Archive for the ‘Glossary’ Category

Terms provided by your  Las Vegas Home Mortgage team .

A home is a the largest single investment for most people, so we encourge you to invest the time to study this list of mortgage terms. By knowing these terms you will be able to understand the mortgage process better.

Acceleration Clause
This language is in the documents you are required to sign when you take out the loan. It states that the whole loan amount is due in full upon certain conditions.

Adjustable Rate Mortgage (ARM)
A mortgage loan that starts off lower and will increase in either 3 or 5 yrs. You should only consider this if you only plan on living in the home for 3-5 yrs;otheriwse, you should get a 30 yr fixed mortgage.  

Adjustment Interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment.

Amortization
Equal periodic payments calculated to pay off the loan at the end of a fixed period, typically 15 or 30 years.

Annual Percentage Rate (APR)
This is the amount that the loan is going to cost you each year. It will be slightly higher than your interest paid amount because of addtional cost associated with your loan.

Appraisal
A valuation of your home by a licensed firm.

Assumption
A contact between the buyer and seller, whereas the buyer takes over the seller’s current loan.

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Balloon Payment Mortgage
Usually a short-term loan involving small payments for a set period of time and one large payment for the remaining principal balance at a specified time.

Broker
A company that acts a middle man on behalf of the borrower to find out the best possible deals.

Buy Down
When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

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CAPS (Interest)
Consumer safeguards that limit the amount that the interest rate on an ARM loan may change per year and/or life of the loan.

CAPS (Payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Closing
Meeting between the buyer, seller and lender escrow officer where the property and funds legally change hands. Also called settlement.

Closing Costs
Usually include an origination fee, appraisal fee, title search and insurance, taxes, deed recording fee, credit report charge and other costs assessed at settlement.

Commitment
An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Construction Loan
Short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

Conventional Loan
A loan not insured by FHA, VA or Farmers Home Administration.

Credit Report
Report listing borrower’s consumer credit use, including past and current debts, payment ratings and terms.

Credit Ratio
A figure use by the mortgage company to determine if you qualify for a certain loan amount based on income, debt amount, and other factors.

Deed of Trust
Document used in many states to secure the payment of a note.

Default
Failure to make the required payments on a loan. Often results in foreclosure.

Delinquency
Failure to make loan payments on time. This could lead to default or foreclosure.

Department of Veterans Affairs
A government agency that helps Verterans secured loan by providing a guarantee to the mortgage company.

Discount Points
See Points

Down Payment
Money paid to make up the difference between the purchase price and loan amount. Down payments usually are 10 to 20 percent of the sales price on conventional loans. Call your Las Vegas Home Mortgage team for the current requirements as they are currently changing.

Due on Sale Clause
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

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Earnest Money
Money given by a buyer as part of the purchase price to bind a transaction or assure payment. Also called DEPOSIT.

Equal Credit Opportunity Act (ECOA)
Federal law requiring 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
The difference between market value and current loan, also known as owner’s interest.

Escrow
Neutral third party that carries out the instructions of both the borrower and lender to handle settlement or “closing.” Escrow may also refer to an account held by the lender into which the borrower pays for tax or insurance payments.

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Fannie Mae
Federal National Mortgage Association –

Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FHA - Federal Housing Administration
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standard for underwriting mortgages.

FHA Loan
Loan insured by the Federal Housing Administration open to qualified home purchasers. While limited in size, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA Mortgage Insurance
A fee that is require to secure a FHA loan.

FNMA - Federal National Mortgage Association
Also known as Fannie Mae. A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

Fixed Rate Mortgage
With a fixed rate mortgage your interest rate, principal and interest payments will remain unchanged during the entire life of your mortgage loan, resulting in predictable housing costs. If you plan on staying in your new home for an extended period of time, the fixed-rate mortgage might be the perfect mortgage for you.

Foreclosure
A legal procedure in which property securing debt is sold by the lender to pay the defaulting borrower’s debt.

Freddie Mac
Federal Home Loan Mortgage Corporation (FHLMC)
Also called Freddie Mac, is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

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GNMA - Ginnie Mae
Government National Mortgage Association. Provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Gross Monthly Income
The total amount the borrower(s) earns each month, before any expenses are deducted.

Guarantee
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

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Hazard Insurance
Insurance which protects the borrower and home from specified losses, such as fire, windstorm, etc. if you are moving to Las Vegas we can assit you with this.

Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, obtained by dividing borrower’s housing expenses by his/her gross monthly income. See debt-to-income ratio.

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Impound
Portion of the borrower’s monthly payment collected by the lender to pay taxes, hazard insurance, mortgage insurance, and other items as they become due. Sometime called reserves by loan officers.

Index
A bench mark set by governments to measure the economy.

Investor/Rental Property
When you are nothing going to live in the home year around and will only use it occassionally.

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Jumbo Loan
Any loan over a certain amount that is set by Fannie Mae.

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Lien
Any claim or debt that is file against a property at the county.

Loan-to-Value Ratio
The relationship between the amount of the loan and the appraised value of the property expressed as a percentage.

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Margin
Rate expressed as a percentage that a lender adds to the index on an adjustable rate loan to establish the adjusted interest rate.

Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Mortgage Insurance
Paid to insure the mortgage when the down payment is less than 20 percent.

Mortgagee
The lender.

Mortgagor
The borrower or homeowner.

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Negative Amortization
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan.

Net Effective Income
The borrower’s gross income minus federal income tax.

No Income Verification
This offers financing to self-employed borrowers or special situation individuals who do not wish to provide tax returns, pay stubs or company P&L’s to confirm income. We accept income as stated and only confirm employment to the extent of position and length of time. These programs will advance up to 80% of the appraised value.

Non-Assumption Clause
Statement in a loan contract forbidding the assumption of the loan without the prior approval of the lender.

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Origination Fee
Fee charged by lender to prepare loan documents, credit checks, etc.; usually computed as a percentage of face value of the loan.

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PITI
Principal, interest, taxes, and insurance. Also called Monthly Housing Expense.

Points (Loan Discount Points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount.

Power of Attorney
A legal document authorizing one person to act on behalf of another.

Prepaids
Expenses necessary to create an escrow account or to adjust an existing account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment Penalty
Fee charged for early repayment of some types loans. Usually 6 months interest on 80% of current balance.

Principal
The balance, not including interest, left on a loan.

Private Mortgage Insurance (PMI)
For loans over 80% loan-to-value. Lenders will loan up to 95% in some cases. With the higher LTV loans, borrowers are required to carry private mortgage insurance, which requires an initial premium and may require an additional monthly fee depending on your loan’s structure.

Realtor
Real estate broker or agent belonging to the National Association of Realtors.

Recision
Law that gives the borrower 3 days after signing to cancel a contract in some cases, if the transaction uses home equity as security.

Recording Fees
Paid to the county for recording a home sale, thereby making it part of the public records. Fee pay at closing for your Las Vegas Home Mortgage .

Renegotiable Rate Mortgage (RRM)
A loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

Real Estate Settlement Procedures Act (RESPA)
Federal law allowing consumers to receive and review information on known or estimated settlement costs after application and again at settlement. Requires lenders to furnish information after application only.

Reverse Annuity Mortgage (RAM)
A Mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as security.

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Second Home Financing
A Las Vegas mortage loan to buy a second / vacation home in Las Vegas.

Servicing
All steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, and property inspections.

Settlement Costs/Settlement Closing Costs
See closing costs.

Title
A document that gives evidence of an individual’s ownership of property.

Title Insurance
A policy, usually issued by a title insurance company, which insures a homebuyer against errors in the title search.

Title Search
An examination of public records to determine the legal ownership of property. Usually is performed by a title company.

Truth-in-Lending
A federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for the loan.

Underwriting
The process of looking and verifying all the information in your loan file to determine if you will qualify for a loan.

VA Loan
Long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Borrowers qualified by military service or other entitlements.

VA Mortgage Funding Fee
Premium of up to 17/9 percent (depending on the size of the down payment) paid on a VA loan.

Variable Rate Mortgage (VRM)
Same as an  adjustable rate mortgage.

Verification of Deposit (VOD)
A form use by the underwriter to verify the amount of money you have in your bank accounts.

Verification of Employment
A form use to verify your job and job history.

 

The team at Las Vegas Home Mortgage is here to help you. If you have additional questions with any of these terms please ask.