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| Terms You Need To KnowAdjustable Rate Mortgage (ARM).A type of mortgage rate loan whose interest rate changes periodically up or down, usually once or twice a year.Annual Percentage Rate (APR).Everything financed in your mortgage loan package (interest, loan fees, points or other charges) expressed as a percentage of the loan amount (usually slightly above the actual interest rate alone.)Assumable Loan.A loan in which the lender is willing to "transfer" from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan can make your home more attractive to buyers when you want to sell.Closing costsCosts the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, prepayments for property taxes, etc. Closing costs normally average 3%-4% of the loan amount.CondominiumA form of property ownership whereby the purchaser receives title to a unit in a multiunit structure, and a proportionate interest in common areas. Conforming LoanA mortgage that conforms to FNMA and/or Freddie Mac underwriting standards. Among other things, those standards set limits on the amount that can be borrowed based on:
Community PropertyA form of ownership under which property acquired during marriage is presumed to be owned jointly unless acquired as separate property of either spouse. Separate property is property acquired before marriage or acquired by gift or inheritance after the marriage. Separate property also includes property acquired with separate funds after the marriage. Separate property can also be created after the marriage by a written contract. Contingency.A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or her sale of a present home.Conventional Mortgage.A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA).Deed Of TrustA type of security instrument used in Texas to convey a borrower's interest in real estate to a third party trustee who holds property as collateral for lender. The third party trustee conveys title back to borrower if debt is fully satisfied, or sells property and pays debts in the event of default by the borrower. EscrowAn item of value, money or documents, deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. Earnest money.Funds submitted with an offer to show "good faith" to follow through with the purchase. Earnest money is placed by the broker in an escrow/trust account until closing, when it becomes part of the down payment of closing costs.Escrow.A procedure in which documents or transfers of cash and property are put in the care of a third party, other than the buyer or seller.Escrow PaymentThat portion of borrower's monthly payment held by the lender or servicer to pay taxes, hazard insurance, mortgage insurance and other items that become due. Escrow WaiverEscrow wavier refers to a lender's agreement that borrower may pay their own taxes, hazard insurance, mortgage insurance and other items that become due. FNMAFNMA is an acronym for Federal National Mortgage Association. FNMA is often referred to as "Fannie Mae." FNMA is a publicly owned corporation chartered by Federal government in 1968. The President of United States appoints a portion of its Board of Directors FNMA is the nation’s largest mortgage investor. FNMA purchases conforming loans in the secondary market and sells securitized interests in mortgages to the public. FHA Financing.Financing for a loan which will be insured against loss by the Federal Housing Administration--a part of the U.S. Department of Housing and Urban Development (HUD). Such financing only requires a 3%-5% down payment.First Time HomebuyerA person applying for a mortgage who has not owned real estate during the 3 previous years. There are exceptions; for example, a person who sold a home to move to a distant community might qualify. FHLMCThe Federal Home Loan Mortgage Corporation, also called Freddie Mac is owned by the public and was chartered Federal government in 1970. The President of United States appoints a portion of its Board of Directors. Freddie Mac is one of nation’s largest mortgage investors. Freddie Mac purchases conforming loans in the secondary market and sells securitized interests in mortgages to the public. Homeowners Insurance.Insurance that protects the homeowner from "casualty" (losses or damage to the home or personal property) and from "liability" (damages to other people or property). Required by the lender and usually included in the monthly mortgage payment.Jumbo LoanA mortgage that exceeds the following maximum amounts permitted by FNMA and/or Freddie Mac underwriting standards: 1 unit - $417,000 2 units - $533,850 3 units - $645,300 4 units - $801,950 Jumbo loans are viewed as having a higher risk than conforming loans and accordingly are more expensive. Underwriting guidelines and loan terms of jumbo loans may vary from lender to lender. Loan Origination Fee.A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.Mortgage Insurance premium (MIP)A charge paid by the borrower to obtain financing, especially when making a down payment of less than 20% of the purchase price.Non-conforming LoanA mortgage that does not conforms to FNMA and/or Freddie Mac underwriting standards. Non-conforming loans are more expensive than conforming loans, but allow more flexible underwriting. The underwriting guidelines vary from lender to lender. PointAn amount equal to 1% of the principal amount being borrowed. The lender may charge the borrower several "points" in order to provide the loan.PUDAn acronym for “Planned Unit Development.” A comprehensive development plan for a large land area. Usually includes residences, roads, schools, recreational facilities, and commercial facilities. Also used to describe a subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of separately owned lots. Property Taxes.Taxes (based on the assessed value of the home) paid by the homeowner for community services such as schools, public works, and other costs of local government.SurveyA measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements. Title Insurance.Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.TownhouseA row house on a small lot that has exterior limits common to other similar units. Title to the unit and its lot is vested in the buyer. Buyer also receives a fractional interest in any common areas. UnderwritingThe analysis of risk associated in making a residential mortgage loan. VA Loan.A loan guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private lender. |
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