The day when a home’s sale or purchase is completed
The closing date, agreed upon by both the seller and buyer, is written in the purchase/sale agreement. Depending onwhat state the property is located, a closing can either bean actual meeting that takes place between the buyer and seller, or escrow, which doesn’t require a meeting.
Even though what happens at on the closing date varies from state to state, in general, there are 4 main steps:
(1) the buyer pays for the property, including the down payment and lender fees
(2) the buyer and seller sign the final closing documents
(3) the deed is recorded at the county courthouse
(4) the mortgage officially begins. In some states, these steps span over several days leading up to, and after, the closing date.
Mortgage definitions and Real Estate Terms, Consolidating loans, refinancing mortgages and reverse mortgage process available to anyone. This consumer information site contains several tools and guides to aid in purchasing or refinancing a home or commercial property.
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Friday, April 14, 2006
Closing costs
Fees that must be paid on (or before) the closing date by the buyer and/or seller in addition to the down payment
These fees, which average 2-5% of a loan’s amount, are paid on (or before) the closing date. Closing costs normally vary based on a combination of three factors - the lender, the property’s location and the type of mortgage you choose. It’s best to have a good idea of all the costs early on: ask your closing agent for a pre-closing HUD-1 document, which gives a detailed list of the expected closing costs.
These fees, which average 2-5% of a loan’s amount, are paid on (or before) the closing date. Closing costs normally vary based on a combination of three factors - the lender, the property’s location and the type of mortgage you choose. It’s best to have a good idea of all the costs early on: ask your closing agent for a pre-closing HUD-1 document, which gives a detailed list of the expected closing costs.
Cash reserves
Money put aside in case of a financial emergency
Most lenders want to know that you have enough savings, either in a checking or savings account, a security or even a 401K retirement fund, to provide a cushion for unexpected expenses in the future. Lenders are typically looking for an amount that is twice your monthly mortgage payment.
See: Mortgage
Most lenders want to know that you have enough savings, either in a checking or savings account, a security or even a 401K retirement fund, to provide a cushion for unexpected expenses in the future. Lenders are typically looking for an amount that is twice your monthly mortgage payment.
See: Mortgage
Cash-out refinance
When home owners apply for a new, larger loan with the purpose of paying off their present loan and pocketing the difference
Cash-out refinancing lets you take advantage of the equity that you have built over the years and free up some cash to remodel your kitchen, pay your children's college tuition or pay off your credit card bills. Usually you refinance when interest rates are lower than your current loan so you lower your monthly payments. Depending on the lender, you can get 80%, and in some cases more, of your home's value.
Example: How can you use cash-out refinance to renovate your home?
Susan wants to remodel her entire living room. Her home is worth $200,000 and the mortgage balance is $125,000. Susan can refinance for $150,000, use $125,000 to pay off her current loan and have $25,000 available to get that fireplace she always wanted.
See: Refinance
Stop my foreclosure
A loan with a fixed interest rate
Cash-out refinancing lets you take advantage of the equity that you have built over the years and free up some cash to remodel your kitchen, pay your children's college tuition or pay off your credit card bills. Usually you refinance when interest rates are lower than your current loan so you lower your monthly payments. Depending on the lender, you can get 80%, and in some cases more, of your home's value.
Example: How can you use cash-out refinance to renovate your home?
Susan wants to remodel her entire living room. Her home is worth $200,000 and the mortgage balance is $125,000. Susan can refinance for $150,000, use $125,000 to pay off her current loan and have $25,000 available to get that fireplace she always wanted.
See: Refinance
Stop my foreclosure
A loan with a fixed interest rate
Capital improvement
Any major renovation that increases your property's value
Some examples of capital improvements include adding a new bedroom, expanding a kitchen, or upgrading the electrical wiring. Repairs and normal maintenance on a home, such as replacing a broken window or fixing a hole in the roof do not qualify as capital improvements.
See: Assessed value
Some examples of capital improvements include adding a new bedroom, expanding a kitchen, or upgrading the electrical wiring. Repairs and normal maintenance on a home, such as replacing a broken window or fixing a hole in the roof do not qualify as capital improvements.
See: Assessed value
Capital gains tax
The tax placed on the profit made from selling a home
The IRS taxes your capital gain, which is the profit you make when you sell your home or other investment.
As long as you have lived in your home for at least 2 of the 5 years prior to sale, you can benefit from the following capital gains tax breaks: if you are single or widowed, you can pocket the first $250,000 gain tax-free. If you are married, you take away the first $500,000 without paying any tax.
Any profit left over will be taxed at a 20% rate.
The IRS taxes your capital gain, which is the profit you make when you sell your home or other investment.
As long as you have lived in your home for at least 2 of the 5 years prior to sale, you can benefit from the following capital gains tax breaks: if you are single or widowed, you can pocket the first $250,000 gain tax-free. If you are married, you take away the first $500,000 without paying any tax.
Any profit left over will be taxed at a 20% rate.
Capital gain
The profit you make when you sell your house
You can calculate your capital gain by subtracting the adjusted cost basis from your home's selling price. The adjusted cost basis is your home's purchase price plus any major renovations you have made on your property, minus any losses like the cost of repairing flood damage. Based on your capital gain, the federal government figures out how much tax you owe.
See: Capital gains tax
You can calculate your capital gain by subtracting the adjusted cost basis from your home's selling price. The adjusted cost basis is your home's purchase price plus any major renovations you have made on your property, minus any losses like the cost of repairing flood damage. Based on your capital gain, the federal government figures out how much tax you owe.
See: Capital gains tax
Cap
The limit on how much the interest rate or monthly payment on an adjustable rate mortgage (ARM) can go up or down
Most ARMs have several types of interest rate caps:
(1) lifetime caps, which are required by law, that limit the increase and decrease of a rate over the full course of a loan. A 12% lifetime cap, for example, means the ARM's rate can never go above 12%,
(2) the first adjustment cap, which limits the rate change on the ARM's initial adjustment and (3) the subsequent adjustment caps (also called periodic caps), which limit the rate changes on the following adjustment periods, even if the market interest rates significantly rise or fall during this time.
Caps on monthly payments are rare since they can cause negative amortization, a situation where your mortgage balance increases despite regular monthly payments.
See: Adjustable rate mortgage
Most ARMs have several types of interest rate caps:
(1) lifetime caps, which are required by law, that limit the increase and decrease of a rate over the full course of a loan. A 12% lifetime cap, for example, means the ARM's rate can never go above 12%,
(2) the first adjustment cap, which limits the rate change on the ARM's initial adjustment and (3) the subsequent adjustment caps (also called periodic caps), which limit the rate changes on the following adjustment periods, even if the market interest rates significantly rise or fall during this time.
Caps on monthly payments are rare since they can cause negative amortization, a situation where your mortgage balance increases despite regular monthly payments.
See: Adjustable rate mortgage
Buydown
A type of financing where the buyer or seller pays extra points (often called discount points) in return for a lower interest rate
The low-down on buydowns is that they are commonly used to make qualifying for a loan easier since they lower a loan' s interest rate. There are two types of buydowns:
(1) a permanent buydown that lets you pay extra points in order to get a low interest rate over the life of a loan
(2) a temporary buydown is when you prepay interest in exchange for a lower rate on the first 2-3 years of a loan.
Often the builder, seller or lender, all who want to make the housing more attractive to buyers, will pay for the buydown. Also, the lower starting rate makes it easier to qualify for the loan.
If you can't qualify for a 30-year fixed, 7% interest loan for $250,000. But, the lender agrees to give you the loan at 5% interest for the first year, 6% interest for the second year and then adjust it to the normal rate of 7% the third year. In return, you must pay the difference between the market ($1,732) and buydown monthly payments ($1,445 and $1,587) for the first two years of the loan at closing.
Buydown account
An account that holds the money needed to pay monthly payments on a temporary buydown mortgage
In a temporary buydown mortgage, you pay some of the interest in advance in order to get a lower interest rate for the first two or three years of your loan. This sum is placed into a buydown account and is used towards the monthly mortgage payments.
The low-down on buydowns is that they are commonly used to make qualifying for a loan easier since they lower a loan' s interest rate. There are two types of buydowns:
(1) a permanent buydown that lets you pay extra points in order to get a low interest rate over the life of a loan
(2) a temporary buydown is when you prepay interest in exchange for a lower rate on the first 2-3 years of a loan.
Often the builder, seller or lender, all who want to make the housing more attractive to buyers, will pay for the buydown. Also, the lower starting rate makes it easier to qualify for the loan.
If you can't qualify for a 30-year fixed, 7% interest loan for $250,000. But, the lender agrees to give you the loan at 5% interest for the first year, 6% interest for the second year and then adjust it to the normal rate of 7% the third year. In return, you must pay the difference between the market ($1,732) and buydown monthly payments ($1,445 and $1,587) for the first two years of the loan at closing.
Buydown account
An account that holds the money needed to pay monthly payments on a temporary buydown mortgage
In a temporary buydown mortgage, you pay some of the interest in advance in order to get a lower interest rate for the first two or three years of your loan. This sum is placed into a buydown account and is used towards the monthly mortgage payments.
Building code
A set of government rules, which control the use, design, construction, and renovation of buildings
Building codes are based on safety and health standards and lay down the law on everything from construction materials to the number of emergency exits needed on every floor.
Building codes vary from city to city and county to county, but any remodeling on a house, such as adding a new bathroom will require a permit.
The Building Department at your City Hall is the best source of information if you have any specific questions on building codes.
Building codes are based on safety and health standards and lay down the law on everything from construction materials to the number of emergency exits needed on every floor.
Building codes vary from city to city and county to county, but any remodeling on a house, such as adding a new bathroom will require a permit.
The Building Department at your City Hall is the best source of information if you have any specific questions on building codes.
Bridge loan
An emergency loan for buyers who need money to close on a new home before they can sell their present home
Banks offer bridge loans to help buyers out of this sticky situation. Bridge loans are short-term, usually up to 1 year, with high interest rates that let you borrow against the old home.
Once the sale on the old home is finished, you can pay off the loan. It is difficult to qualify for bridge since you need enough income to cover the bridge loan and the mortgage payments on the old and new homes.
Bridge loans are also called interim financing, swing loans or turnarounds.
Banks offer bridge loans to help buyers out of this sticky situation. Bridge loans are short-term, usually up to 1 year, with high interest rates that let you borrow against the old home.
Once the sale on the old home is finished, you can pay off the loan. It is difficult to qualify for bridge since you need enough income to cover the bridge loan and the mortgage payments on the old and new homes.
Bridge loans are also called interim financing, swing loans or turnarounds.
Breach of contract
When someone breaks a part (or whole) of a written agreement
If a breach of contract happens, you can
(1) negotiate to find a solution that all parties agree upon
(2) sue the person who broke the contract for money in damages, or
(3) have the court force the person to carry out the terms of the contract.
If a breach of contract happens, you can
(1) negotiate to find a solution that all parties agree upon
(2) sue the person who broke the contract for money in damages, or
(3) have the court force the person to carry out the terms of the contract.
Bond
A note that a government or corporation gives an investor, which promises to repay the borrowed amount plus interest on a specific date
Bonds help finance large, expensive projects, such as building new bridges or highways. When you buy a bond, the seller agrees to repay the bond principal to you when it matures, and to make interest payments.
The longer the bond takes to mature, the higher the interest payments since there is more risk at stake. If you are looking to raise money for a down payment, you might want to consider investing in short-term bonds since they have a low risk factor.
Bonds help finance large, expensive projects, such as building new bridges or highways. When you buy a bond, the seller agrees to repay the bond principal to you when it matures, and to make interest payments.
The longer the bond takes to mature, the higher the interest payments since there is more risk at stake. If you are looking to raise money for a down payment, you might want to consider investing in short-term bonds since they have a low risk factor.
Blanket insurance policy
A single insurance policy that covers more than one piece of property
Blanket mortgage
A loan covering more than one piece of property
Land developers commonly use blanket mortgages when they buy a plot of land and divide it into many separate lots. They spread the mortgage across the entire property rather than overeach individual lot.
See: Mortgage insurance
Blanket mortgage
A loan covering more than one piece of property
Land developers commonly use blanket mortgages when they buy a plot of land and divide it into many separate lots. They spread the mortgage across the entire property rather than overeach individual lot.
See: Mortgage insurance
Biweekly payment mortgage
A loan that has a biweekly payment schedule
With biweekly payments, you end up paying the equivalent of 13 monthly payments per year. That one extra payment allows you to pay off a loan faster and save money in interest - up to a few thousand dollars. The downsides are that lenders or a third party collection agency charge a $300 to $500 fee to set up the biweekly payment schedule. And, in some months, you end up paying 3 times a month - on the 1st, 15th and 29th. You can achieve the same results yourself, simply by making extra monthly payments.
With biweekly payments, you end up paying the equivalent of 13 monthly payments per year. That one extra payment allows you to pay off a loan faster and save money in interest - up to a few thousand dollars. The downsides are that lenders or a third party collection agency charge a $300 to $500 fee to set up the biweekly payment schedule. And, in some months, you end up paying 3 times a month - on the 1st, 15th and 29th. You can achieve the same results yourself, simply by making extra monthly payments.
Bill of sale
An official document that transfers ownership of personal property
A bill of sale is used to swap ownership of things that are movable, such as a car or mobile home. A home is not personal property since it is permanently attached to the land. A deed, such as a grant deed or warranty deed, is the official document used to transfer ownership of a home.
A bill of sale is used to swap ownership of things that are movable, such as a car or mobile home. A home is not personal property since it is permanently attached to the land. A deed, such as a grant deed or warranty deed, is the official document used to transfer ownership of a home.
Beneficiary
A lender who loans you money to buy a home
A lender, usually a bank, is called a beneficiary in certain states. The beneficiary holds onto the deed of trust, which acts as a guarantee that you will repay your loan. If you fail to pay your loan (default), the beneficiary can give the trustee - the neutral third party who acts on behalf of the beneficiary - permission to foreclose on your property.
See:Deed of Trust
A lender, usually a bank, is called a beneficiary in certain states. The beneficiary holds onto the deed of trust, which acts as a guarantee that you will repay your loan. If you fail to pay your loan (default), the beneficiary can give the trustee - the neutral third party who acts on behalf of the beneficiary - permission to foreclose on your property.
See:Deed of Trust
Before-tax income
Your income earnings before federal and local taxes are taken out
You can find your before-tax income on your paycheck. Before-tax income, which is also called gross income or pre-tax, is used to calculate your tax bracket and other items that you have to report on your annual income tax forms.
You can find your before-tax income on your paycheck. Before-tax income, which is also called gross income or pre-tax, is used to calculate your tax bracket and other items that you have to report on your annual income tax forms.
Bankruptcy
When you hand over your assets to a federal court because you can' t pay your debts, and are no longer held responsible for paying off your creditors
You can either enter bankruptcy voluntarily, or you can be forced to petition for bankruptcy after your creditors bring you to court to try and collect on their money. In general, the three main types of bankruptcies are:
(1) Chapter 7, which wipes out most of your debt -- taxes, alimony and student loans are often exceptions - and protects you from your creditors
(2) Chapter 13, which lets you keep your assets if the court approves your plan to repay your creditors
(3) Chapter 11, typically for a company, which needs court approval on its plan to reorganize its finances and repay creditors.
Bankruptcies stay on your credit report for 10 years and are automatically erased after this time.
Stop my foreclosure
A loan with a fixed interest rate
You can either enter bankruptcy voluntarily, or you can be forced to petition for bankruptcy after your creditors bring you to court to try and collect on their money. In general, the three main types of bankruptcies are:
(1) Chapter 7, which wipes out most of your debt -- taxes, alimony and student loans are often exceptions - and protects you from your creditors
(2) Chapter 13, which lets you keep your assets if the court approves your plan to repay your creditors
(3) Chapter 11, typically for a company, which needs court approval on its plan to reorganize its finances and repay creditors.
Bankruptcies stay on your credit report for 10 years and are automatically erased after this time.
Stop my foreclosure
A loan with a fixed interest rate
Balloon payment
The final lump-sum payment to pay off a balloon mortgage' s balance
The balance on a balloon mortgage is due in full typically between 5 to 7 years, after the day it starts. This last payment is a large sum of money, and if you can not pay it off, you do have the option to sell or refinance, even though interest rates might be high. If you do not take any of these options, you' re risking foreclosure. Some balloon mortgages do allow you to extend the loan in exchange for a higher rate.
Stop my foreclosure
The balance on a balloon mortgage is due in full typically between 5 to 7 years, after the day it starts. This last payment is a large sum of money, and if you can not pay it off, you do have the option to sell or refinance, even though interest rates might be high. If you do not take any of these options, you' re risking foreclosure. Some balloon mortgages do allow you to extend the loan in exchange for a higher rate.
Stop my foreclosure
Balloon mortgage
A loan with a fixed interest rate and monthly payment that becomes due in full, typically after 5 to 7 years
A balloon mortgage has a lower interest rate than fixed rate mortgages, and can save you money at the beginning. But, if you can' t afford to pay off everything you owe when the balloon "bursts" and becomes due, you need to refinance or sell, or risk foreclosure.
For some balloon mortgages on an owner-occupied property, the lender may let you extend the loan, without having to pay it in one lump sum. In exchange, you get a higher interest rate and agree not to apply for a second mortgage. Home buyers typically choose this type of loan because they plan to sell their home before the balloon pops.
Stop my foreclosure
A loan with a fixed interest rate
A balloon mortgage has a lower interest rate than fixed rate mortgages, and can save you money at the beginning. But, if you can' t afford to pay off everything you owe when the balloon "bursts" and becomes due, you need to refinance or sell, or risk foreclosure.
For some balloon mortgages on an owner-occupied property, the lender may let you extend the loan, without having to pay it in one lump sum. In exchange, you get a higher interest rate and agree not to apply for a second mortgage. Home buyers typically choose this type of loan because they plan to sell their home before the balloon pops.
Stop my foreclosure
A loan with a fixed interest rate
Assumption fee
A lender's fee for processing an assumption request
The fee, normally about $500, covers the processing and administrative costs for a buyer to assume an existing loan.
See: Assumable mortgage
The fee, normally about $500, covers the processing and administrative costs for a buyer to assume an existing loan.
See: Assumable mortgage
Assumption Clause
The part of a loan contract that says a buyer can take over an existing mortgage.
See: Assumable mortgage
See: Assumable mortgage
Assumption
When a buyer takes over the seller' s mortgage upon purchasing a home
Assumptions happen with an assumable mortgage, which allow a buyer to take over an existing mortgage. The seller no longer has to pay off the rest of the loan and the buyer can strike gold if the assumable mortgage has a lower interest rate than rates on new loans. Note that in case of foreclosure, the seller, not the buyer, can be held liable if the property sells for less than the loan' s balance.
See: Assumable mortgage
Assumptions happen with an assumable mortgage, which allow a buyer to take over an existing mortgage. The seller no longer has to pay off the rest of the loan and the buyer can strike gold if the assumable mortgage has a lower interest rate than rates on new loans. Note that in case of foreclosure, the seller, not the buyer, can be held liable if the property sells for less than the loan' s balance.
See: Assumable mortgage
Assumable mortgage
A loan that allows a home buyer to take over a seller's mortgage when purchasing a home
Assumable mortgages require the lender's approval. When you assume a mortgage you inherit both its interest rate and monthly payment schedule. It can mean big savings if the interest rate on the existing mortgage is lower than the current rate on new loans - the lender, though, can change the loan's terms. You will still need to qualify for the loan and you have to pay closing fees, including the costs of the appraisal and title insurance.
The lender also holds the seller liable for the loan. For example, if you default and the lender forecloses, but the property sells for less than the loan' s balance, the lender can sue the seller for the difference.
Scenario #1:
Smith wants to sell his home for $95,000 and has an assumable $90,000 loan at 7% interest. Brown wants to buy Smith' s house. Brown only has to put down $5,000 (plus closing fees) to take over Smith' s house and mortgage.
Scenario #2:
Jones got an assumable loan 15 years ago for $80,000 at 6.5% interest. The loan balance today is $70,000. White wants to assume the property, which is now worth $160,000. White must raise $90,000 (plus money for closing costs) to close the deal.
See: Acceleration clause
Assumable mortgages require the lender's approval. When you assume a mortgage you inherit both its interest rate and monthly payment schedule. It can mean big savings if the interest rate on the existing mortgage is lower than the current rate on new loans - the lender, though, can change the loan's terms. You will still need to qualify for the loan and you have to pay closing fees, including the costs of the appraisal and title insurance.
The lender also holds the seller liable for the loan. For example, if you default and the lender forecloses, but the property sells for less than the loan' s balance, the lender can sue the seller for the difference.
Scenario #1:
Smith wants to sell his home for $95,000 and has an assumable $90,000 loan at 7% interest. Brown wants to buy Smith' s house. Brown only has to put down $5,000 (plus closing fees) to take over Smith' s house and mortgage.
Scenario #2:
Jones got an assumable loan 15 years ago for $80,000 at 6.5% interest. The loan balance today is $70,000. White wants to assume the property, which is now worth $160,000. White must raise $90,000 (plus money for closing costs) to close the deal.
See: Acceleration clause
Asset
Anything of value that can be converted into cash
Assets come in all sorts of shapes and sizes, including, land, investments and personal property. Even an antique ring or string of pearls is an asset it is anything that can be turned into cash. If an asset can easily convert into cash, like stocks, it is called a liquid asset. A home is not liquid since it can take a while to sell.
Assets come in all sorts of shapes and sizes, including, land, investments and personal property. Even an antique ring or string of pearls is an asset it is anything that can be turned into cash. If an asset can easily convert into cash, like stocks, it is called a liquid asset. A home is not liquid since it can take a while to sell.
Assessment
A tax to pay for repairs and improvements in the neighborhood
Some counties charge home owners an assessment tax for fixing the sewer, street lighting and sidewalks. In many cases, the assessment tax only applies to properties on certain streets or areas within a county. Condominium owners also pay a special assessment for major improvements like repainting the exterior or replacing the roof, which is calculated as part of their Home Owners' Association dues.
See: Homeowners' Association dues
Some counties charge home owners an assessment tax for fixing the sewer, street lighting and sidewalks. In many cases, the assessment tax only applies to properties on certain streets or areas within a county. Condominium owners also pay a special assessment for major improvements like repainting the exterior or replacing the roof, which is calculated as part of their Home Owners' Association dues.
See: Homeowners' Association dues
Assessed value
The government's estimate of a property's value, which is used to calculate property taxes
Each county and state has its own formula to calculate property taxes, but for the most part, the assessed value is multiplied by the local tax rate. You will notice that the assessed value is not always equal to the actual value of a property. If you feel that your property taxes are too high, petition your local tax assessor to reconsider the assessed value.
Each county and state has its own formula to calculate property taxes, but for the most part, the assessed value is multiplied by the local tax rate. You will notice that the assessed value is not always equal to the actual value of a property. If you feel that your property taxes are too high, petition your local tax assessor to reconsider the assessed value.
Appreciation
An increase in a property's value
A home generally increases in value over time. If you buy a house for $100,000 and sell it one year later for $110,000, the house has appreciated by $10,000. Appreciation increases your net worth, as well as your equity - the difference between your home's market value and the amount of money you owe on your mortgage. The three main factors that affect the future value of your home are its location and condition, and the selling price of similar properties in the area.
See: Comparable sale (comp)
Compare: Depreciation
A home generally increases in value over time. If you buy a house for $100,000 and sell it one year later for $110,000, the house has appreciated by $10,000. Appreciation increases your net worth, as well as your equity - the difference between your home's market value and the amount of money you owe on your mortgage. The three main factors that affect the future value of your home are its location and condition, and the selling price of similar properties in the area.
See: Comparable sale (comp)
Compare: Depreciation
Appraisal / Appraiser
When a certified professional estimates the value of a property
Before your loan can be completely approved, the property that you want to buy or refinance must be appraised. To make an accurate estimate, an appraiser collects data about the property, such as the number and size of the bedrooms and bathrooms and improvements. Then the appraiser compares it to similar properties recently sold in the area and adjusts the price to account for any differences. An appraisal generally costs between $200 and $400.
See: Comparable sale (comp)
Before your loan can be completely approved, the property that you want to buy or refinance must be appraised. To make an accurate estimate, an appraiser collects data about the property, such as the number and size of the bedrooms and bathrooms and improvements. Then the appraiser compares it to similar properties recently sold in the area and adjusts the price to account for any differences. An appraisal generally costs between $200 and $400.
See: Comparable sale (comp)
Application
A paper or online form used to apply for a loan
When you fill out an application and submit it to a broker or lender, you have taken the first step in applying for a loan. Even if you do not have a property in mind, you can still apply and get a preapproval on a loan. The application, also referred to as a 1003, asks for personal and financial information, such as your current bills, present salary and bank account balances.
See: Preapproval
When you fill out an application and submit it to a broker or lender, you have taken the first step in applying for a loan. Even if you do not have a property in mind, you can still apply and get a preapproval on a loan. The application, also referred to as a 1003, asks for personal and financial information, such as your current bills, present salary and bank account balances.
See: Preapproval
Annual Percentage Rate (APR)
A measurement used to compare different loans offered by competing lenders, which takes into account both the interest rate and closing fees
Unlike an interest rate, an APR gives you a bigger picture when shopping for the best deal on a loan. An APR lets you see the total cost of a mortgage, including closing fees and lender points over the life of a loan - not just the interest due. Even though lenders are required by law to show a loan’s APR, they do not all use the same fees in their calculation, skewing the comparison. So always check tomake sure that the APRs you are comparing include similar fees.
Unlike an interest rate, an APR gives you a bigger picture when shopping for the best deal on a loan. An APR lets you see the total cost of a mortgage, including closing fees and lender points over the life of a loan - not just the interest due. Even though lenders are required by law to show a loan’s APR, they do not all use the same fees in their calculation, skewing the comparison. So always check tomake sure that the APRs you are comparing include similar fees.
Amortization term
The amount of time you need to completely pay off a mortgage
The amortization term on a 30-year fixed or a 30-year adjustable rate mortgage is 30 years. Similarly, for a 15-year fixed rate mortgage, the amortization term is 15 years. Balloon mortgages are amortized over 30 years, but are usually due in full in 5 to 7 years.
See: Balloon mortgage
The amortization term on a 30-year fixed or a 30-year adjustable rate mortgage is 30 years. Similarly, for a 15-year fixed rate mortgage, the amortization term is 15 years. Balloon mortgages are amortized over 30 years, but are usually due in full in 5 to 7 years.
See: Balloon mortgage
Amortization schedule
A time table of mortgage payments over the course of a loanthat shows how much is applied to both the principal andinterest.
An amortization schedule gives a breakdown of your monthly payments in principal and interest. During the early years of your mortgage, the bulk of your payments go to interest. So, even after 10 years of fixed payments on a 30-year loan, you’veonly made a small dent on the debt.
You can use an amortization schedule to figure out the equity you gain during your mortgage term. The longer you own a house, the more equity you gain. But, if you do not plan on keeping your home for very long, the equity can still increase due to other factors, such as appreciation and capital improvements.
An amortization schedule gives a breakdown of your monthly payments in principal and interest. During the early years of your mortgage, the bulk of your payments go to interest. So, even after 10 years of fixed payments on a 30-year loan, you’veonly made a small dent on the debt.
You can use an amortization schedule to figure out the equity you gain during your mortgage term. The longer you own a house, the more equity you gain. But, if you do not plan on keeping your home for very long, the equity can still increase due to other factors, such as appreciation and capital improvements.
Amortization
When you reduce the size of your loan through regular, periodic payments
When you make monthly payments that cover both the principal and interest, you are amortizing the loan. On the other hand, interest-only payments delay amortization since you never fully pay off the mortgage.
See: Amortization schedule
Compare: Negative amortization
When you make monthly payments that cover both the principal and interest, you are amortizing the loan. On the other hand, interest-only payments delay amortization since you never fully pay off the mortgage.
See: Amortization schedule
Compare: Negative amortization
Administrator(trix)
The person who is responsible for settling the estate of someone who died without a will
By law, if a home owner dies, an administrator takes over of the property until the courts decide who the next rightful owner will be. A female administrator is called an administratrix.
By law, if a home owner dies, an administrator takes over of the property until the courts decide who the next rightful owner will be. A female administrator is called an administratrix.
Adjustment period
How often an adjustable rate mortgage's interest rate changes
While most adjustment rate mortgages (ARMs) change annually, others fluctuate monthly or semi-annually. Usually, the longer the adjustment period, the higher the initial fixed interest rate (called a teaser rate) will be.
While most adjustment rate mortgages (ARMs) change annually, others fluctuate monthly or semi-annually. Usually, the longer the adjustment period, the higher the initial fixed interest rate (called a teaser rate) will be.
Adjustment date
The day when the interest rate changes on an adjustable rate mortgage (ARM)
After an initial period where an ARM's interest rate remains the same, the rate changes on the adjustment date to reflect the current market rate. It will continue to adjust either monthly, semi-annually or annually over the life of the loan. For example, the first adjustment date for a 10/1 ARM is after 10 years.
See: Adjustable rate mortgage
After an initial period where an ARM's interest rate remains the same, the rate changes on the adjustment date to reflect the current market rate. It will continue to adjust either monthly, semi-annually or annually over the life of the loan. For example, the first adjustment date for a 10/1 ARM is after 10 years.
See: Adjustable rate mortgage
Acceptable debt
How much debt a lender thinks borrower can handle before agreeing to give them a loan
Mortgage lenders prefer when less than 5% of your salary goes to paying off debt, such as credit cards, car or student loans. They need to know that you will be able to comfortably pay your monthly mortgage payments without other overwhelming bills.
Mortgage lenders prefer when less than 5% of your salary goes to paying off debt, such as credit cards, car or student loans. They need to know that you will be able to comfortably pay your monthly mortgage payments without other overwhelming bills.
Acceleration clause
Part of an agreement that gives a lender permission, under certain conditions, to demand all the money owed on a loan
Most loans have an acceleration clause and it usually takes effect when a buyer assumes a seller's mortgage and monthly payment schedule. Less often, the clause is used when a home owner misses payments or breaks a term that was agreed to in the contract.
Most loans have an acceleration clause and it usually takes effect when a buyer assumes a seller's mortgage and monthly payment schedule. Less often, the clause is used when a home owner misses payments or breaks a term that was agreed to in the contract.
APR calculations
Unless otherwise indicated, these APR calculations are based on the following: Conforming loans (whose maximum loan amount is below $417,000 for the contiguous states, District of Columbia, and Puerto Rico or below $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $333,700 with closing costs of $6,674. Jumbo Loans (whose maximum loan amount exceed $417,000 for the contiguous states, District of Columbia, and Puerto Rico or exceed $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $1,000,000 with closing costs of $20,000. Your actual APR may be different depending upon these factors.
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