Glossary of Mortgage Terms
Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate may vary and is adjusted periodically based on a pre-selected index sometimes known as the variable rate mortgage. These types of loans can be cheaper initially, but can be unpredictable.
Appraiser: A qualified individual who uses his or her experience and knowledge to determine the value of a home and prepare the appraisal estimate.
Balloon (payment) Mortgage: Usually a short-term fixed –rate mortgage that involves small payments for a certain period of time, and one large payment for the remaining amount of the principal at a time specified in the contract.
Blanket Mortgage: A single mortgage securing several pieces of real estate.
Borrower: A person who has been approved to receive a loan and is then obligated to repay it, plus any additional fees according to the loan terms.
Closing Costs: Are all the different charges that you’ll be required to pay at or before the closing. They include charges related to the purchase of your home, and charges related to getting a mortgage. Depending on the specific circumstances of your particular loan, closing costs typically run between three and five percent of the loan amount.
Consumer Loan Act (CLA): This authorizes higher interest rates so as to ensure credit availability to borrowers with higher than average credit risks that might otherwise be unable to obtain loans.
Consumer Protection Act (CPA): This prohibits unfair and deceptive acts or practices in trade or commerce.
Conventional Loan: A mortgage not insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA). This mortgage is not a subprime loan.
Credit Report: A consumer credit report is a document that contains a record of an individual’s credit payment history. The report contains four types of information: identifying information, credit information, public record information and inquiries.
Escrow Agent: The person or organization having a fiduciary responsibility to both the buyer and seller to see that the terms of the purchase/sale (or loan) are carried out. Often referred to as “closing” the loan, title companies, attorneys and even the lender may serve in this role.
Escrow Agent Registration Act (EARA): This requires strict handling of closing documents and the funds necessary for closing your loan.
Equal Credit Opportunity Act (ECOA): This prohibits discrimination in lending. ECOA prohibits any creditor from discriminating against an applicant with respect to any aspect of a credit transaction based on sex, race, color, religion, national origin, disability or parental status.
Fair Credit Reporting Act (FCRA): This stipulates the requirements of users of credit reports and disclosure to consumers.
Fair Housing Act: This provides protection against housing-related discriminatory practices based on sex, race, color, religion, national origin, disability or parental status.
FHA Loan: A loan insured by the Federal Housing Administration, open to all qualified home purchasers. This program allows buyers who might not otherwise qualify for a home loan to obtain one because the risk is removed from the lender by the FHA. While there are limits to the size of the FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country.
Fixed-Rated Mortgage: A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments precisely predictable, but it’s not always the cheapest alternative.
Good Faith Estimate (GFE): The Good Faith Estimate provides you with estimates of the charges you are likely to pay at closing.
Home Ownership and Equity Protection Act (HOEPA): Requires additional disclosures for certain types of high cost loans.
Inspector: A designated agent who inspects and documents the physical condition of the property as described and verified in an inspection certificate.
Lender: A credit union, bank or mortgage lender: Any person or entity loaning funds, which are to be repaid.
Listing Agent: The real estate agent who represents the seller or buyer, and works to find a listing.
Mortgage Broker: Any person who for compensation or gain, or in the expectation of compensation or gain (a) makes a residential mortgage loan or assists a person in obtaining or applying to obtain a residential mortgage loan, or (b) holds himself or herself out as being able to make a residential mortgage loan or assist a person in obtaining or applying to obtain a residential mortgage loan.
Mortgage Brokers Practices Act (MBPA): This is designed to promote honest and fair dealings and to preserve public confidence in the lending industry by preventing fraudulent practices.
Pre-Payment Penalty: A penalty that you may have to pay if you pay the loan off early.
Real Estate Settlement Procedures Act (RESPA): This prohibits cost increasing abusive practices such as kickbacks and referral fees, and requires advance disclosure of settlement service costs.
Reverse Mortgage: A loan where a lender pays you a monthly advance, a line of credit, or a combination of all three while you continue to live in your home. The amount you’re eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging. Funds you receive from a reverse mortgage may be used for any purpose.
Selling Agent: The real estate agent obtaining the buyer rather than listing the property. The listing and selling agent may be the same person or company.
Subprime Lender/Loan: A lender that changes a finance rate that is higher than the “prime” or normal rate offered by conventional lenders. Typically, it’s a lender that approves loans for individuals who may have poor credit history or no credit history, or who have other characteristics that justify a higher rate. Keep in mind: because you’re approved for a subprime loan doesn’t mean that you cannot qualify for a conventional loan from another lender. Be sure to explore your options.
Title Company/Title Insurance Company: A company which issues insurance regarding title to real property.
Truth in Lending Act (TILA): This requires disclosure of the cost of credit to the consumer and the terms of repayment.
Truth in Lending Disclosure Statement: This is neither a contract nor a commitment to lend. It is to show you the estimated total costs of borrowing, the expected payment amounts over the life of the loan, and other significant features of your loan.
Uniform Settlement Statement (HUD-1): This is provided to the borrower upon the closing of the loan and sets forth the final settlement charges paid both to and by the borrower.
|
|
