Glossary of Terms
In our ProGrowth Mortgage
Promise™, we make a commitment to you to uncomplicate the mortgage
process and help you make an informed decision. One of the most
frustrating aspects of a new home purchase can be the numerous and
confusing terms used by mortgage lenders and closing agents. We hope
this Glossary of Financing Terms demonstrates one of the many ways
we at ProGrowth keep our promise.
abstract of title Usually
a very thick document which is a summary statement of the successive
conveyances and other facts on which a title to a piece of land
rests from its origin to the present.
adjustable rate mortgage A
loan that allows the lender to adjust the borrower's interest rate
and payments at designated times and sometimes with designated
limits. Lower interest rates are common.
amortized loan A loan that
is paid off in equal installments during its term.
appraisal An estimate of
real estate value, usually issued to the standards of FHA, VA, FNMA.
Recent comparable sales in the neighborhood are the most important
factor in determining value.
assumable mortgage
Purchaser takes ownership of real estate encumbered by an existing
mortgage and assumes responsibility as the guarantor for the unpaid
balance of the mortgage.
bridge loan Also known as
a gap loan where the customer may use the equity available in an
existing home or other real property to help purchase a new home or
property.
closing costs Expenses
incurred in the closing of a real estate or mortgage transaction.
Purchaser's expenses normally include,
but not limited to::
In addition, the purchaser may
have to place in escrow a sum of money to cover accrued real estate
taxes and insurance.
conventional mortgage A
loan neither insured by the FHA nor guaranteed by the VA.
discount fee or point
Points are prepaid interest on your mortgage, charged by the lender
at the time of closing. Each point is one percent of the loan
amount. For example, two points on a $100,000 mortgage is $2,000.
The more points you pay, the lower your interest rate will be, thus
lowering your monthly payment. The points you pay are tax
deductible.
equity The difference
between the market value of property and the homeowner's
indebtedness (mortgage).
escrow payment The portion
of a mortgagor's monthly payment held in trust by lender to pay for
taxes, hazard insurance, mortgage insurance, lease payments and
other items as they become due.
exchange The trading of
equity in one piece of property for the equity in another.
fixed mortgage rate A loan
that fixes the interest rate at a designated rate for the duration
of the loan.
Freddie Mac Nickname for
Federal Home Loan Mortgage Corporation (FHLMC), a federally
controlled and operated corporation to support the secondary
mortgages insured by FHA or guaranteed by VA, as well as
conventional home mortgages.
Fannie Mae Nickname for
Federal National Mortgage Association (FNMA), a tax paying
corporation created by Congress to support the secondary mortgages
insured by FHA or guaranteed by VA, as well as conventional home
mortgages.
graduated mortgage payment
A FHA, VA or Conventional Loan where the borrower pays a portion of
the interest due each month during the first few years of the loan.
This payment increases gradually during the first few years to the
amount necessary to fully amortize the loan during its life.
investor The holder of a
mortgage or the permanent lender for whom the mortgage banker
services the loan. Any person or institution that invests in
mortgages.
lease purchase agreement
Buyer makes a deposit for the future purchase of property with the
right to lease the property in the interim.
loan-to-value ratio The
ratio of the mortgage loan principal (amount borrowed) to the
property's appraised value (selling price). On a $100,000 home, with
a mortgage loan principal of $80,000, the loan to value ratio is
80%. ($80,000÷$100,000=.80)
mortgage/deed of trust
Pledge of real property to secure a debt by written instrument given
by the mortgagor. Should be recorded in the County Recorder's
Office.
mortgage insurance premium
The consideration paid by a mortgagor for mortgage insurance either
to FHA or private mortgage insurance company. This insurance
protects the investor from possible loss in the event of a
borrower's default on a loan.
mortgagee The lender of
money or the receiver of the mortgage document.
mortgagor The borrower of
money or the giver of the mortgage document.
note A written promise to
pay a certain amount of money.
origination fee A fee or
charge for work involved in the evaluation, preparation and
submission of a proposed mortgage loan.
point One percent of loan
amount.
prepayment penalty A fee
paid to the mortgagee for paying off the mortgage before it is due.
Also known as prepayment fee or reinvestment fee.
prepayment privilege The
right given to a purchaser to pay all or part of a debt prior to its
maturity. The mortgagee does not have to accept any payment other
than those originally agreed to.
private mortgage insurance
Insurance written by a private company protecting the mortgage
lender against loss caused by a mortgage default.
rate lock A process
whereby after receiving from the customer a signed rate lock
agreement the lender will work with its investor to guarantee to the
customer an agreed upon rate at closing. Rate locks are good for a
fixed number of days. Typically 30, 45, or 60 days are locked but
sometimes shorter or longer periods are available. However, if the
original lock-in maturity date expires through no fault of the
lender, there may be a fee charged to the customer to extend the
lock-in for a longer period. Occasionally lock-ins are “floating
locks” which means if the market rate goes down so will the locked
in rate. The use of these rate locks varies from lender to lender.
Most common are fixed rate lock-ins.
rent with option A contract
that gives one the right to lease property for a certain sum with
the option to purchase at a future date.
second mortgage/second trust
Junior Mortgage or Junior Lien; an additional loan imposed on
property with a first mortgage, generally at a higher interest rate
and for a shorter term than a "first" mortgage.
straight loan A loan with
periodic payments of interest only; the principal sum due in one
lump sum at maturity.
title Often used
interchangeably with the word ownership. It indicates the
accumulation of all rights in property.
title insurance An
insurance policy that protects the insured (purchaser or lender)
against loss resulting from defects in title.
Torrens certificate
Usually a two-sided, one sheet document which is a summary statement
of the successive conveyances and other facts on which a title to a
piece of land rests from the time it was converted from abstract to
being platted as Torrens property to the present.
Thank you for choosing ProGrowth
Bank as your mortgage lender.
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