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banner2011 Glossary of Common Real Estate Terms

Adjustable Rate Mortgage (ARM)
A loan on which the monthly payments will increase or decrease over time based on the changes in its interest rate index. Commonly used indices include 11th District Cost of Funds, one-year T-Note and six-month T-Bill. ARM's are typically adjusted at six-month or one-year intervals.

The gradual repayment of a mortgage through monthly (i.e. installment) payments. Early payments are applied mostly toward interest. As time goes on, payments go increasingly toward reducing the loan's principal balance.

Annual Percentage Rate
The annual cost of a mortgage including interest, loan fees and other costs stated as a percentage of the loan amount.

Appraised Value
An opinion of the market value of a home expressed by a real estate appraiser. Also referred to an "Appraisal".

Closing Costs
Expenses in addition to the price of the home incurred by buyers and sellers when a home is sold. Common closing costs include escrow fees, title insurance fees, document recording fees and real estate commissions.

Conventional Mortgage
A loan not guaranteed, insured or made by the federal or state government.

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Debt-To-Income (DTI) Ratio

The ratio of monthly debt payments to monthly gross income. Lenders use a housing DTI ratio (house payments divided by monthly income) and a total DTI ratio (total debt including the house payment divided by monthly income) to determine whether a borrower's income qualifies him or her for a mortgage.

A legal document conveying ownership of property.

Down Payment
The portion of a home's purchase price the buyer pays in cash.

Earnest Money
The deposit given by a buyer to a seller to show the buyer is serious about purchasing a home. Earnest money usually is refundable to home buyers in the event a contingency of the sales contract cannot be met.

The difference between a home's value and the mortgage amount still owing on it.

The holding of documents and money by a neutral third party prior to closing.

Escrow Account
An account established by a lender to collect a borrower's property tax and insurance payments. Impound accounts are normally required on mortgages with down payments of 10 percent or less.

Contact Dean Shiffler at CBBurnet Home Loans for an interest rate update.
Fannie Mae and Freddie Mac

Respectively, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Government-sponsored, but privately owned entities that convert mortgages bought from lenders into securities which are bought by investors. As such, they represent the chief secondary market for mortgages.

Fixed-Rate Mortgage (FRA)
A loan on which the interest rate and monthly payment do not change.

Generally and commonly, it is the failure to pay to a mortgage holder, and the creditor repossesses the property and sells it to cover the debt. Should its sale price not cover the entire loan amount, a creditor may file a claim for deficiency judgment. There are numerous types of foreclosure, each with specific terms detailed in the loan document.

Hazard Insurance
Policies that compensate owners for damage to property from fire, wind, and other hazards.

Home Equity Loan
A secured debt that uses a home as collateral. It is based on the difference between the amount owed on a home and its current appraised value, or the property's equity. Sometimes referred to as a Second Mortgage, additional costs also may include appraisals, closing costs, points, transaction and maintenance fees. The limits and repayment terms on the lender credit lines vary greatly.

Homeowners Warranty
A policy that covers certain repairs (e.g., plumbing or heating) of a newly purchased home for a certain period of time.

Home Inspection
A home inspection is an objective visual examination of the current condition of the physical structure and systems of a house. Its purpose is to identify components and systems that may need major repair, or replacement, or prevent your ability to finance, legally occupy, or insure the home. A typical inspection takes about three hours, and you need not be present. It is neither an appraisal, nor a municipal inspection.

Joint Tenants
Right of Survivorship for property with multiple owners: If one property owner dies, the property is assigned to the surviving party automatically. See also Tenants in Common.

Loan-to-Value (LTV) ratio
The ratio of the amount of money owed on a home to the home's value. The LTV ratio for a $500,000 home financed with a $450,000 mortgage would be 90 percent, for example.

Mortgage Banker
A company that originates mortgages for sale into the secondary mortgage market (see FANNIE MAE and FREDDIE MAC).

Mortgage Broker
A company that, for a fee, matches borrowers and lenders.

Mortgage Deed
Companion legal document to a promissory note recorded by the county enumerating the lender's procedure to enforce loan terms.

Mortgage Interest Deduction
The ability of mortgage borrowers to deduct the interest paid on a home loan for purposes of federal and state income taxes.

Promissory note to lender details terms of repayment of amount borrowed.

Origination Fee
A fee charged by a lender for making a mortgage.

Principal, Interest, Taxes and Insurance. The primary components of a mortgage payment.

One percent of the mortgage amount. Points are charged by lenders to increase their return on the mortgage. Typically, lenders charge from zero to two points. Loan points are tax-deductible.

The loan amount borrowed, or still owing.

Private Mortgage Insurance (PMI)
Policies issued by private companies to insure lenders against a loss should a borrower default on a mortgage. PMI is common when the down payment is less than twenty percent.

Rose Hart will help you buy and sell a home in a challenging market.

A real estate broker or agent who, as a member of the local board of Realtors, a state association of Realtors and the National Association of Realtors, adheres to high standards of professionalism and a strict code of ethics.

Second Mortgage
A mortgage in addition to, and subordinate to, an already mortgaged property. See also Home Equity Loan.

Seller Financing
A financing agreement in which a seller provides all or part of the financing needed by the home buyer.

Sheriff's Sale
A court ordered public auction to: 1) Liquidate a mortgage foreclosure, 2) separate the property of Joint Tenants who disagree on separation terms, 3) sell the property of a probated estate.

Short Sale
Sale of a foreclosed property for less than the amount owed.

Tenants in Common
Right of Survivorship for property owned by one or more parties: If one property owner dies, their property is assigned to the deceased's heirs automatically; not the other property owner. See also Joint Tenants.

A legal document establishing the right of ownership of a property.

Title Insurance
A policy to protect the buyer and lender against losses arising from disputes over the ownership of a property.

The process of evaluating a loan application to determine if it meets the lender's standards.

Underwater Mortgage
The balance of the loan amount is greater than the property's current appraised value.

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