Mortgage Loans Terms For Home Mortgages And Lending | A - C
7/23 & 5/25 Mortgage Loans - These types of mortgages feature a one-time adjustment in rates after seven years and five years, respectively.
3/1, 5/1, 7/1 & 10/1 ARM Loans - These are adjustable-rate mortgage loans that have a fixed rate for three-, five-, seven-, and ten-year periods, respectively. After that term ends, however, the rate might adjust annually.
Acceleration - Basically, the lender has the right to demand the borrower to immediately repay the balance of the mortgage loan in the event of a default.
Adjustable Rate Mortgage - An adjustable rate mortgage, or ARM, is a mortgage loan that adjusts periodically to conform to a pre-selected index.
Adjustment Interval - This refers to the time in between changes in an adjustable-rate mortgage loan's interest rate or monthly payment. The interval is generally either one, three, or five years in duration depending on the pre-selected index.
Amortization - This is a method of debt repayment in which the lender makes equal payments periodically so that the entire balance, including interest, is repaid in full at the end of a fixed period of time.
Annual Percentage Rate - An annual percentage rate, or APR, is a way to measure the complete cost of a loan, including interest on the outstanding balance and also various loan fees. The APR of a loan is calculated the same way for all lenders, so potential borrowers can rely on this factor to compare the cost of different loans.
Appraisal - This is a professional evaluation of a property's value made by an "appraiser."
Assessment - An assessment is a local tax on a piece of property for a particular purpose (i.e. street lights).
Assumption - This action occurs when the buyer assumes payments on an existing mortgage from the seller when the property changes hands. This typically saves the buyer money.
Balloon Mortgage - This refers to a loan that is amortized for a period of time that is longer than the actual term of the mortgage. At the end of the loan's term, the remaining balance is due. This payment is called the balloon payment.
Blanket Mortgage - When two or more pieces of property are used as collateral for a single mortgage, it is called a blanket mortgage.
Borrower - The borrower is a person who receives a sum of money as a mortgage loan with the intention of paying back this amount (plus interest) in full.
Broker - A broker is a person who specializes in aiding his/her client negotiate a loan contract with a lender, but does not actually loan the money. However, the broker usually charges some kind of fee for his/her services.
Buy-down - This occurs when the lender subsidizes a mortgage by means of lowering the interest rate for the loan's first couple of years. The payments will then increase once the subsidy ends.
Cash Flow - The money accumulated over a period of time from a particular income-producing piece of property. This amount should be able to cover the expenses of maintaining this piece of property (i.e. mortgage payment, utilities).
Caps - Interest caps limit the amount that the interest rate on an adjustable-rate mortgage loan can change over the course of a year or over the entire duration of the loan. Payments caps limit the amount that a borrower's monthly payments on an adjustable-rate mortgage loan can change.
Certificate of Eligibility - This is granted to qualified veterans, entitling them to VA-backed loans. These are obtained by submitting forms DD-214 and VA-1880 to the nearest VA office.
Certificate of Reasonable Value - A Certificate of Reasonable Value, or CRV, is an appraisal made by the VA of a piece of property's current value in relation to the market.
Certificate of Veteran Status - The document is granted to veterans who have served at least ninety days of continuous duty, which includes training time. It is obtained by submitting form DD-214 to the local VA office, along with form 26-8261a. Ultimately, this certificate allows veterans to obtain a lower down payment on specific FHA-insured loans.
Closing - Also known as a settlement, this is the meeting between the homebuyer, the seller, and the mortgage lender during which the property and funds are legally exchanged.
Closing Costs - These typically include the loan origination fee, discount points, a property appraisal fee, insurance, taxes, and various other costs that are evaluated during the settlement. In general, the closing costs will add up to anywhere between three and six percent of the total mortgage amount.
COFI - The cost-of-funds index, which is used as a ruler indicating how much to adjust the interest rate on a particular ARM.
Construction Loan - These short-term interim loans are used to pay for the construction of residential and commercial/industrial real estate. Typically, the builder receives funds periodically depending on his/her rate of progress.
Contract Sale or Deed - This is a document drawn up between the buyer and the seller of a piece of property, describing the conditions that need to be met before the title can change hands.
Conventional Loan - A conventional loan refers to a mortgage loan that is not insured by the FHA or backed by the VA.
Credit Report - This document outlines the credit history and current financial status of a borrower.
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