|
N | O | P | Q | R | S
IMPORTANT NOTICE REGARDING THESE MORTGAGE TERMS AND MORTGAGE DEFINITIONS
The mortgage terms and mortgage definitions that follow are meant to give simple, informal meanings for mortgage words and mortgage phrases you may see on this mortgage Web site that may be unfamiliar to you. The specific meaning of a mortgage term or mortgage phrase will depend on where and how it is used. The mortgage terms and mortgage definitions that follow have no binding effect for purposes of any contracts or other transactions. We offer mortgage terms and mortgage definitions here in the hope they will provide helpful basic information.
Negative Amortization
A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.
No-doc or low-doc loan
These no-documentation or low-documentation loans are designed for the entrepreneur or self-employed, for recent immigrants with money in foreign countries or for borrowers who cannot or choose not to reveal information about their incomes. You need a substantial down payment, excellent credit history and will usually pay a higher interest rate.
Non-conforming loan
Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Non-conforming loans usually incur a rate and origination fee premium. The current non-conforming loan limit is $359,650 and above.
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Notary Public
One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages.
Notice of default
Written notice to a borrower that a default has occurred and that legal action may be taken.
Open House
When the seller's real estate agent opens the seller's house to the public. You do not need a real estate agent to attend an open house.
Open End Mortgage
A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.
Origination Fee
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
Oral Contract
A verbal agreement; one which is not reduced to writing. Normally Unenforceable.
Owner financing
A transaction in which the seller of a house provides all or part of the financing. Sellers may provide financing because they need to sell the property right away or they are having difficulty selling the house and want to provide financing as an incentive to a buyer.
Owner of Record
The person named in the public record as the owner of a property or mortgage.
Owner Occupant
When the borrower plans to reside in the property, more favorable mortgage terms may be available because lenders feel these people are less likely to default on the mortgage.
Partial Release
A release of a portion of property covered by a mortgage. A sub divider will obtain a partial release as each lot is sold, upon payment of an agreed upon amount. In areas where the sub divider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveyance" is the document used.
Periodic Payment Cap
For an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate Cap
The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable-rate mortgage (ARM) where the interest rate and principal fluctuate independently of one another.
Permanent Loan or Mortgage
Also called permanent financing. This mortgage loan covers most costs of a building project; development costs, interim loans, construction loans, financing expenses, marketing, administrative and legal costs. It differs from construction or interim loans because the money from the loan is not received by the borrower until the project is constructed and ready for occupancy. It is a longer term loan of at least 5 years and generally 30 years for residential property.
Permit
License: The act of giving a formal (usually written) authorization.
PITI
Stands for principal, interest, taxes, and insurance, which are the usual components of a monthly mortgage payment.
PITI Reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months (usually three).
Planned Unit Development (PUD)
A one to four family owner unit situated upon a parcel of land which also includes common property for the benefit and use of the individual PUD owners. The common property and elements thereon are maintained and owned by a homeowner’s association, corporation or trust. The association requires automatic membership of each individual unit owner, with mandatory assessments. The common property enhances the enjoyment of the premises and the value of the property securing the PUD unit mortgage.
Plat
Also called "plat map." A map dividing a parcel of land into lots, as in a subdivision. A plat book contains the plat maps for a given area.
Plat Book
A public record containing maps of land and showing the division of the land into streets, blocks, and lots indicating the measurements of the individual parcels.
Points
Points are broken out on the site for Discount and Origination. The definitions for each are as follows: Discount Points = Interest Charges paid up-front when a borrower closes a loan. A point is equal to 1 percent of the loan amount (e.g. 1.5 points on a $100,000 mortgage would cost the borrower $1,500). Generally, by paying more points at closing, the borrower reduces the interest rate of his loan and thus future monthly payments. Origination Points = A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.
Portfolio Loan
A portfolio loan enables the borrower to obtain a mortgage loan when he or she does not meet a mortgage company or bank's investor guidelines. We can help you with situations such as being newly self-employed, recent bankruptcy, slow payments on your car, credit card, or even your mortgage loan.
Power of Attorney
Legal document authorizing one person to act on behalf of another.
Prepaid Interest
Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest.
Pre-Approval
This process goes a step further than pre-qualification. It means the lender has contacted the borrower's employer, bank and other places to verify all claims of earnings and assets. In return, the borrower receives a letter stating the lender is willing to grant a mortgage for a specified amount, within a limited period of time.
Pre-Payment
A payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a "pre-payment in full"; otherwise, it is a "partial pre-payment."
Pre-Payment Penalty
A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment, or a specified number of months interest.
Prepayment Plan
Similar to a biweekly mortgage, but operated by a third party. In it, the borrower pays to the third party half the monthly mortgage payment every two weeks. At the end of the year, the plan operators typically take the extra money that results from the process and send lump sum payments to the participants' lenders. Instead of 12 monthly payments of $665, or $7,980 a year, on the 30-year mortgage, the borrower would make 26 biweekly payments of $332.50, or pay $8,645 annually. As a result, total interest would shrink by $34,130 and the loan term would shorten to less than 24 years.
Pre-Qualification
The process of determining how much money a prospective homebuyer will be eligible to borrow before he or she applies for a loan. Often confused with Pre-Approved.
Primary Mortgage Market
Lenders making mortgage loans directly to borrower's, such as savings and loan association, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.
Prime Rate
The interest rate banks charge their most creditworthy commercial customers. Banks use the prime as a base to set rates for credit cards, home-equity loans and other loans, including loans to small and medium-size businesses. The rate is determined by general trends in interest rates. As rates decline, the prime rate will also move lower. However, it doesn't typically move on a day-by-day basis. Prime rate changes are usually led by major money center banks. Normally, the prime rate will move in steps and then remain constant until a major rate change has been made. This usually happens when the Federal Reserve makes major changes in monetary policy.
Principal
The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.
Private Mortgage Insurance (PMI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent. (See Also Mortgage Insurance)
Promissory Note
A legal document describing the contractual terms under which a borrower agrees to repay a sum of money to a lender
Property Tax
The primary source of revenue for local governments. The property tax is a tax on the assessed value of property. The tax rate times the assessed value owned by a taxpayer is what the taxpayer owes to the government; the tax rate times the total assessed value of the government is the total tax levy. The state government also collects a very small part of the property tax, at a rate of one cent per $100 assessed value. The property tax is administered on the state level by the State Board of Tax Commissioners, and on the local level by the county and township assessors, the county auditor and the county treasurer.
Quit Claim Deed
A quit claim deed conveys only the grantor’s rights in the property without disclosing the nature of the rights and with no warranties of ownership. A deed by which the grantor releases to the grantee any interest or title in the property which the grantor possesses. Example – In the case of a divorce. If Mrs. is granted the house in the settlement Mr. will sign a quit claim deed removing him from title to the house. Leaving Mrs. the only vested owner.
Radon
A radioactive gas found in some homes that in sufficient concentrations can cause health problems. Many home inspections check for radon.
Rate Lock
A commitment issued by a lender to a home buyer or to the mortgage broker guaranteeing a specific interest rate for a specified amount of time.
(See also lock
or lock in)
Realtor
A specific designation given to members of real estate firms affiliated with the National Association of Realtors (NAR) who are trained and licensed to assist clients in buying and selling real estate.
Real Estate Broker
A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission and who may be responsible for supervising real estate agents in their employ.
Real Estate Settlement Procedure Act (RESPA)
The Real Estate Settlement Procedures Act is a federal law covering most mortgage loans made on one- to four-family residential property which requires lenders to provide loan applicants with pertinent information regarding loan terms and fees so that the applicants may make an informed decision when choosing financing. The provisions of the act are implemented by the Department of Housing and Urban Development as Regulation X.
Recast
To recalculate the monthly payment on the ARM so that the loan will fully amortize during the original term of the loan. Recasting is most commonly used with negatively amortizing ARMs and usually occurs when the negative amortization cap has been reached at a predetermined interval (often 5 years).
Reconveyance
The transfer of the title of land from one person to the immediately preceding owner. This instrument is commonly used in California when the performance or debt is satisfied under a deed of trust and the trustee conveys the title he has held back to the owner.
Recording
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property.
Reliction
An increase in the amount of land that occurs when a river or sea permanently withdraws.
Rescission
The cancellation contract by the operation of a law or by mutual consent. In some circumstances, borrowers have the right to cancel a transaction within three business days after closing.
Restrictive Covenant
A clause in a deed that restricts the use of property for a period of time.
Regulation Z (Reg Z)
A regulation written by the Federal Reserve Board to implement the Truth-in-Lending Act. It is a comprehensive regulation, containing full restatement of all the requirements of the act and is enforced by the Federal Trade Commission (FTC). Both new real estate loans and assumptions of existing loans come under Regulation Z’s purview.
Reverse Mortgage
Unlike an ordinary mortgage, which involves payments by the borrower to the lender, a reverse mortgage involves payments by the lender to the borrower. It is an arrangement whereby homeowners get cash (usually in the form of monthly payments or a lump sum) in return for a mortgage on their home, which is used as security against the loan. This is a strategy sometimes used by retired homeowners who need to supplement their income. A reverse mortgage is one way of tapping into the value of a home.
Revocable Trust
A type of trust that either may be changed or terminated by the grantor during his or her lifetime.
Roll-in loans
A refinance loan that rolls any closing costs or fees into the loan. These programs best serve people who have a reasonable amount of equity, want to reduce their overall interest expense and plan to stay in their homes. Most refinance programs also cap the allowable LTV at 97 percent, which means some borrowers won't have the option of rolling their costs in no matter what.
Rollover Loan
A loan that is amortized over a long period of time (e.g. 30 yrs) but the interest rate is fixed for a short period (e.g. 5 yrs). The loan may be extended or rolled over, at the end of the shorter term, based on the terms of the loan.
Rural Housing Service (RHS)
This agency of the U.S. Department of Agriculture provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. It offers low-interest-rate loans with no down payment to borrowers with low-to-moderate incomes who live in rural areas or small towns.
Sale Agreement
A written contract signed by the buyer and the seller of a house stating the terms and conditions under which the property will be sold.
Satisfaction of Mortgage
A recorded document issued by a lender verifying full repayment of a mortgage loan
Secondary Mortgage Market
A system whereby lenders and investors buy existing mortgage or mortgage-backed securities and in doing so provide greater availability of funds for additional mortgage lending by banks, mortgage bankers, and savings and loan associations.
Second Home
A seasonally occupied
dwelling that is not the primary residence of the owner.
Such residences are usually found in areas with
substantial opportunities for recreation or tourist
activity.
Second Mortgage
A mortgage that has a lien position subordinate to the first mortgage.
Security
Property that your creditor can claim in case you default on your obligation; "bankers are reluctant to lend without good security"
Servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Settlement Statement
A statement prepared by broker, escrow or lender giving a complete breakdown of the cost associated with a real estate transaction.
Special Assessment
Any special charge levied against real property for public improvements (e.g., sidewalks, streets, water and sewer, etc.) that benefit the assessed property.
Sheriff's Deed
A deed given at the sheriff's sale.
Single Family Housing (SFR)
A type of residential structure designed to include one dwelling. Example : Town houses, detached units.
Signature Guarantee
An assurance by a financial institution or other entity that a particular signature is valid. Typical guarantors include commercial banks, trust companies, savings and loan associations, or member firms of a national securities exchange.
Spec House
A home either currently under construction or one finished by a builder in which a Purchaser has yet to be found.
Standard Uniform Loan Application (Form 1003)
A standard loan application widely used in the mortgage industry.
Subdivision
The division of land into individual parcels.
Subordination
Occurs when a party agrees in writing that its claim on a property is inferior to the claim of another. For example, a second mortgage lender agrees to subordination when he agrees that the proceeds from the sale of a property will go first to pay off the first mortgage lender.
Subprime Mortgage
A mortgage granted to a borrower considered subprime, that is, a person with a less-than-perfect credit report. Subprime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.
Survey
A drawing or map the shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Sweat Equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash. sale-leaseback A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
|
