A
ADJUSTABLE RATE MORTGAGE- Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Mortgage Loans, Flexible Rate Loans, Variable Rate Loans.
ANNUAL PERCENTAGE RATE (APR)- The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points). Comparing the Annual Percentage Rates of different loans is regarded as a better way to gauge the overall cost of a loan than simply comparing rates because it takes all of these factors into consideration
APPRAISAL REPORT- A written report by an appraiser containing his opinion as to the value of a property and the reasoning leading to this opinion. The factual data supporting the opinion, such as comparables, appraisal formulas, and qualifications of the appraiser, will also be set forth.
ASSESSMENT- (1) The estimating of value of property for tax purposes. (2) A levy against property in addition to general taxes. Usually for improvments such as streets, sewers, etc.
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B
BALLOON NOTE- A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.
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C
CLOSING- In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.
CONDOMINIUM- A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units.
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E
ESCROW ACCOUNT (Impound Account)- Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.
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F
FIRST MORTGAGE- A mortgage having priority over all other voluntary liens against certain property.
FIXED RATE MORTGAGE- A mortgage having a rate of interest which remains the same for the life of the mortgage.
FLOOD INSURANCE- Insurance indemnifying against loss by flood damage. Required by lenders in areas designated (federally) as potential flood areas. The insurance is private but federally subsidized.
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H
HAZARD INSURANCE- Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
HOME OWNERS- ASSOCIATION (1) An association of people who own homes in a given area, formed for the purpose of improving or maintaining the qualities of the area. (2) An association formed by the builder of condiminiums or planned developments, and required by statute in some states. The builder's participation as well as the duties of the association are controlled by statute.
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I
Interest only payments- Mortgages requiring a monthly payment of interest only. These loans have a lower monthly payment than the traditional monthly payment requiring payment of principal and interest.
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M
MORTGAGE BROKER- One who brings together a borrower and lender, and handles the necessary application for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.
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N
NOTE- A unilateral agreement containing an express and absolute promise of the signer to pay to a named lender a definite sum of money at a specified date or on demand. It usually provides for interest and , concerning real property, is secured by a mortgage or trust deed.
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P
PRE-PAYMENT PENALTY- A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.
PRIVATE MORTGAGE INSURANCE- Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a government agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.
PURCHASE AGREEMENTS- An agreement between a buyer and seller of real property, setting forth the price and terms of sale.
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S
SECOND MORTGAGE- A mortgage which ranks after a first mortgage in priority. Properties may have two, three, or more mortgages, deeds of trust, or land contracts, as liens at the same time. Legal priority would determine whether they are called first, second, third, etc.lien.
SETTLEMENT STATEMENT- A statement prepared by the title company or attorney giving a complete breakdown of costs involved in real estate sale.
SURVEY- The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.
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T
TITLE INSURANCE- Insurance against loss resulting from defects of title to a specifically described parcel of real property.
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W
WARRANTY DEED- A deed used in many states to convey fee title to real property. Until the widespread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.
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