for veterans and service persons
guaranteed by the Department of Veterans Affairs
(VA), requiring very low or no down payments and
with generous requirements for qualification.
Z
Zoning A
local government authority's specifications for
the use of property in certain areas.
Zoning
Ordinances The
acts of an authorized local government
establishing building codes, and setting forth
regulations for property land usage.
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