A type of loan that has a low interest rate for the first 5 or 7 years, then adjusts to a higher interest rate for the remaining 25 or 23 years.
Two-step mortgages are ideal for first-time buyers and if you have a job that demands that you relocate often. Your monthly loan payments are lower for those first years than a regular 30-year fixed loan, and when it is time to adjust to the higher rate, you can do so at no cost. The new rate that you get after 5 or 7 years though can be high, which is when most people decide to move. Two-step mortgages are also called resets.
See: Adjustable rate mortgage
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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Monday, March 26, 2007
Truth-in-lending act
A federal law that requires a lender to give borrowers the annual percentage rate (APR).
The APR helps borrowers compare one loan to another since it factors in not only the interest rate but also all the fees and closing costs that you need to pay. APR, though, is not always the best measure of comparison since not all the lenders include the same fees and closing costs. The Truth-in-Lending act is also called Regulation Z.
See: APR
The APR helps borrowers compare one loan to another since it factors in not only the interest rate but also all the fees and closing costs that you need to pay. APR, though, is not always the best measure of comparison since not all the lenders include the same fees and closing costs. The Truth-in-Lending act is also called Regulation Z.
See: APR
Trustee's sale
When a lender sells your property to pay for a mortgage in default.
Most Deed of trust have a "power of sale" clause, giving the trustee, a neutral party who acts on behalf of the lender, the right to a trustee's sale. A trustee's sale varies from state to state, but in general the trustee, typically a title insurance company, advertises the property's sale in a local/count newspaper and then auctions off the property to the highest bidder.
All is not lost, you have up to five days before the sale to pay everything you owe, plus the legal fees incurred by the trustee, to get back your property. Note that some mortgages contain a power of sale clause, giving the lender the right to foreclose without taking you to court first.
See: Foreclosure, Deed of trust
Stop my foreclosure
Most Deed of trust have a "power of sale" clause, giving the trustee, a neutral party who acts on behalf of the lender, the right to a trustee's sale. A trustee's sale varies from state to state, but in general the trustee, typically a title insurance company, advertises the property's sale in a local/count newspaper and then auctions off the property to the highest bidder.
All is not lost, you have up to five days before the sale to pay everything you owe, plus the legal fees incurred by the trustee, to get back your property. Note that some mortgages contain a power of sale clause, giving the lender the right to foreclose without taking you to court first.
See: Foreclosure, Deed of trust
Stop my foreclosure
Transfer tax
A state or local tax that a buyer or seller has to pay when property changes ownership.
The seller usually has to pay the transfer tax, which is paid on the closing date. The rules on how it is calculated vary from state to state, but usually it is based on the property's purchase price.
Some cities will also add a tax on top of the transfer tax.
The seller usually has to pay the transfer tax, which is paid on the closing date. The rules on how it is calculated vary from state to state, but usually it is based on the property's purchase price.
Some cities will also add a tax on top of the transfer tax.
Title report
The results from a title search.
In some states, the title insurance company conducts a second title search a couple of days before closing and gives you a title report. This report makes sure that there are no claims on the property and that the seller is the legal owner of the property. If there are any claims, they must be cleared before you can buy it.
See: Preliminary title report
In some states, the title insurance company conducts a second title search a couple of days before closing and gives you a title report. This report makes sure that there are no claims on the property and that the seller is the legal owner of the property. If there are any claims, they must be cleared before you can buy it.
See: Preliminary title report
Title insurance
An insurance policy that protects a lender and/or home owner against any loss resulting from a title error or dispute.
Most lenders require that you buy title insurance for them to protect against future problems that might arise with the title (ownership). For example, a long lost relative may show up out of the blue to refute your right to a property, claiming that the property's deed is a forgery.
Depending on where you live, you may have to pay for both your policy and the lender's policy. The cost of the owner's policy is based on the property's purchase price, about $3 to $5 per $1,000.
The cost for the lender's policy is based on the loan amount, about $2 to $3 per $1,000. You pay this one-time fee on your home's closing date.
Title insurance may also cover the charge to oversee closing, conduct the title search and the premium. If you refinance your mortgage, you only have to buy the lender's title insurance. The owner's policy protects you and your heirs until you sell your property.
Most lenders require that you buy title insurance for them to protect against future problems that might arise with the title (ownership). For example, a long lost relative may show up out of the blue to refute your right to a property, claiming that the property's deed is a forgery.
Depending on where you live, you may have to pay for both your policy and the lender's policy. The cost of the owner's policy is based on the property's purchase price, about $3 to $5 per $1,000.
The cost for the lender's policy is based on the loan amount, about $2 to $3 per $1,000. You pay this one-time fee on your home's closing date.
Title insurance may also cover the charge to oversee closing, conduct the title search and the premium. If you refinance your mortgage, you only have to buy the lender's title insurance. The owner's policy protects you and your heirs until you sell your property.
Tenancy in common
A type of ownership where two or more people share ownership of a property, but not necessarily equally.
Even though the owners of a tenancy in common property can have unequal shares of the property, they all have the right to use the entire property. Unlike joint tenancy, tenancy in common doesn't have right of survivorship. So, if one of the co-owners dies, his/her interest passes to an heir(s), not the surviving co-owners. When this happens, probate court is required.
Even though the owners of a tenancy in common property can have unequal shares of the property, they all have the right to use the entire property. Unlike joint tenancy, tenancy in common doesn't have right of survivorship. So, if one of the co-owners dies, his/her interest passes to an heir(s), not the surviving co-owners. When this happens, probate court is required.
Take-out loan
A long-term loan taken out upon completion of a new building.
Take-out loans work together with construction loans. Here is how it works: A land developer gets a construction loan to build a cluster of homes. Then when all the homes are ready to sell, a lender offers a buyer a take-out loan to purchase one of the new homes. The builder, now taking on the role as seller, will then use part or all of the money from the sale towards paying off the construction loan. If you plan to build your own home, you can also pay off the construction loan using a take-out loan. Take-out loans are also called permanent loans.
Example: How does a builder pay off a construction loan?
The builder gets a $1 million construction loan to put up ten homes. The builder then puts up each home for sale at $300,000. The buyer gets a take-out loan for $300,000 to buy one of these brand new homes. For every home that the builder sells, the builder pays $100,000 towards the construction loan and pockets $200,000 as profit.
Take-out loans work together with construction loans. Here is how it works: A land developer gets a construction loan to build a cluster of homes. Then when all the homes are ready to sell, a lender offers a buyer a take-out loan to purchase one of the new homes. The builder, now taking on the role as seller, will then use part or all of the money from the sale towards paying off the construction loan. If you plan to build your own home, you can also pay off the construction loan using a take-out loan. Take-out loans are also called permanent loans.
Example: How does a builder pay off a construction loan?
The builder gets a $1 million construction loan to put up ten homes. The builder then puts up each home for sale at $300,000. The buyer gets a take-out loan for $300,000 to buy one of these brand new homes. For every home that the builder sells, the builder pays $100,000 towards the construction loan and pockets $200,000 as profit.
Sweat equity
A program that gives a buyer part or all of the money for a down payment in exchange for hours of labor helping to build the home.
Sweat equity allows you strike a deal with a homebuilder to exchange hours of hard labor for 5% to 10% of your down payment. Depending on your skill set, you can do a range of construction jobs such as sand and paint walls, nail down floorboards and fit bathroom tiles.
Lenders find sweat equity programs risky because buyers often don't follow through on the amount of work required.
Sweat equity allows you strike a deal with a homebuilder to exchange hours of hard labor for 5% to 10% of your down payment. Depending on your skill set, you can do a range of construction jobs such as sand and paint walls, nail down floorboards and fit bathroom tiles.
Lenders find sweat equity programs risky because buyers often don't follow through on the amount of work required.
Super jumbo loan
Any mortgage for $1 million or more.
Though not very common, lenders do provide loans for $1 million or more. A millionaire, for example, might take out a mortgage solely to benefit from the tax write-offs.
Though not very common, lenders do provide loans for $1 million or more. A millionaire, for example, might take out a mortgage solely to benefit from the tax write-offs.
Secondary market
Companies that buy groups of loans from lenders and then sell them to other lenders and investors.
The secondary market allows lenders to get more money in order to offer more loans.
Three federally-charted agencies are important in keeping a steady flow of cash available for loans: Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae).
In general, Fannie Mae and Freddie Mac buy and sell loans, and Ginnie Mae issues mortgage-backed securities, which lenders sell to investors.
The secondary market allows lenders to get more money in order to offer more loans.
Three federally-charted agencies are important in keeping a steady flow of cash available for loans: Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae).
In general, Fannie Mae and Freddie Mac buy and sell loans, and Ginnie Mae issues mortgage-backed securities, which lenders sell to investors.
Seasonal income
Any income that you receive on a cyclical basis.
Here are a few examples of seasonal income:
(1) you’re not a full-time accountant, but you make money preparing income taxes during tax season, from February to April
(2) you work on a farm only during the spring as a strawberry picker. If you can prove that you have received a seasonal income for two years in a row and it is likely to continue, you can cite it as a source of income when applying for a loan to buy a home.
Here are a few examples of seasonal income:
(1) you’re not a full-time accountant, but you make money preparing income taxes during tax season, from February to April
(2) you work on a farm only during the spring as a strawberry picker. If you can prove that you have received a seasonal income for two years in a row and it is likely to continue, you can cite it as a source of income when applying for a loan to buy a home.
Sales comparable
A recent sale of a property that is used to estimate the value of a similar property.
Generally referred to as comps. Comps come in handy when you are trying to set the best sale price on your home, they provide a good reference point, so you accurately price your home's value. Appraisers, certified professionals who estimate the fair market value on homes, also use comps to help them evaluate properties.
When attempting to set a price, you should use comps that were sold in the last six months and are similar to your home in age, style, size, condition and location. Real estate agents also have easy access to comps via an online network. Keep in mind that other factors, such as market conditions also affect a home's selling price.
Generally referred to as comps. Comps come in handy when you are trying to set the best sale price on your home, they provide a good reference point, so you accurately price your home's value. Appraisers, certified professionals who estimate the fair market value on homes, also use comps to help them evaluate properties.
When attempting to set a price, you should use comps that were sold in the last six months and are similar to your home in age, style, size, condition and location. Real estate agents also have easy access to comps via an online network. Keep in mind that other factors, such as market conditions also affect a home's selling price.
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