Learning Center

Information at Your Fingertips...

The following information is provided by Louisiana Mortgage Associates and should be a significant help to you if you are getting ready to purchase a new home or refinance your present mortgage. These resources will provide you with the answers to many of the questions that you may have about home loans and related information. The "Glossary of Mortgage Terms" is one of the most extensive that you will find on the internet. Additional information can be found on our questions and answers page (Q's & A's). If you did not find what you were looking for on our website, please click here to let us know. Remember, we are the mortgage professionals for Louisiana and located in Lake Charles. Please let us do your next home loan.

Please Note: Our friendly staff of professionals are available to help you with all of your home loan and mortgage needs, Monday-Friday (8-5).

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Appraisal Information
  
Basic Appraisal Information
  
Basic Methods of Appraising
  
Reasons for Ordering an Appraisal
  
Appraisals and Actual Market Value
  
How to Help the Appraiser
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Basic Credit Information
  
Simplifying Credit Basics
  
How Credit Affects Interest Rates
  
How Credit Scoring Actually Works
  
Your Legal Rights & Credit Reports
  
How to Improve Your Credit
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Closing Cost Information
  
Various Closing Costs
  
Required Prepaid Amounts
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Credit Bureau Information
  
Your Payment History
  
Amounts Currently Owed
  
Length of Credit History
  
Newly Established Credit
  
Types of Credit Being Used
  
Understanding Your Score
  
Graph of Score Content
  
Credit Bureau Contact Info
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First Time Home Buyers
  
Deciding When to Buy Your First Home 

When you consider that it is time to stop renting and to buy your first home, you should first consider the following issues before making that all-important decision:

Generally speaking, the longer that you plan to remain in a residence, the more advantageous it is to own a home instead of continuing to pay rent.

Now is not the time to buy a home if you just had a nice increase in salary. Save the additional income for a year, or two, and use it for a down payment on a home. You'll find that you're much better off at that time.

Now would be a good time to purchase a home if you have just received a lump sum amount (from any source) that would make a suitable down payment on a home.

Current market conditions are favorable for buying a home if the price of a house is not more than renting for the next 20 years. If you were renting a home for $750 per month, your rental payments would total $180,000 in 20 years. Now would be a good time to buy if you could purchase a home of the same quality for less than $180,000, providing you had an available down payment. Call one of our mortgage specialists today to find out how to purchase a home with no out-of-pocket money.

Deciding in What Area to Buy 

The first step is to make a list of the criteria that is most important to you, the second step is to identify the neighborhood in which you would like to live, and finally focus on those neighborhoods that best meet your criteria. Carefully consider the following factors when you are researching a particular area to live in:

  • Inspect the neighborhood thoroughly to determine its amenities. 
  • Determine if the average price range of homes in the area fluctuates greatly. 
  • Find out if this area is in a flood zone or has the potential to flood. 
  • Determine how far this area is from local fire and police departments. 
  • Determine the commuting time from this area to your place of employment. 
  • Determine the distance from this area to a church that you would like to attend. 
  • If you have children, find out if there are other children in this area of similar age. 
  • If you have children, determine the quality of the schools they will be attending. 
  • Check with the local police department to determine the crimes rates for the area.
Making Sure That You Get What You Pay For 

When possibly making the largest investment of your life, it makes sense to remove as much of the risk as possible. This can be accomplished by taking sensible steps well before the property changes hands. Many issues can be easily resolved if they are addressed early in the purchase process. The following 4 items should be taken into account when purchasing a home:

Locate a reputable realtor to represent your interests. If you contact the realtor that has listed the property, their first responsibility will be to the seller. Click here to view a list of local realtors.

Have the home completely inspected, from top to bottom, by a licensed house inspector if this is a pre-owned home. As a matter of fact, this is a requirement of most lenders today and the cost for the inspection is usually the buyer's responsibility.

If a pre-owned home, have the home inspected for termites by a reputable pest inspector. You should receive a copy of the "Termite Certificate" which will be issued by the company that performed the inspection. This is also a requirement of all lenders and the cost is usually the responsibility of the seller.

Hire a real estate attorney to make sure that all documents are properly completed and filed. Most lenders and mortgage brokers have reputable attorneys available for this purpose and will be glad to do this for you.

Please Note: Our friendly staff of professionals are available to help you with all of your home loan and mortgage needs, Monday-Friday (8-5).
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Fixed vs Adjustable Rates
  
Fixed Rate Information
  
Adjustable Rate Information
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Glossary of Mortgage Terms
  

Acceleration
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Provision.

Acceptance
A buyer's or seller's agreement to enter into a contract and be bound by the terms of the offer.

Additional Principal Payment
A payment made by a borrower of more than the scheduled principal amount due, in order to reduce the outstanding balance on the loan, to save on interest over the life of the loan and/or pay off the loan early.

Adjustable Rate Mortgage (ARM)
A home loan that permits the lender to adjust its interest rate periodically during the life of the loan on the basis of changes in a specified financial index.

Adjustment Date
The date on which the interest rate changes for an adjustable rate mortgage (ARM).

Adjustment Period
The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM), typically 6 months or 1 year for most popular ARMs.

Affordability Analysis (Pre-Qualification)
A preliminary analysis of a borrower's ability to afford the purchase of a home. An affordability analysis takes into consideration factors such as income, liabilities, and available funds, along with the type of home loan, the likely taxes and insurance for the home, and the estimated closing costs.

Amenity
A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction, although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views, etc. Man-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization
The gradual repayment of a home loan by periodic installments.

Amortization Schedule
An amortization schedule shows the amount of each payment applied to interest and principal and the remaining balance after each payment is made.

Amortization Term (Period)
The amount of time it takes to pay off the loan. The amortization term is expressed as a number of months. For example, for a 30 year fixed rate loan, the amortization term is 360 months.

Amortize
To repay a loan with regular payments that cover both principal and interest.

Annual Percentage Rate (APR)
The effective cost of a home loan stated as a yearly rate taking into account such items as interest, mortgage insurance, most closing costs, discount points and loan origination fees. Disclosure of APR is required by the Truth-In-Lending Law.

Application (Form 1003)
A form to be completed by a home loan applicant with the lender's assistance to provide pertinent information about a prospective borrower's employment, income, assets, debts and other financial information, about the purpose of the home loan, and about the property securing the home loan.

Application Fee
A fee usually paid at the time an application is given to a lender for helping to complete and review an application. Some lenders collect fees for a property appraisal and a credit report, instead of an application fee, at the time of application.

Appraisal
A written analysis or opinion of the estimated value of a property prepared by a qualified appraiser.

Appraised Value
The dollar figure for a property's estimated fair market value, based on an appraiser's knowledge, experience, and analysis of the property and comparable properties near by.

Appraiser
A person qualified by education, training, and experience to estimate the value of real property.

Appreciation
An increase in the value of a property due to changes in market conditions or other causes. Inflation, increased demand, home improvement, and sweat equity are all causes of appreciation. The opposite of depreciation.

Assessed Value
The value used to determine property taxes, based on a public tax assessor's opinion.

Assessment
The amount of tax due to local government. May also refer to the amount due to local government or to common owners of a property (e.g., a homeowner's association) for a special payment to cover expenses for improvements or maintenance, such as new sewers or roads.

Assessment Rolls
A public record of the assessed value of property in the taxing jurisdiction.

Assessor
A public official who establishes the value of a property for taxation purposes.

Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment
The method of transferring a right or contract, such as the terms of a loan, from one person to another.

Assumable Loan
A home loan that allows a new purchaser of the home to take over (assume") the loan obligations of the seller when a home is sold."

Assumption
The buyer's acceptance of liability for the seller's existing home loan.

Assumption Clause
A provision in an assumable loan that allows a buyer to assume responsibility for the home loan from the seller. The loan does not need to be paid in full by the original borrower (seller) upon sale or transfer of the property.

Assumption Fee
The fee paid to a lender (usually by the buyer) for the lender's agreement to start collecting payment from the buyer instead of the original borrower (seller).

Balance Sheet
A financial statement that shows an individual's assets, liabilities, and net worth as of a specific date.

Balloon Loan/Mortgage
A loan that has level monthly payments that will amortize it over a stated term (e.g., 30 years) but requires a lump sum payment of the entire principal balance at the end of a shorter term (e.g., 10 years).

Balloon Payment
The final lump sum payment that is made at the end of the shorter term for a balloon loan and pays the loan in full.

Bankrupt
A person, firm, or corporation that is financially unable to pay debts when due. The debtor seeks relief through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must surrender control of all assets to a court appointed trustee.

Bankruptcy
A proceeding in a federal court in which a debtor, who is financially unable to pay debts when due, seeks relief to work out a payment schedule or erase debts.

Before-Tax Income
Income before taxes are deducted.

Beneficiary
The person designated to receive the income from a trust, estate, or a deed of trust.

Bill of Sale
A written document that transfers title to personal property from the seller to the buyer.

Binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

Biweekly Payment Loan
A loan that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30 year fixed rate loan, and they are usually drafted from the borrower's bank account. The result for the borrower is faster amortization leading to substantial interest savings from faster principal reduction.

Blanket Mortgage
A mortgage that is secured by a cooperative project, as opposed to the share loans on individual units with the project.

Bond
An interest bearing certificate of debt with a maturity date. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower (Mortgagor)
An individual who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Breach
A violation of terms of any legal obligation.

Break Even Point
The point at which total income equals total expenses.

Bridge Loan
A type of mortgage financing between the termination of one loan and the start of another loan. For example, a mortgage secured by the borrower's present home (which is usually up for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Broker
A person who is normally licensed by the state and who, for a commission or a fee, assists in negotiating a real estate transaction or negotiating the terms of a home loan.

Budget
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

Building Code
Local regulations that specify minimum structural requirements for design of, construction of, and materials used in a home or office building. Building codes are based on safety and health standards.

Buydown
A temporary buydown gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buydown is paid the same way but reduces the interest rate over the entire life of a home loan.

Buydown Account
An account in which funds are held so that they can be applied as part of the monthly loan payment as each payment comes due during the period that an interest rate buydown plan is in effect. For example, if a seller agrees to help reduce a buyer's monthly payment during the first year of a loan, the seller may put money in a buydown account which is then paid to the lender each month to reduce the buyer's monthly payment. This is more commonly done through a buydown paid directly to the lender at closing.

Call Option
A provision in a loan that gives the lender the right to accelerate the debt, and require for full payment of the loan immediately, at the end of a specified period or for a specified reason.

Cap
A provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or loan payments may increase or decrease. In upward rate markets, it protects the borrower from large increases in the interest rate or monthly payment.

Capital
1. Money used to create income, either as an investment in a business or an income property. 2. The money or property comprising the wealth owned or used by a person or business enterprise. 3. The accumulated wealth of a person or business. 4. The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure
The cost of an improvement made to extend the useful life of a property or to add to its value, such as adding a room. The cost of repairing a property is not a capital expenditure. Capital expenditures are appreciated over their useful life. Repairs are subtracted from income for the current year.

Capital Improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Cash Available for Closing
Borrower funds available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from certain sources, borrower's cash available for closing does not include cash reserves or money from other sources.

Cash Flow
The amount of cash derived over a certain period of time from an income producing property. The cash flow should be large enough to pay the expenses of the income producing property; which includes the mortgage payment, maintenance, utilities, and etc.

Cash-Out Refinance
A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement, or any other purpose. The borrower effectively borrows against the home's equity.

Ceiling
The maximum interest rate that can accrue on a variable rate loan or adjustable rate mortgage (ARM).

Certificate of Eligibility
A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) loan.

Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan, based on an approved appraisal.

Certificate of Title
A statement provided by an abstract company, title company, or attorney stating who holds title to real estate based on the public record.

Certificate of Veteran Status
This document is given to veterans or reservists who have served 90 days of continuous active duty; which includes any training time. This document enables veterans to obtain lower down payments on certain FHA insured loans.

Chain of Title
The history of all of the documents affecting title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable rate mortgage (ARM).

Clear Title
A title that is marketable and is free of liens or disputed legal questions as to ownership of the property.

Closing
A meeting at which all documents are signed and all expenses are paid to transfer ownership of property.

Closing Cost Item
A fee or amount that a home buyer must pay at closing for a particular service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 settlement statement.

Closing Costs
Various expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include items such as broker's commissions, discount points, origination fees, attorney's fees, taxes, title insurance premiums, escrow agent fees, and charges for obtaining appraisals, inspections and surveys. Closing costs will vary according to the area of the country. Lenders or real estate professionals often provide estimates of closing costs to prospective homebuyers even before the HUD-1 settlement statement is delivered.

Closing Statement
An accounting of funds given to both buyer and seller before real estate is sold.

Cloud on Title
An outstanding claim or lien, revealed by a title search, that adversely affects the owner's title to real estate. Usually, clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Co-Borrower (Also Known as a Co-Maker)
A person who signs a promissory note along with the borrower. A co-borrower's signature also guarantees that the loan will be repaid, because the borrower and the co-borrower are equally responsible for the repayment.

Coinsurance
A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Coinsurance Clause
A provision in a hazard insurance policy stating the minimum amount of coverage that must be maintained as a percentage of the total value of the property in order for the insured to collect the full amount of a loss.

Collateral
An asset (such as a car or a home) that is pledged as security for the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract or promissory note.

Collection
The efforts used to bring a delinquent loan current and, if necessary, to file legal papers and notices to proceed with foreclosure.

Combined Loan to Value
The ratio of the total amount borrowed on all mortgages against a property compared to the appraised value of the property. For example, if you have an $80,000 1st mortgage and a $10,000 2nd mortgage on a home with an appraised value of $100,000, the Combined Loan to Value is 90% ($80,000 + $10,000 = $90,000 / $100,000 = 90%).

Commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan (such as 3%, 5%, or 6%).

Commitment Letter
A formal notification from a lender stating that the borrower's loan has been conditionally approved and specifying the terms under which lender agrees make the loan.

Common Area Assessments
Payments required of individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of its operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Community Home Improvement Mortgage Loan
An alternative financing option that allows low and moderate income home buyers to obtain 95% financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30% of the appraised value.

Community Property
In some Western and Southwestern states, the law specifies that property acquired during a marriage is presumed to be owned jointly by the husband and wife unless acquired as separate property of one spouse or the other.

Community Seconds®
An alternative financing option for low and moderate income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part or all of the second mortgage debt may be forgiven depending on how long the buyer remains in the home.

Comparables
An abbreviation for comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size

Compound Interest
Interest paid on the principal balance and on the accrued and unpaid interest.

Condemnation
1. Declaration that a building is unfit for use or is dangerous and must be destroyed. 2. Taking of private property for a public use (such as a park, street or school) through an exercise of the right of eminent domain.

Condominium
A real estate project in which each unit owner has title to a unit in a multi-unit building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Conforming Loan
A home loan with a maximum loan amount of $300,700 that is eligible for purchase by FNMA and FHLMC.

Construction Loan
A short-term, interim loan for financing the cost of home construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Consumer Reporting Agency (Bureau)
An organization that prepares reports that lenders use to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from creditors such as mortgage lenders, credit card companies, department stores, etc.

Contingency
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract
An oral or written agreement to do or not do something.

Contract Sale or Deed
A contract between a purchaser and a seller of real estate to convey the title after certain conditions have been met.

Conventional Loan
A home loan that is not insured or guaranteed by the federal government. Can be for conforming or non-conforming loan amounts.

Convertibility Clause
A provision in some adjustable rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed rate loan at specified times during the life of the loan.

Convertible ARM
An adjustable rate mortgage (ARM) that can be converted to a fixed rate loan under specified conditions.

Cooperative (Co-Op)
A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate Relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

Co-Signer
A person who signs a promissory note along with the borrower. A co-borrower's signature helps to assure that the loan will be repaid. The borrower and the co-borrower are jointly responsible for the repayment of the loan.

Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable rate mortgage (ARM) plans. It represents the weighted average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

Covenant
A promise in a mortgage or deed that requires or prevents certain uses of the property that, if violated, may result in loss or foreclosure of the property.

Credit
An agreement in which a borrower receives money or something of value in exchange for a promise to repay the lender on specified terms at a later time.

Credit History
An evaluation of an individual's capacity and history of debt repayment. A credit history helps a lender to determine whether a potential borrower is likely to repay a loan in a timely manner.

Credit Life Insurance
A type of insurance that pays off a loan if one of the borrowers dies while the policy is in force.

Credit Limit
The maximum amount that can be borrowed under the home equity line of credit.

Credit Rating
An expression of creditworthiness based upon an individual's present financial condition and past credit history.

Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit Repository or Credit Bureau
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Credit Scoring
Credit scores are numerical values that rank individuals according to their credit history at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae, one of the major investors in home loans, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.

Creditor
A person to whom money is owed.

Cumulative Interest
Is the total interest accrued.

Curtailment
A payment that reduces the principal balance of a loan.

Debt
An amount that is owed to another individual or company.

Debt Service
The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Deed
A legal document conveying title to a property.

Deed of Trust
The document used in some states instead of a mortgage; title is vested in a trustee to secure repayment of the loan.

Deed-in-Lieu
A deed given by a borrower to the lender to satisfy a debt and avoid foreclosure. Also called a voluntary conveyance"."

Default
Failure to make loan payments on a timely basis or to comply with other requirements of a mortgage.

Deferred Interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.

Delinquency
Failure to make mortgage payments when due.

Deposit
A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

Depreciation
A decline in the value of property because of physical or economic changes such as wear and tear. The opposite of appreciation.

Discount Points
Amounts paid to the lender at origination to lower the rate on the face of the note.

Down Payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a home loan.

Draw Period
The time period in which the borrower may access and use a line of credit.

Due-on-Sale Provision
A provision in a mortgage home loan that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the loan.

Due-on-Transfer Provision
This terminology is usually used for second mortgages.

Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Easement
A right of way, giving to persons other than the owner, access to or over a property.

Effective Age
An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Effective Gross Income
Normal annual income, including overtime, that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Eminent Domain
The right of a government to take private property for public use upon payment of fair compensation to the owner. Eminent domain is the basis for condemnation proceedings.

Employer-Assisted Housing
A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment
An improvement that physically intrudes or trespasses on another's property.

Encumbrance
Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, deeds, or restrictions.

Endorser
A person who signs a check or promissory note over to another party.

Entitlement
The VA home loan benefit is called an entitlement. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on any home loans or liens against the property.

Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow Account
The account in which the lender holds the borrower's escrow payments prior to paying property expenses, such as property taxes or homeowners insurance.

Escrow Analysis
The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Collections
Funds collected by the lender and set aside in an escrow account to pay borrower expenses such as property taxes, mortgage insurance, and hazard homeowners insurance.

Escrow Disbursements
The use of escrow funds to pay real estate taxes, homeowners insurance, mortgage insurance, and other property expenses as they become due.

Escrow Payment
The portion of a borrower's monthly payment that is held by the lender to pay for taxes, hazard homeowners insurance, mortgage insurance, lease payments, and other items as they become due.

Estate
The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Eviction
A legal proceeding by a landlord to recover possession of real property from the tenant.

Examination of Title
The report on the title of a property from the public records or an abstract of the title.

Exclusive Listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure and use of consumer credit information, establishes rules for credit reporting to consumer credit reporting agencies, and establishes procedures for a consumer to view his or her credit report and correct mistakes on it.

Fair Market Value
The price that a buyer, willing but not compelled to buy, and a seller, willing but not compelled to sell, would agree on.

Fannie Mae (Federal National Mortgage Association)
A New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages. It adds liquidity to the mortgage market by investing in home loans through the country.

Fannie Mae's Community Home Buyer's Program
An income based community lending mode, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low or moderate income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home buyer education sessions.

Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and loan underwriting but does not lend money or plan or construct housing.

Fee Simple
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA Coinsured Home Loan
A loan (under FHA Section 244) for which the Federal Housing Administration and the originating lender share the risk of loss in the event of the borrower's default.

FHA Home Loan
A mortgage home loan that is insured by the Federal Housing Administration. Also known as a government loan.

FHA Loans
FHA loans are available to help people who can't necessarily afford a 10% down payment on a new home. If approved, the Federal Housing Administration will cover up to 97.75% of the purchase price.

FHA Mortgage Insurance
Requires a fee (up to 2.25% of the loan amount) which is paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5% of the current loan amount paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FICO Score
A FICO score is a credit score developed by Fair Isaac and Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number.

Finder's Fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

Firm Commitment
A lender's agreement to make a loan to a specific borrower on a specific property.

First Mortgage
A home loan that is the primary lien against a property.

Fixed Installment
The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

Fixed Period ARM
Provides a fixed rate for 3, 5, 7 or 10 years then adjusts annually based on a financial index for the remaining loan term.

Fixed Rate Mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term of the loan.

Fixture
Personal property that becomes real property when attached in a permanent manner to real estate (such as a lighting fixture or an in-ground spa).

Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

FNMA
The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA and conventional mortgages from primary lenders. Also known as Fannie Mae.

Foreclosure
The legal process by which a borrower's interest in mortgaged property is taken because of a default on the loan. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Forfeiture
The loss of money, property, rights, or privileges due to a breach of legal obligation.

Freddie Mac (Federal Home Loan Mortgage Corporation)
A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Fully Amortized ARM
An adjustable rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Good Faith Estimate
An estimate of charges which a borrower is likely to incur in connection with a settlement.

Government Loan
A loan that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS).

Government National Mortgage Association (GNMA or Ginnie Mae)
A government owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan programs formerly administered by Fannie Mae.

Grace Period
A period of time during which a loan payment may be paid after its due date without incurring a late penalty. Such late payments may be reported on your credit bureau report.

Graduated Payment Mortgage (GPM)
A type of flexible payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Grantee
The person to whom an interest in real property is conveyed (e.g. the buyer).

Grantor
The person who conveys an interest in real property (e.g. the seller).

Gross Monthly Income
Normal annual income including overtime that is regular or guaranteed. The before taxes income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Ground Rent
The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

Group Home
A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.

Hazard Insurance
Insurance which protects against the loss to real estate caused by fire, some natural causes, vandalism, and etc. (depending on the terms of the policy).

Home Equity Line of Credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.

Home Equity Loan
A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvements or freeing of equity for investments in other real estate. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt and education loans.

Home Inspection
A thorough inspection 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
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards. The policy typically combines personal liability insurance and property hazard insurance coverage for a dwelling and its contents.

Homeowner's Warranty (HOW)
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It may be provided by the builder or property seller as a condition of the sale but homeowners can also purchase it.

Housing Expense Ratio
The percentage of gross monthly income that goes toward paying housing expenses.

HUD
The U.S. Department of Housing and Urban Development.

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 are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD).

Impound
That portion of a borrower's monthly payments that are held by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due. Also known as reserves.

Income Property
Real estate developed or improved to produce income.

Index
A number used to compute the interest rate for an adjustable rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. Some lenders provide caps that limit how much the interest rate or loan payments may increase or decrease.

In-File Credit Report
An objective account, normally computer-generated, of credit and other financial information obtained from a credit reporting agencies.

Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial Draw Amount
The amount of the home equity line of credit that the borrower is requesting at closing (up to, but never exceeding, the credit line amount).

Initial Interest Rate
The starting interest rate for an adjustable rate mortgage (ARM) loan or variable rate home equity line of credit. At the end of the effective period for the initial rate, the interest rate adjusts periodically during the life of the loan based on changes in a specified financial index.

Installment Debt
The regular periodic payments that a borrower agrees to make to a lender. (i.e. car loans, student loans, and etc.) These payments do not include mortgage payments.

Installment Loan
Borrowed money that is repaid in equal payments, known as installments.

Insurable Title
A property title that a title insurance company agrees to insure against defects and disputes.

Insurance
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance Binder
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest
The fee charged for borrowing money.

Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

Interest Payment
The portion of a monthly payment that goes to interest based on the amortization schedule.

Interest Rate
The percentage rate of return charged for the use of a sum of money. This percentage rate is specified in the mortgage note.

Interest Rate
The periodic charge, expressed as a percentage, for use of credit.

Interest Rate Buydown plan
A temporary buydown gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buydown is paid the same way but reduces the interest rate over the entire life of a home loan.

Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Introductory Rate
The starting rate for a home equity loan or line of credit, usually a discounted rate, for a short period of time.

Investment Property
A property that is not occupied by the owner and is generally rented to a tenant to produce income.

Joint Tenancy
A form of co-ownership that gives each tenant equal undivided interest and rights in the property, including the right of survivorship.

Judgment
A decree by a court of law that one person, a debtor, is indebted to another, a creditor, in a specified amount. The court may place a lien against the debtor's real property as collateral for payment of the judgment to the creditor.

Judgment Lien
A lien on the property of a debtor resulting from a judgment.

Judicial Foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit where the court confirms the sales price for the property and the distribution of the sale proceeds.

Jumbo Loan
A loan that exceeds Fannie Mae's legislated mortgage amount limits of $300,700. Also called a nonconforming loan.

Late Charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 10-15) after the due date.

Lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may use the real estate for a specified period of time and the amount of rent to be paid.

Leasehold Estate
A tenant's interest in or right to hold possession of a property.

Legal Description
A property description, recognized by law, using a government rectangular survey, metes and bounds, or a plat map to sufficiently locate and identify a property.

Lender
The bank, mortgage company, or mortgage broker offering the loan.

Lender's Fees
Fees paid to the lender to cover costs associated with processing, underwriting and closing of the loan.

Liabilities
A person's debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.

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. See also homeowners insurance.

Lien
A legal claim against a property that must be paid off when the property is sold. A lien is created when you borrow money to purchase or refinance a home loan or and with obtain a home equity loan.

Lifetime Rate 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 loan.

Line of Credit
An agreement by a lender to extend credit up to a certain amount for a certain time without the need for the borrower to file another application.

Line or Loan Amount
The entire HELOC or Fixed Rate Second mortgage loan amount.

Liquid Asset
A cash asset or an asset that is easily converted into cash.

Loan Amount
A sum of borrowed money (principal) that is generally repaid over time with interest.

Loan Commitment
A lender's agreement to advance money on specified terms after specified conditions are met.

Loan Origination
The process by which a mortgage lender makes a home loan and records a mortgage against the borrower's real property as security for repayment of the loan.

Loan-to-Value (LTV) Ratio
The ratio of the total amount borrowed on a mortgage against a property compared to the appraised value of the property. For example, if you have an $80,000 1st mortgage on a home with an appraised value of $100,000, the LTV is 80% ($80,000 / $100,000 = 80%).

Lock-In
A written agreement in which the lender guarantees a specified loan program interest rate and points if a mortgage goes to closing within a set period of time.

Lock-In Period
The time period during which the lender has guaranteed an interest rate to a borrower.

Margin
For an adjustable rate mortgage (ARM) or home equity line of credit, the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change. The margin is static and will not change during the life of the loan.

Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Master Association
A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a second-level" association that handles matters affecting the entire development

Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. At the maturity of a 30-year loan the principal balance will be paid in full.

Maximum Financing
The maximum amount a lender will lend on a specific loan program.

Maximum Rate
The maximum interest rate that can accrue on a variable rate loan.

Merged Credit Report
A credit report that contains information from more than one credit reporting agency. When the report is created, the information is compared for inconsistencies and duplicate entries. Any duplicates are combined to provide a summary of a your credit.

Minimum Payment
The minimum amount that must be paid monthly on an account. On the HELOC product, the minimum payment is interest only during the draw period. On the Fixed Rate Second products, the minimum payment is principal and interest.

Modification
The act of changing any of the terms of the mortgage.

Money Market Account
A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money Market Fund
A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Monthly Debt
A borrower's monthly expenses including credit cards, installment loans, student loan payments, alimony and child support and housing payment expense.

Monthly Mortgage Insurance Payment
Portion of monthly payment that covers the cost of Private Mortgage Insurance.

Monthly Payment
Payments to reduce the principal balance of a home loan made once a month.

Monthly Principal & Interest (P & I) Payment
Portion of monthly payment that covers the principal and interest due on the loan.

Monthly Taxes & Insurance (T & I) Payment
Portion of monthly payment that funds the escrow or impound account for taxes and insurance.

Mortgage
A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Banker
A company that originates, sells and services mortgages exclusively for resale in the secondary mortgage market.

Mortgage Broker
An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

Mortgage Disability Insurance
A disability insurance policy that will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.

Mortgage Insurance (MI)
A contract that insures the lender against loss caused by a borrower's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan.

Mortgage Insurance Premium (MIP)
The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance company.

Mortgage Life Insurance
A type of term life insurance sometimes bought by borrowers. The amount of coverage decreases as the loan's principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgagee
The lender in a mortgage agreement.

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. Typically a 2-4 unit property.

Negative Amortization
An increase in the outstanding balance of a mortgage that occurs when the monthly payment is not large enough to cover the interest due. The amount of the shortfall is added to the remaining balance to create negative amortization.

Net Cash Flow
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net Effective Income
The borrower's gross income minus federal income tax.

Net Worth
The value of all of a person's assets, including cash, minus all liabilities.

No Closing Cost Loan
A loan in which the fees the borrower(s) are not required to pay cash out-of-pocket at closing for the normal closing costs. The lender typically includes the closing costs in the principal balance or charges a higher interest rate than for a loan with closing costs to cover the advance of closing costs.

No Out-of-Pocket Cost Loan
A loan in which the fees the borrower(s) are not required to pay cash out-of-pocket at closing for the normal closing costs. The lender typically includes the closing costs in the principal balance or charges a higher interest rate than for a loan with closing costs to cover the advance of closing costs.

Non-Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Non-Conforming Loan
A loan that exceeds Fannie Mae's legislated mortgage amount limits of $300,700. Also called a jumbo loan.

Non-Liquid Asset
An asset that cannot easily be converted into cash.

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
The interest rate stated on a mortgage note.

Notice of Default
A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Office of Thrift Supervision
The regulatory and supervisory agency for federally chartered savings institutions. Formally known as the Federal Home Loan Bank Board.

Original Principal Balance
The total amount of principal owed on a mortgage before any payments are made.

Origination Fee
A fee paid to a lender for processing a loan application, making a home loan, and recording a mortgage against the borrower's real property as security for repayment of the loan. The origination fee is stated in the form of points. One point is 1% of the mortgage amount (e.g., 1,000 on a $100,000 loan).

Owner Financing
A property purchase transaction in which the property seller provides all or part of the financing and takes back a security instrument.

Partial Payment
A payment that is not sufficient to cover the scheduled monthly principal and interest payment on a mortgage loan.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM). Generally, the payment change date occurs in the month immediately after the adjustment date and the borrower is notified 30 days prior as to the new rate.

Payoff
To pay the outstanding balance of a loan in full.

Periodic Payment Cap
A provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or loan payments may increase or decrease. In upward rate markets, it protects the borrower from large increases in the interest rate or monthly payment at each adjustment period.

Periodic Rate Cap
A provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or loan payments may increase or decrease. In upward rate markets, it protects the borrower from large increases in the interest rate or monthly payment at each adjustment period.

Permanent Loan
A long term mortgage, usually ten years or longer.

Personal Property
Any property that is not real property or is not permanently fixed to land. Cash, furniture, and cars are all examples of personal property.

Piggyback
A combination of two loans. Example: A loan is made for 90% of the home price. 80% of the purchase price is supplied by a 1st mortgage and 10% by a 2nd mortgage. The 2nd mortgage is piggybacked on the first mortgage.

PITI
Term for principal, interest, taxes, and insurance.

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.

Planned Unit Development
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

Points
A one time charge by the lender for originating a loan. A point is 1% of the amount of the mortgage (e.g., 1,000 on a $100,000 loan).

Power of Attorney
A legal document authorizing one person to act on another's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval
A lender's conditional agreement to lend a specific amount on specific terms to a homebuyer.

Prearranged Refinancing Agreement
A formal or informal arrangement between a lender and a borrower where the lender agrees to offer special terms (such as a reduction in the rate or closing costs) for a future refinancing as an inducement for the borrower to enter into the original mortgage transaction.

Pre-Foreclosure Sale
A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property, typically for less than the amount that is owed to the lender.

Pre-Paid Interest
Mortgage interest that is paid in advance of when it is due.

Pre-Paid Items (Expenses)
Items required by lender to be paid at closing prior to the period they cover such as prorated property taxes, homeowners insurance and pre-paid interest.

Prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty
A fee that may be charged to a borrower who pays off a loan before it is due. Generally, a prepayment penalty is added to a loan in exchange for a discounted rate.

Pre-Qualification
The process of determining how much money a prospective home buyer might be eligible to borrow before he or she applies for a loan.

Primary Mortgage Market
Lenders making mortgage loans directly to borrowers such as savings and loan associations, commercial banks and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets.

Primary Residence
The place where someone lives the majority of the time.

Prime Rate
The interest rate that banks charge on short-term loans to its most creditworthy customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

Principal
Interest, Taxes, and Insurance (PITI),Four potential components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that may be paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Principal Balance
The outstanding balance on a mortgage. The principal balance does not include interest or any other charges.

Principal Payment
Portion of your monthly payment that reduces the remaining balance of a home loan.

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 PMI for a loan with a loan-to-value (LTV) percentage in excess of 80%.

Promissory Note
A written promise to repay a specified amount over a specified period of time.

Public Auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.

PUD (Planned Unit Development)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Transaction
A loan used in part as payment for a purchase. A loan that is used to buy a home is called a purchase money mortgage.

Purchase Price
The total amount paid for a home.

Qualifying Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

Quitclaim Deed
A deed that transfers, without warranty of ownership, whatever interest or title a grantor may have at the time the conveyance is made.

Rate Cap
A limit on how much the interest rate can change, either at each adjustment period or over the entire life of the loan.

Rate Lock-In
A commitment issued by a lender to a borrower guaranteeing a specified interest rate for a specified period of time.

Rate Reduction Option
A fixed-rate mortgage that includes a provision that gives the borrower an option to reduce the interest rate (without refinancing) at a later date. It is similar to a prearranged refinancing agreement, except that it does not require re-qualifying.

Real Estate Agent
A person who is normally licensed by the state and who, for a commission or a fee, assists in negotiating a real estate transaction.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that, among other things, requires advance disclosure of settlement costs to home buyers and sellers, prohibits certain types of referral and other fees, sets rules for escrow accounts, and requires notice to borrowers when servicing of a home loan is transferred.

Real Property
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk".

Recording
The noting in a book of public record of the terms of a legal document affecting title to real property, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage.

Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Reduced Documentation
A method used to determine income when qualifying a borrower(s) for a loan. Borrower(s) provide their income, however no verification documentation is typically required.

Refinance Transaction
The process of paying off one loan with the proceeds from a new loan, typically using the same property as security for the new loan.

Rehabilitation Mortgage
A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.

Remaining Balance
The amount of principal that has not yet been repaid.

Remaining Term
The original amortization term minus the number of payments that have been applied.

Repayment Plan
An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are often called relief provisions"."

Request for Notice of Default
A recorded document that obligates the holder of the first mortgage lien to notify subordinate lien holders in the event of default by the borrower.

Rescission
The act of cancellation or annulment of a transaction or contract by the operation of a law. Borrowers usually have the option to cancel certain credit transactions, including a refinance or home equity transaction, within three business days after consummation (when the consumer becomes contractually obligated by, for example, signing the loan documents).

RESPA (Real Estate Settlement Procedures Act)
RESPA is a federal law that allows consumers to review information on known or estimated settlement costs after the application is submitted and once prior to or at the settlement of the loan.

Revolving Liability
A credit arrangement, such as a credit card or HELOC, that allows a customer to borrow against a predetermined line of credit when purchasing goods and services. The borrower makes payments on the amount that is actually borrowed plus any interest due.

Right of First Refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Ingress or Egress
The right to enter or leave designated premises.

Right of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Rural Housing Service (RHS)
An agency within the Department of Agriculture. This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.

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.

Second Home
A property occupied part time by a person in addition to his or her primary residence.

Second Mortgage
A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market
An informal market where lenders and investors buy and sell existing mortgages. Government sponsored entities and private investors buy mortgages from lenders who use the proceeds to make additional loans.

Secured Loan
A loan that is backed by collateral. If the borrower defaults, the lender can sell the collateral to satisfy the debt.

Security
The property that will be pledged as collateral for a loan. If the borrower defaults, the lender can sell the collateral to satisfy the debt.

Security Interest
An interest a lender takes in the borrower's property to assure repayment of a debt. If the borrower defaults, the lender can sell the collateral to satisfy the debt.

Seller Take-Back
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Servicing
The collection of principal and interest payments from borrowers and management of borrowers' tax and insurance escrow accounts.

Settlement
A meeting at which all documents are signed and all expenses are paid to transfer ownership of property.

Settlement Sheet
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD).

Simple Interest
Interest which is computed only on the principle balance.

Single Family Residence
A residential structure designed to include one dwelling.

Special Deposit Account
An account that is established for rehabilitation mortgages to hold the funds needed for the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.

Start Rate
The starting interest rate for an adjustable rate mortgage (ARM) loan or variable rate home equity line of credit. At the end of the effective period for the initial rate, the interest rate adjusts periodically during the life of the loan based on changes in a specified financial index.

Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage. The subordinate loan has a claim to payment in a foreclosure only after the first mortgage is paid.

Subsidized Second Mortgage
An alternative financing option known as the Community Seconds® mortgage for low and moderate income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part or all of the second mortgage debt may be forgiven depending on how long the buyer remains in the home.

Survey
A drawing or map showing 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 performed personally by the owner.

Tenancy by Entirety
A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. One spouse dies the property goes to the other spouse.

Tenancy in Common
A type of joint tenancy in a property without right of survivorship.

Third Party Fees
Fees collected by lender for services provided by other companies, such as an appraiser.

Third Party Origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the home loan.

Title
A legal document evidencing a person's right to ownership of a property.

Title Company
A company that specializes in examining and insuring titles to real estate.

Title Insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Total Expense Ratio
Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts. Used to help qualify a potential borrower for a home loan.

Transaction Fee
A fee charged each time the borrower draws on the credit line.

Transfer of Ownership
Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property subject to" the mortgage

Transfer Tax
State or local tax payable when title to a property passes from one owner to another.

Treasury Index
An index that is used to determine interest rate changes for certain adjustable rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. See adjustable-rate mortgage (ARM).

Trustee
A fiduciary who holds or controls property for the benefit of another.

Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of credit, such as a mortgage, including the annual percentage rate (APR) and other charges.

Two to Four Family Property
A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

Two-Step Mortgage
A mortgage in which the borrower receives a below market interest rate for a specified number of years (most often 7 or 10 years) and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of the specified period.

Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.

Unsecured Loan
A loan that is not backed by collateral.

Usury
Interest charged in excess of the legal rate established by law.

VA Mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.

Variable Rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease per the terms of the loan agreement or note.

Verification of Deposit (VOD)
A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE)
A document signed by the borrower's employer verifying his/her position and salary.

Vested
Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.

Veterans Affairs (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

What-If Analysis
An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.

Year-End Statement
A report sent to the borrower each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

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Insurance Information
  
Homeowners Insurance
  
How to Save on Homeowners Insurance
  
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Private Mortgage Insurance (PMI)
  
Canceling Private Mortgage Insurance
  
Title Insurance
  
Title Insurance Protection
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Packing Tips When Moving
  
Undertaking a move can be a very stressful time in your life. Packing properly and using the right packing materials will protect those valuables that can never be replaced. Careful planning will payoff in the long run. The main packing materials can usually be purchased at local moving and shipping companies, which consists of:
  • Sturdy Boxes
    • Various Sizes for General Packing
    • Wardrobe Boxes for Hanging Clothes
    • Containers for Packing Dishes and Breakables
    • Mattress Boxes to Protect Mattresses and Box Springs
  • Rolls of Packing Tape (You May Need a Dispenser)
  • Rolls of White Packing Paper to Keep Dishes Clean
  • Rolls of Bubble Wrap
  • Packing Peanuts
Quite often, moving companies will have used boxes for sale that are in very good condition. You will be able to save a considerable amount if you are fortunate enough to find some used boxes and containers. You will be able to get very sturdy boxes, at no charge, from stores that sell electronic equipment and computers. Quite often, they will also have packing peanuts that they would be glad to give you. Many stores will save boxes for you if you ask them to. When anticipating a move, start to look for boxes in the early stages of your planning. You will also need the following items:
  • Note Pad
  • Black Indelible Marker
  • Large Pair of Scissors
  • Box Cutter or Razor Knife
  • Newspaper for Packing
Newspaper makes an excellent packing material for items that will not be damaged by the ink. When using newspaper to wrap dishes, you will need to wash the dishes when they are unpacked to remove the ink. Do not use newspaper as a packing material if it will come into contact with any type of fabric. Old towels, sheets, blankets, and pillows also make excellent packing materials.


      Moving Basics
      • If at all possible, try to move on a weekday when banks, stores, and utility companies are open.
      • Plan ahead and determine what you'll need on the first day after your move. Pack your toiletries, prescriptions, and a change of clothes in a separate bag.
      • Wrap items individually. Always place a layer of crushed paper in the bottom of each box and fill empty spaces with crushed paper so as to cushion its contents and eliminate breakage.
      • If possible, place heavier items in smaller boxes so that they're easier to carry.
      • Make sure that boxes are packed firmly with the heavier items on the bottom and the lighter items on top. This can help to eliminate breakage unless the contents are pots and pans.
      • Do "not" pack flammable items like aerosol cans, cleaning fluids, oil based paints, propane tanks, gasoline containers, and etc.
      • Do "not" pack heat sensitive items like, candles, records, cassette tapes (audio and video), computer disks, and etc.
      • Pack one room at a time. Using a marker, label each box with the room the box belongs in. If the box contains breakable items, mark the box "Fragile". Either keep a detailed list of what items are packed in each box or list the contents on the box itself. If keeping a list, it would help to number each box for easy reference. This will make unpacking much easier.
      • Some things may have to be taken apart when moving. It is a good idea to keep the parts, knobs, screws, bolts, and etc. in plastic bags that can be easily marked for identification. Place all of these bags in one box per room and mark the box "Parts". When starting to unpack, always unpack the box marked "Parts" first so you will have all of the necessary items to reassemble everything that was taken apart in that particular room.
      Renting a Truck and Moving Yourself
      • Don't rent a truck that will be too large for your specific needs. The larger the truck, the more it will cost to rent. Make sure that the truck comes with enough protective blankets and tie down straps to accommodate your load.
      • If a dolly is not provided with the truck, you will need to rent one. It is also a good idea to rent a small furniture dolly (4 wheels) to move larger pieces of furniture.
      • Use common sense when loading your truck by keeping in mind the size, sturdiness, and the weight of your boxes. Make sure that all items are secure before attempting to move your load.
      • When packing the truck, make sure that the items that you will need first are packed last.            

              

      Resource Center

      Learn about your neighborhood before you move! Before you relocate make sure you know your new neighborhood inside and out. With the Louisiana Mortgage Associates Resource Center, you can research City of Lake Charleslocal weather, local schools, businesses, and more, prior to the big move.                       

                           

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