Annual Percentage Rate (APR)
APR is not the same as your mortgage loan interest
rate. It is measure of the cost of credit expressed as a yearly
percentage rate. It includes interest as well as closing costs
and other charges.
Because all lenders follow the same rules in computing the APR, it provides consumers with a good basis
for comparing the cost of loans.
Appraised Value
An opinion of the value of a property at a given time,
based on facts regarding the location, improvements, and comparable
sales of area properties.
Closing Statement or Settlement
Statement
The statement which lists the financial settlement between
buyer and seller, and also the costs each must pay. A separate
statement for buyer and seller is sometimes prepared.
Commitment
A written promise to make or insure a loan for a specified
amount and on specified items.
Comparables
Properties used as comparisons to determine the value of a
specified property when doing an appraisal.
Closing Costs
Expenses incurred in the closing of a real estate or
mortgage transaction. This could include the application fee,
appraisal, points, origination fee, property transfer tax, processing
fees, title search, title insurance and various inspections.
Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.
Equity
The difference between the market value of the property and
the homeowner's mortgage debt.
Escrow Payment
That portion of a mortgagor's monthly payment held in trust
by the lender to pay for taxes, mortgage insurance, hazard insurance
and other items as they become due, also know as "impounds"
in some states.
Federal Housing Administration
(FHA)
A federal agency which insures first mortgages, enabling
lenders to loan a very high percentage of the sale price.
Lease with Option to Purchase
A lease under which the lessee has the right to purchase
the property. The option may run for the length of the lease or only
for a portion of the lease period.
Loan-to-Value Ratio (LTV)
The ratio of the mortgage loan amount to the properties
appraised value (or the selling price whichever is less).
Mortgage Broker
One who for a fee, brings together a borrower and lender,
and handles the necessary applications for the borrower to obtain a
loan against real property by giving a mortgage or deed of trust as
security. Also known as a loan broker.
Mortgagee
The lender of money or the receiver of the mortgage
document.
Mortgagor
The borrower of money or the giver of the mortgage
document.
Mortgage Insurance
Insurance required for loans with a loan above 80.01% of
the property value.
Origination Fee
A fee or charge for work involved in the evaluation,
preparation and submission of a proposed mortgage loan, generally 1%
of the loan amount.
Owners Title Policy
Title insurance for the owner of property, rather than the
lender.
PMI - Private Mortgage Insurance
Insurance similar to FHA or VA insurance, insuring part of
the first mortgage or deed of trust, enabling a lender to make a
conventional loan of a higher percentage of the property value.
Points
A point is equal to 1% of the principal amount of
your mortgage. For example, if you get a mortgage for $100,000, one
point means you pay $1,000 to the lender. Lenders frequently charge
points in order to increase the yield of the mortgage. These points are usually collected at closing and
may be paid by the borrower or the home seller, or may be split
between them.
Pre-paids
Pro-rated taxes, homeowner's insurance and interest to the
end of the month. Pre-paids are collected at closing in order to
establish an escrow or impound account.
Property Tax
A tax levied on real estate, generally a county tax paid
semi-annually.
Second Mortgage
A loan secured by a mortgage or trust deed, which is
secondary to the first mortgage or trust deed. Most second
mortgages involve a lump sum borrowed and received at closing.
Settlement Statement (HUD-1)
A statement prepared by broker, escrow or title company, or lender, giving a
complete breakdown of costs involved in a real estate sale.
Title Insurance
An insurance policy which protects the insured (purchaser
and lender) against loss arising from defects in title.
