6032 York Avenue S.
Edina, MN 55410
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
- 7/23 and 5/25 Mortgages
with a one time rate adjustment after seven years and five years respectively.
- 3/1, 5/1, 7/1 and 10/1 ARMs
Adjustable-rate mortgages in which rate is fixed for three-year,
five-year, seven-year and ten-year periods, respectively,
but may adjust annually after that.
- 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 Clause.
- Adjustable rate mortgage (ARM)
- Is a mortgage in which the interest rate is adjusted
periodically based on a pre-selected index. Also sometimes
known as the renegotiable rate mortgage, the variable
rate mortgage or the Canadian rollover mortgage.
- Adjustment interval
- On an adjustable rate mortgage, the time between changes
in the interest rate and/or monthly payment, typically one, three or five
years depending on the index.
- Means loan payment by equal periodic payment calculated to
pay off the debt at the end of a fixed period, including accrued
interest on the outstanding balance.
- Annual percentage rate (A.P.R.)
- APR is a measurement of the full cost of a loan including
interest and loan fees expressed as a yearly percentage rate.
Because all lenders apply the same rules in calculating the
annual percentage rate, it provides consumers with a good basis
for comparing the cost of loans.
- An estimate of the value of property, made by a qualified
professional called an "appraiser".
- A local tax levied against a property for a specific purpose,
such as a sewer or street lights.
- The agreement between buyer and seller where the buyer takes
over the payments on an existing mortgage from the seller.
Assuming a loan can usually save the buyer money since this
is an existing mortgage debt, unlike
a new mortgage where closing cost and new, probably higher, market-rate
interest charges will apply.
- Balloon Mortgage
- A loan which is amortized for a longer period than the term of the loan.
Usually this refers to a thirty-year amortization and a five year term.
At the end of the term of the loan, the remaining outstanding principal
on the loan is due. This final payment is known as a balloon payment.
- Blanket Mortgage
- A mortgage covering at least two pieces of real estate as
security for the same mortgage.
- Borrower (Mortgagor)
- One who applies for and receives a loan in the form of a mortgage
with the intention of repaying the loan in full.
- An individual in the business of assisting in arranging funding or
negotiating contracts for a client but who does not loan the money himself.
Brokers usually charge a fee or receive a commission for their services.
- When the lender and/or the home builder subsidized the mortgage by
lowering the interest rate during the first few years of the loan. While the
payments are initially low, they will increase when the subsidy expires.
- 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 (mortgage payment, maintenance,
- Caps (interest)
- Consumer safeguards which limit the amount the interest rate
on an adjustable rate mortgage which may change per year and/or the life of the
- Caps (payment)
- Consumer safeguards which limit the amount monthly payments on an
adjustable rate mortgage may change.
- Certificate of Eligibility
- The document given to qualified veterans which
entitles them to VA guaranteed loans for homes, business and mobile homes.
Certificates of eligibility may be obtained by sending form DD-214
(Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)
- Certificate of Reasonable Value (CRV)
- An appraisal issued by the Veterans Administration showing the property's
current market value
- Certificate of veteran status
- The document given to veterans or reservists who have served 90 days
of continuous active duty (including training time) It may be obtained by
sending DD 214 to the local VA office with form 26-8261a
(request for certificate of veteran status. This document enables veterans
to obtain lower down payments on certain FHA insured loans).
- The meeting between the buyer, seller and lender or their agents
where the property and funds legally change hands, also called settlement.
Closing costs usually include an origination fee, discount points, appraisal
fee, title search and insurance, survey, taxes, deed recording fee, credit
report charge and other costs assessed at settlement. The cost of closing
usually are about 3 percent to 6 percent of the mortgage amount.
- Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District
Cost of Funds.
- Construction loan
- A short term interim loan to pay for the construction of
buildings or homes. These are usually designed to provide periodic
disbursements to the builder as he progresses.
- Contract sale or deed:
- A contract between purchaser and a seller of real estate to convey
title after certain conditions have been met. It is a form of
- Conventional loan
- A mortgage not insured by FHA or guaranteed by the VA.
- Credit Report
- A report documenting the credit history and current status of a
borrower's credit standing.
- Debt-to-Income Ratio
- The ratio, expressed as a percentage, which results when
a borrower's monthly payment obligation on long-term debts is
divided by his or her gross monthly income. See housing
- Deed of trust
- In many states, this document is used in place of a mortgage to
secure the payment of a note.
- Failure to meet legal obligations in a contract, specifically, failure
to make the monthly payments on 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. See negative amortization
- Failure to make payments on time. this can lead to foreclosure.
- Department of Veterans Affairs (VA)
- An independent agency of the federal government
which guarantees long-term, low-or no-down payment mortgages to
- Discount Point
- see point
- Down Payment
- Money paid to make up the difference between the purchase price
and the mortgage amount.
- A provision in a mortgage or deed of trust that allows the
lender to demand immediate payment of the balance of the mortgage if
the mortgage holder sells the home.
- Earnest Money
- Money given by a buyer to a seller as part of the purchase price
to bind a transaction or assure payment.
- The VA home loan benefit is called entitlement. Entitlement for a
VA guaranteed home loan. This is also known as eligibility.
- Equal Credit Opportunity Act (ECOA)
- Is 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.
- The difference between the fair market value and current indebtedness,
also referred to as the owner's interest. The value an owner has
in real estate over and above the obligation against the property.
- An account held by the lender into which the home buyer pays money
for tax or insurance payments. Also earnest deposits held pending
- Fannie Mae
- seeFederal National Mortgage Association.
- Farmers Home Administration (FmHA)
- Provides financing to farmers and other qualified borrowers who
are unable to obtain loans elsewhere.
- Federal Home Loan Bank Board (FHLBB)
- The former name for the regulatory and supervisory agency for
federally chartered savings institutions. Agency is now called the Office
of Thrift Supervision
- Federal Home Loan Mortgage Corporation(FHLMC) also
called "Freddie Mac",
- Is a quasi-governmental agency that purchases conventional
mortgage from insured depository institutions and HUD-approved
- Federal Housing Administration (FHA)
- A division of the Department of Housing and Urban
Development. Its main activity is the insuring of residential mortgage
loans made by private lenders. FHA also sets standards for
- Federal National Mortgage Association (FNMA)
also know as "Fannie Mae"
- A tax-paying corporation created by Congress that purchases and sells
conventional residential mortgages as well as those insured by FHA or
guaranteed by VA. This institution, which provides funds for one in seven
mortgages, makes mortgage money more available and more affordable.
- FHA loan
- A loan insured by the Federal Housing Administration open to all
qualified home purchasers. While there are limits to the size of FHA loans
($155,250 as of 1/1/96), they are generous enough to handle
moderately-priced homes almost
anywhere in the country.
- FHA mortgage insurance
- Requires a fee (up to 2.25 percent of the loan amount) paid at
closing to insure the loan with FHA. In addition, FHA mortgage insurance
requires an annual fee of up to 0.5 percent of the current loan amount,
paid in monthly installments. The lower the down payment, the more years
the fee must be paid.
- The Federal Home Loan Mortgage Corporation provides a secondary market
for savings and loans by purchasing their conventional loans. Also known
as "Freddie Mac."
- Firm Commitment
- A promise by FHA to insure a mortgage loam for a specified
property and borrower. A promise from a lender to make a mortgage loan.
- Fixed Rate Mortgage
- The mortgage interest rate will remain the same on these mortgages
throughout the term of the mortgage for the original borrower.
- 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."
- A legal process by which the lender or the seller forces a sale of a
mortgaged property because the borrower has not met the terms of the
mortgage. Also known as a repossession of property.
- Freddie Mac
- see Federal Home Loan Mortgage Corporation
- Ginnie Mae
- see Government National Mortgage Association.
- Government National Mortgage Association (GNMA)
- Also known as "Ginnie Mae", provides sources of funds for residential
mortgages, insured or guaranteed by FHA or VA.
- 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.
- A promise by one party to pay a debt or perform an obligation contracted
by another if the original party fails to pay or perform according to a
- Hazard Insurance
- A form of insurance in which the insurance company protects
the insured from specified losses, such as fire, windstorm and the like.
- Housing Expenses-to-Income Ratio
- The ratio, expressed as a percentage, which results when a
borrower's housing expenses are divided by his/her gross monthly income.
See debt-to-income ratio.
- That portion of a borrower's monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they be
- Jumbo Loan
- A loan which is larger (more than $240,000 as of 1/1/99)
than the limits set by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Co
- Mortgage Insurance
- Money paid to insure the mortgage when the down payment is less
than 20 percent. See private mortgage insurance, FHA
- The lender
- The borrower or homeowner
- Negative Amortization
- Occurs when your monthly payments are not large enough to pay
all the interest due on the loan. This unpaid interest is added to the
unpaid balance of the loan. the danger of negative amortization is that the
home buyer ends up owing more than the original amount of the loan.
- Net Effective Income
- The borrower's gross income minus federal income tax.
- Non Assumption Clause
- A statement in a mortgage contract forbidding the assumption of
the mortgage without the prior approval of the lender. Note: The
signed obligation to pay a debt, as a mortgage note.
- Office of Thrift Supervision (OTS)
- The regulatory and supervisory agency for federally chartered
savings institutions. Formally known as Federal Home Loan
- One-year adjustable
- Mortgage whose annual rate changes yearly. The rate is usually
based on movements of a
published index plus a specified margin, chosen by the lender.
- Origination Fee
- The fee charged by a lender to prepare loan documents, make
credit checks, inspect and sometimes appraise a property; usually
computed as a percentage of the face value of the loan.
- Permanent Loan
- A long term mortgage, usually ten years or more. Also
called an "end loan."
- Principal, Interest, Taxes and Insurance. Also called monthly
- Pledged account Mortgage (PAM):
- Money is placed in a pledged savings account and this fund plus
earned interest is gradually used to reduce mortgage payments.
- Points (loan discount points)
- Prepaid interest assessed at closing by the lender. Each point is
equal to 1 percent of the loan amount (e.g., two points on a
$100,000 mortgage would cost $2,000).
- Power of Attorney
- A legal document authorizing one person to act on behalf of another.
- Prepaid Expenses
- Necessary to create an escrow account or to adjust the seller's existing
escrow account. Can include taxes, hazard insurance, private
mortgage insurance and special assessments.
- A privilege in a mortgage permitting the borrower to make payments in
advance of their due date.
- Prepayment Penalty
- Money charged for an early repayment of debt. Prepayment penalties are
allowed in some form (but not necessarily imposed) in many states.
- Primary Mortgage Market
- Lenders making mortgage loans directly to borrower's such as savings
and loan associations, commercial banks, and mortgage companies. These
lenders sometimes sell their mortgages into the secondary mortgage
markets such as to FNMA or GNMA, etc.
- The amount of debt, not counting interest, left on a loan.
- Private Mortgage Insurance (PMI)
- In the event that you do not have a 20 percent down payment, lenders
will allow a smaller down payment - as low as 3 percent in some cases.
With the smaller down payment loans, however, borrowers are usually
required to carry private mortgage insurance. Private mortgage insurance
will usually require an initial premium payment and may require an
additional monthly fee depending on you loan's structure.
- A real estate broker or an associate holding active membership in a
local real estate board affiliated with the National Association of
- The cancellation of a contract. With respect to mortgage
refinancing, the law that gives the homeowner three days to cancel a
contract in some cases once it is signed if the transaction uses
equity in the home as security.
- Recording Fees
- Money paid to the lender for recording a home sale with the
local authorities, thereby making it part of the public records.
- Obtaining a new mortgage loan on a property already owned. Often
to replace existing loans on the property.
- Renegotiable Rate Mortgage
- A loan in which the interest rate is adjusted periodically.
See adjustable rate mortgage.
- Short for the Real Estate Settlement Procedures Act. RESPA is a federal
law that allows consumers to review information on known or estimated
settlement cost once after application and once prior to or at a settlement.
The law requires lenders to furnish the information after application only.
- Reverse Annuity Mortgage (RAM)
- A form of mortgage in which the lender makes periodic payments to the
borrower using the borrower's equity in the home as collateral for and
repayment of the loan.
- Satisfaction of Mortgage
- The document issued by the mortgagee when the
mortgage loan is paid in full. Also called a "release of mortgage."
- Second Mortgage
- A mortgage made subsequent to another mortgage and subordinate
to the first one.
- Secondary Mortgage Market
- The place where primary mortgage lenders sell the mortgages they
make to obtain more funds to originate more new loans. It provides liquidity
for the lenders.
- All the steps and operations a lender performs to keep a loan in
good standing, such as collection of payments, payment of taxes,
insurance, property inspections and the like.
- Settlement/Settlement Costs
- see closing/closing costs
- Shared Appreciation Mortgage (SAM)
- A mortgage in which a borrower receives a below-market interest
rate in return for which the lender (or another investor such
as a family member or other partner) receives a portion of the
future appreciation in the value of the property. May also apply
to mortgage where the borrowers shares the monthly principal and interest
payments with another party in exchange for part of the appreciation.
- Simple Interest
- Interest which is computed only on the principle balance.
- A measurement of land, prepared by a registered land surveyor, showing
the location of the land with reference to know points, its dimensions, and
the location and dimensions of any buildings.
- Sweat Equity
- Equity created by a purchaser performing work on a property
- A document that gives evidence of an individual's ownership of
- Title Insurance
- A policy, usually issued by a title insurance company, which insures a
home buyer against errors in the title search. The cost of the
policy is usually a function of the value of the property, and is often
borne by the purchaser and/or seller. Policies are also available to
protect the lender's interests.
- Title Search
- An examination of municipal records to determine the legal ownership of
property. Usually is performed by a title company.
- A federal law requiring disclosure of the Annual Percentage Rate
to home buyers shortly after they apply for the loan. Also known as
- Two-Step Mortgage
- A mortgage in which the borrower receives a below-market
interest rate for a specified number of years (most often seven or 10), 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 seven or 10 years. also called "Super
Seven" or "Premier" mortgage.
- The decision whether to make a loan to a potential home buyer
based on credit, employment, assets, and other factors and the matching of
this risk to an appropriate rate and term or loan amount.
- Interest charged in excess of the legal rate established by law.
- VA Loan
- A long-term, low-or no-down payment loan guaranteed by the Department
of Veterans Affairs. Restricted to individuals qualified by military service
or other entitlements.
- VA Mortgage Funding Fee
- A premium of up to 1-7/8 percent (depending on the size of
the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate
mortgage with no down payment, this would amount to $1,406 either paid
at closing or added to the amount financed.
- Variable Rate Mortgage (VRM)
- see adjustable rate mortgage
- 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
- Warehouse Fee
- Many mortgage firms must borrow funds on a short term basis in
order to originate loans which are to be sold later in the secondary
mortgage market (or to investors). When the prime rate of interest is
higher on short term loans than on mortgage loans, the mortgage firm has
an economic loss which is offset by charging a warehouse fee.
- Wraparound mortgage
- Results when an existing assumable loan is combined with a new
loan, resulting in an interest rate somewhere between the old rate
and the current market rate. The payments are made to a second lender or
the previous homeowner, who then forwards the payments to the first
lender after taking the additional amount off the top.
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