- Abstract (Of Title)
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- 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.
Acceleration Clause
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- 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).
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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.
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
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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:
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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.
- 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
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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
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Loan-to-Value Ratio
(LTV)
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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.
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Down payment is the difference between the purchase price
and the mortgage amount.
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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.
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- 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.
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- 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%.
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- 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.
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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.
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- 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.
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- 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.
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- 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.
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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.
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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.
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- Mortgagee
The lender in a mortgage agreement.
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Mortgagor
The borrower in a mortgage agreement.
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- 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.
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- 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.
- Parcel
A separately assessed for tax purposes lot or piece of real
property.
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PITI
Principal, Interest, Taxes
and Insurance. These components are usually all included in the monthly
mortgage payment unless escrows are waived.
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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.
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- 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.
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- 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.
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- 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.
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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.
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- 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.
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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.
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- 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.
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Processing,
Underwriting, Courier and Document Fees
Charges for the lender's services associated with making the loan.
- Purchase Agreement
See
Representation
Agreement
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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
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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.
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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.
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- 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.
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- 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."
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Refinancing
The process of the same mortgagor paying off one loan with the
proceeds from another loan.
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- 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.
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- 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.
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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.
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- Reverse Mortgage
A special type of home loan that lets elderly homeowners convert the
equity in their home into regular payments of cash.
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- Right of Survivorship
In joint tenancy, the right of survivors to acquire the interest of
a deceased joint tenant.
- Sales Agreement
See
Representation
Agreement
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- 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.
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- 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.
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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.
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Servicing
The collection of payments, handling your escrow accounts and
management of operational procedures that a lender performs.
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- Set Back Ordinance
Regulates the distance from the lot line to the point where
improvements may be constructed.
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- 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.
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- 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.
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- 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.
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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.)
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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.
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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.
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- 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.
- 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.
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- Teaser Rate
A low initial interest rate on a mortgage.
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- 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.
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- 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.
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- Title Insurance Binder
Written commitment of a title insurance company to insure title to
the property under the conditions stated in the binder.
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- 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.
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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
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- 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.
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- 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.
- 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.
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- 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.
- Zoning
A local government authority's specifications for the use of
property in certain areas.
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- Zoning Ordinances
The acts of an authorized local government establishing building
codes, and setting forth regulations for property land usage.
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