Mortgage Terms

| A | B | C | - | E | F | - | H | I | - | - | - | M | N | - | P | - | - | S | T | - | - | W | - | - | -

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 yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The APR is disclosed as a requirement of federal truth in lending statutes.

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.

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.

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 indivisually owned; the balance of the property (both land and building) is owned in common by the owners of the indivisual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors, and ceiling. The balance of the property is called the common area.

E

ESCROW ACCOUNT (Impound Account)- Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor or trustor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.

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 (usually banks) in areas designated (federally) as potential flood areas. The insurance is private but federally subsidized.

H

HAZARD INSURANCE- Real estate insurance protecting against loss caused by fire, some natural causes, vandilism, etc., depending upon the termsof the policy.

HOME OWNERS- ASSOCIATION (1) An association of people who own homes in a givien 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 statue in some states. The builder's participation as well as the duties of the association are controlled by statue.

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.

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. Also called a loan broker..

N

NOTE- A unilateral agreement containing an express and absolute promise of the singer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on dmand. Usually provides for interest and , concerning real property, is secured by a mortgage or trust deed.

P

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.

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 broker, escrow, or lender, giving a complete breakdown of costs involved in real estate sale. A separate statement is prepared for the seller and buyer.

SURVEY- The measurement of the boundries of a parcel of land, its area, and sometimes its topography.

T

TITLE INSURANCE- Insurance against loss resulting from defects of title to a specifically described parcel of real property.

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.