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hazard
insurance
Insurance coverage that in the event of
physical damage to a property from fire, wind, vandalism, or other
hazards.
Home Equity Conversion
Mortgage (HECM)
Usually referred to as a reverse
annuity mortgage, what makes this type of mortgage unique is that
instead of making payments to a lender, the lender makes payments to
you. It enables older home owners to convert the equity they have in
their homes into cash, usually in the form of monthly payments.
Unlike traditional home equity loans, a borrower does not qualify on
the basis of income but on the value of his or her home. In
addition, the loan does not have to be repaid until the borrower no
longer occupies the property.
home equity
line of credit
A mortgage loan, usually in second
position, that allows the borrower to obtain cash drawn against the
equity of his home, up to a predetermined
amount.
home
inspection
A thorough inspection by a professional
that evaluates the structural and mechanical condition of a
property. A satisfactory home inspection is often included as a
contingency by the purchaser.
homeowners'
association
A nonprofit association that manages the
common areas of a planned unit development (PUD) or condominium
project. In a condominium project, it has no ownership interest in
the common elements. In a PUD project, it holds title to the common
elements.
homeowner's
insurance
An insurance policy that combines personal
liability insurance and hazard
insurance coverage for a dwelling and its contents.
homeowner's
warranty
A type of insurance often purchased by
homebuyers that will cover repairs to certain items, such as heating
or air conditioning, should they break down within the coverage
period. The buyer often requests the seller to pay for this coverage
as a condition of the sale, but either party can
pay.
HUD median
income
Median family income for a particular county
or metropolitan statistical area (MSA), as estimated by the
Department of Housing and Urban Development
(HUD).
HUD-1
settlement statement
A document that provides an
itemized listing of the funds that were paid at closing. Items that
appear on the statement include real estate commissions, loan fees,
points, and initial escrow (impound) amounts. Each type of expense
goes on a specific numbered line on the sheet. The totals at the
bottom of the HUD-1 statement define the seller's net proceeds and
the buyer's net payment at closing. It is called a HUD1 because the
form is printed by the Department of Housing and Urban Development
(HUD). The HUD1 statement is also known as the "closing statement"
or "settlement sheet."
joint
tenancy
A form of ownership or taking title to
property which means each party owns the whole property and that
ownership is not separate. In the event of the death of one party,
the survivor owns the property in its entirety.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judgment
A
decision made by a court of law. In judgments that require the
repayment of a debt, the court may place a lien against the debtor's
real property as collateral for the judgment's creditor.
judicial
foreclosure
A type of foreclosure proceeding used in
some states that is handled as a civil lawsuit and conducted
entirely under the auspices of a court. Other states use
non-judicial foreclosure.
jumbo
loan jumbo
loan
A loan that exceeds Fannie Mae’s and Freddie
Mac’s loan limits, currently at $227,150. Also called a
nonconforming loan. Freddie Mac and Fannie Mae loans are referred to
as conforming loans.
late
charge
The penalty a borrower must pay when a
payment is made a stated number of days. On a first trust deed or
mortgage, this is usually fifteen days.
lease lease
A written
agreement between the property owner and a tenant that stipulates
the payment and conditions under which the tenant may possess the
real estate for a specified period of time.
leasehold estate
A way of holding title to a property wherein
the mortgagor does not actually own the property but rather has a
recorded long-term lease on it.
lease option
An alternative financing option that allows home buyers to
lease a home with an option to buy. Each month's rent payment may
consist of not only the rent, but an additional amount which can be
applied toward the down payment on an already specified price.
legal
description
A property description, recognized by
law, that is sufficient to locate and identify the property without
oral testimony.
lender
A
term which can refer to the institution making the loan or to the
individual representing the firm. For example, loan officers are
often referred to as "lenders."
liabilities
A person's financial
obligations. Liabilities include long-term and short-term debt, as well as any other amounts that
are owed to others.
liability
insurance
liability
insurance
Insurance coverage that offers protection
against claims alleging that a property owner's negligence or
inappropriate action resulted in bodily injury or property damage to
another party. It is usually part of a homeowner’s insurance
policy.
lien
A legal claim
against a property that must be paid off when the property is sold.
A mortgage or first trust deed is considered a
lien.
life cap
For
an adjustable-rate mortgage (ARM), a limit on the amount that the interest
rate can increase or decrease over the life of the
mortgage.
line of
credit
An agreement by a commercial bank or other
financial institution to extend credit up to a certain amount for a
certain time to a specified borrower.
liquid
asset
A cash asset or an asset that is easily
converted into cash.
loan
A sum of
borrowed money (principal) that is generally repaid with interest.
loan
officer
Also referred to by a variety of other
terms, such as lender, loan representative, loan "rep," account
executive, and others. The loan officer serves several functions and
has various responsibilities: they solicit loans, they are the
representative of the lending institution, and they represent the
borrower to the lending institution.
loan
origination
How a lender refers to the process of
obtaining new loans.
loan
servicing
After you obtain a loan, the company you
make the payments to is "servicing" your loan. They process
payments, send statements, manage the escrow/impound account,
provide collection efforts on delinquent loans, ensure that
insurance and property taxes are made on the property, handle
pay-offs and assumptions, and provide a variety of other
services.
loan-to-value (LTV)
The percentage relationship between the amount
of the loan and the appraised value or sales price (whichever is
lower).
lock-in
An
agreement in which the lender guarantees a specified interest rate
for a certain amount of time at a certain
cost.
lock-in
period
The time period during which the lender has
guaranteed an interest rate to a borrower.
margin
The
difference between the interest rate and the index on an adjustable
rate mortgage. The margin remains stable over the life of the loan.
It is the index which moves up and down.
maturity maturity
The
date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable.
merged credit
report
A credit report which reports the raw data
pulled from two or more of the major credit repositories. Contrast
with a Residential Mortgage Credit Report (RMCR) or a standard
factual credit report.
modification modification
Occasionally, a
lender will agree to modify the terms of your mortgage without
requiring you t refinance. If any changes are made, it is called a
modification.
mortgage mortgage
A
legal document that pledges a property to the lender as security for
payment of a debt. Instead of mortgages, some states use First Trust
Deeds.
mortgage
banker mortgage
banker
For a more complete discussion of mortgage
banker, see "Types of Lenders." A mortgage banker is generally
assumed to originate and fund their own loans, which are then sold
on the secondary market, usually to Fannie Mae, Freddie Mac, or
Ginnie Mae. However, firms rather loosely apply this term to
themselves, whether they are true mortgage bankers or simply
mortgage brokers or correspondents.
mortgage
broker mortgage
broker
A mortgage company that originates loans,
then places those loans with a variety of other lending institutions
with whom they usually have pre-established relationships.
mortgagee mortgagee
The
lender in a mortgage agreement.
mortgage
insurance (MI) mortgage
insurance (MI)
Insurance that covers the lender
against some of the losses incurred as a result of a default on a
home loan. Often mistakenly referred to as PMI, which is actually
the name of one of the larger mortgage insurers. Mortgage insurance
is usually required in one form or another on all loans that have a
loan-to-value higher than eighty percent. Mortgages above 80% LTV
that call themselves "No MI" are usually a made at a higher interest
rate. Instead of the borrower paying the mortgage insurance premiums
directly, they pay a higher interest rate to the lender, which then
pays the mortgage insurance themselves. Also, FHA loans and certain
first-time homebuyer programs require mortgage insurance regardless
of the loan-to-value.
mortgage insurance premium
(MIP) mortgage insurance premium
(MIP)
The amount paid by a mortgagor for mortgage
insurance, either to a government agency such as the Federal Housing
Administration (FHA) or to a private mortgage insurance (MI)
company.
mortgage life and
disability insurance mortgage life and
disability insurance
A type of term life insurance
often bought by borrowers. The amount of coverage decreases as the
principal balance declines. Some policies also cover the borrower in
the event of disability. In the event that the borrower dies while
the policy is in force, the debt is automatically satisfied by
insurance proceeds. In the case of disability insurance, the
insurance will make the mortgage payment for a specified amount of
time during the disability. Be careful to read the terms of
coverage, however, because often the coverage does not start
immediately upon the disability, but after a specified period,
sometime forty-five days.
mortgagor mortgagor
The
borrower in a mortgage agreement.
multi-dwelling units
Properties that provide separate housing units
for more than one family, although they secure only a single
mortgage.
negative
amortization negative
amortization
Some adjustable rate mortgages allow
the interest rate to fluctuate independently of a required minimum
payment. If a borrower makes the minimum payment it may not cover
all of the interest that would normally be due at the current
interest rate. In essence, the borrower is deferring the interest
payment, which is why this is called "deferred interest." The
deferred interest is added to the balance of the loan and the loan
balance grows larger instead of smaller, which is called negative
amortization.
no cash-out
refinance no cash-out
refinance
A refinance transaction which is not
intended to put cash in the hand of the borrower. Instead, the new
balance is calculated to cover the balance due on the current loan
and any costs associated with obtaining the new mortgage. Often
referred to as a "rate and term refinance."
no-cost
loan
Many lenders offer loans that you can obtain at
"no cost." You should inquire whether this means there are no
"lender" costs associated with the loan, or if it also covers the
other costs you would normally have in a purchase or refinance
transactions, such as title insurance, escrow fees, settlement fees,
appraisal, recording fees, notary fees, and others. These are fees
and costs which may be associated with buying a home or obtaining a
loan, but not charged directly by the lender. Keep in mind that,
like a "no-point" loan, the interest rate will be higher than if you
obtain a loan that has costs associated with
it.
note
A
legal document that obligates a borrower to repay a mortgage loan at
a stated interest rate during a specified period of
time.
note
rate note
rate
The interest rate stated on a mortgage
note.
no-cost
loan
Almost all lenders offer loans at "no points."
You will find the interest rate on a "no points" loan is
approximately a quarter percent higher than on a loan where you pay
one point.
notice of default
A
formal written notice to a borrower that a default has occurred and
that legal action may be taken..
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