Abstract: A written compilation of public records detailing property history.
Adjustable Rate Mortgage (ARM): Loans with interest rates changing periodically based on a specified financial index.
Amortization: Repayment of a loan through scheduled installment payments.
Appraisal: A report by a qualified individual indicating a property’s value as of a given date, often representing the bank in a real estate transaction.
Application Fee: Amount paid to a lender to process your loan application.
Assumable Mortgage: Buyer assumes the seller’s mortgage, taking responsibility for payments; becoming rare with new loans.
Balloon Mortgage: Repayment of the loan balance scheduled at one time.
Binder: A preliminary purchase agreement, often secured by earnest money, also known as a purchase offer.
Blanket Mortgage: One mortgage covering two or more properties.
Buy-Down: Funds advanced to lower monthly mortgage payments for a specified period.
Cap (Interest Rate): Maximum allowable interest rate increase on an adjustable-rate mortgage.
Cap (Payment Rate): Maximum allowable payment amount increase on an adjustable-rate mortgage.
Closing: The legal transfer of property from seller to buyer.
Closing Costs: Fees paid at the time of closing, varying among lenders.
Conventional Mortgage: A loan not insured or guaranteed by a government or private source.
Deed: A written transfer of property ownership.
Default: Failure to meet an obligation when due.
Easement: Legal right for limited use of another’s land.
Encumbrance: Claim, lien, or liability attached to a property title, affecting its value.
Equity: The difference between the property’s fair market value and outstanding mortgage balance.
Escrow: Deposits held in a special account until contract terms are fulfilled.
Fannie Mae (FNMA): Federal National Mortgage Association, a quasi-government corporation trading mortgages.
Federal Housing Administration (FHA) Loan: Insures mortgages on residential property with a low down payment.
Fixed Rate Mortgage (FRM): A loan with a constant interest rate.
Foreclosure: Lender reacquires property after default.
Freddie Mac (FHLMC): Federal Home Loan Mortgage Corporation, pools mortgages and sells participation agreements.
Grantee: Buyer of property.
Grantor: Seller of property.
Index: A guide for rate changes influencing the annual percentage rate over time.
Interest Rate: Periodic charge, expressed as a percentage, for credit use.
Lien: Legal claim on property used as security for a debt.
Loan-to-Value Ratio: Percentage relationship between the property’s mortgage and its value.
Margin: On an adjustable mortgage, the points added to the index rate to determine the adjusted rate.
MIP – Mortgage Insurance Premium: Insurance protecting the bank against foreclosure on all FHA mortgages.
Mortgage: A legal document using the property as security to guarantee loan repayment.
Negative Amortization: Loan balance increase over time due to payments being less than the interest owed.
Party-Hat Mortgage: A playful term created for humor by Michael.
PITI: Payments covering principle, interest, taxes, and insurance on a property.
PMI – Private Mortgage Insurance: Insurance protecting the bank against foreclosure on loans with an LTV of 80% or greater.
Points: Up-front charge for making the loan (1 point = 1% of loan amount).
Prepayment Penalty: Fee paid if the borrower repays the loan before it is due.
Principal: The balance owed or amount borrowed on a loan.
Promissory Note: Document explaining what is owed and how it will be paid, signed by the borrower and given to the lender.
Rate Cap: Limit on how much the variable-interest rate can increase during the loan’s life.
Refinancing: Obtaining a new mortgage, usually with a lower rate, to pay off an existing loan.
Reverse Mortgage: Lender makes payments to the borrower, with certain restrictions.
Secondary Market: Buying and selling of mortgages after closing.
SONYMA (State of New York Mortgage Association): A state-funded program for eligible first-time home buyers offering special mortgage rates.
Title: Document showing ownership of property.
Title Insurance: Insurance against defects in title.
Title Search: Report presenting the current property condition, checking for liens, encumbrances, ownership concerns, etc.
Transfer Tax: City, county, or state taxes imposed when property passes from one person to another.
VA (Veteran’s Administration): Government agency insuring loans for armed services personnel/veterans.
Variable Rate Mortgage: A mortgage with an interest rate that may change at specified intervals based on an economic indicator.
