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Adjustable Rate
An interest rate that changes periodically in relation
to an index. Payments may increase or decrease.
Amortization
The calculation used to determine the amount of
equal principle and interest payments needed to
pay off a loan within a certain specified period
of time. Most first mortgages are amortized over
fifteen or thirty years.
Annual Percentage Rate (APR)
The total amount of the finance charge, including
interest, points, and all loan fees (i.e., escrow,
processing, etc.), calculated as a percent of the
borrowed amount and expressed as a yearly rate.
Application Fee
A fee that may be charged by the lender to cover
the costs of processing your loan application. It
is usually charged at the beginning of the application
process.
Appraisal
The professional examination of property for the
purpose of estimating its current market value.
Also, the written report of the same.
Appraisal Fee
The fee you pay to have a property appraised.
Balloon Payment
When monthly payments are not sufficient to amortize
the loan, there is a large, or balloon, payment
to be made in a lump sum when the loan term ends.
Sometimes the balloon payment is written into the
mortgage loan; such should be avoided.
Binder
Written evidence of insurance, which coverers a
limited time: to be replaced later with a permanent
policy.
Closing
The final procedure in a real estate transaction;
when documents are executed and/or recorded, title
is transferred from seller to buyer, funds are disbursed,
and the sale is completed.
Closing Costs
Buyer's and seller's expenses incidental to the
sale and purchase of real estate, such as title
fees, loan fees, etc.
Closing Statement
A statement prepared by attorney, broker, escrow
company, or lender, giving a complete itemization
of costs incurred in a real estate transaction.
A separate statement is prepared for the buyer and
seller.
Condominium
A structure of two or more units, the interior space
(including the wall coverings but not the wall)
of each unit being individually owned; the balance
of the structure and the land is owned in common
by all the unit owners.
Conveyance
Transfer of title. The document, such as a deed,
by which the title is officially transferred.
Credit Limit
The maximum amount that you can borrow under the
home equity plan.
Deed of Trust (or Trust Deed)
Used in place of a mortgage in some states. Title
is transferred to a trustee by the borrower, with
the lender as beneficiary, until the loan balance
has been paid.
Earnest Money
Deposit of money accompanying an offer to buy property,
to show good faith.
Escrow
The temporary holding by a third (neutral) party
of deposited funds pending completion of agreed
terms in a sale contract. In some states, all instruments
necessary to the sale are delivered to a third party
with instructions as to their use. The term "in
escrow" is used in some areas to refer to the time
from completion of sales contract to transfer of
title.
Escrow Account
An account held by the lender for payments of taxes,
insurance, and other periodic debts against a property.
The borrower pays a specific amount over and above
the monthly loan payment, and the lender pays the
bills with the accumulated funds. Some lenders require
an escrow account for certain types of financing.
Escrow Company
A company established to perform escrow services.
Equity
The difference between the fair market value (the
appraised value) of your home and your outstanding
mortgage balance.
Hazard Insurance
Insurance protection for the borrower and the lender
against the property loss due to fire, wind, or
natural hazards. Many lenders require payment of
the first year's premium as part of the closing
costs.
Home Equity Loan
A loan secured against your equity in the property.
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