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Appraisal
A written justification of the price paid for a property,
primarily based on an analysis of comparable sales of
similar homes nearby. |
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Biweekly
Mortgage
A mortgage in which you make payments every two weeks
instead of once a month. The basic result is that instead
of making twelve monthly payments during the year, you
make thirteen. The extra payment reduces the principal,
substantially reducing the time it takes to pay off a
thirty year mortgage. |
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Cash-out
Refinance
When a borrower refinances his mortgage at a higher amount
than the current loan balance with the intention of pulling
out money for personal use, it is referred to as a "cash
out refinance." |
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Credit
History
A record of an individual's repayment of debt. Credit
histories are reviewed my mortgage lenders as one of the
underwriting criteria in determining credit risk. |
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Creditor
A person to whom money is owed. |
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Down
Payment
The part of the purchase price of a property that the
buyer pays in cash and does not finance with a mortgage. |
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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. |
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Equity
The current market value of a home minus any outstanding
liens or mortgage balances. For example, if your homes
market value is $100,000 and you owe $60,000 on your mortgage,
then you have $40,000 equity in your home. |
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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 earnest money deposit is put
into escrow until delivered to the seller when the transaction
is closed. |
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Fixed-rate
Mortgage
A mortgage in which the interest rate does not change
during the entire term of the loan. |
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Foreclosure
The legal process by which a borrower in default under
a mortgage is deprived of his or her interest in the mortgaged
property. This usually involves a forced sale of the property
at public auction with the proceeds of the sale being
applied to the mortgage debt. |
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Home
Equity Line of Credit
A mortgage loan, usually in second position, that allows
the borrower to obtain cash drawn against the equity of
his home, up to a predetermined amount. |
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Lender
A term which can refer to the institution making the loan
or to the individual representing the firm. For example,
loan officers are often referred to as "lenders." |
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Loan
A sum of borrowed money (principal) that is generally
repaid with interest. |
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Loan
Officer
Also referred to by a variety of other terms, such as
lender, loan representative, loan "rep," account
executive, and others. The loan officer serves several
functions and has various responsibilities: they solicit
loans, they are the representative of the lending institution,
and they represent the borrower to the lending institution. |
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Mortgage
A legal document that pledges a property to the lender
as security for payment of a debt. |
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Mortgage
Insurance (MI)
Insurance that covers the lender against some of the losses
incurred as a result of a default on a home loan. Often
mistakenly referred to as PMI, which is actually the name
of one of the larger mortgage insurers. Mortgage insurance
is usually required in one form or another on all loans
that have a loan-to-value higher than eighty percent.
Mortgages above 80% LTV that call themselves "No
MI" are usually a made at a higher interest rate.
Instead of the borrower paying the mortgage insurance
premiums directly, they pay a higher interest rate to
the lender, which then pays the mortgage insurance themselves.
Also, FHA loans and certain first-time homebuyer programs
require mortgage insurance regardless of the loan-to-value. |
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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. |
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Prepayment
Penalty
A fee that may be charged to a borrower who pays off a
loan before it is due. |
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Principal
The amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance of
a mortgage. |
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Purchase
Agreement
A written contract signed by the buyer and seller stating
the terms and conditions under which a property will be
sold. |
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Rate
Lock
A commitment issued by a lender to a borrower or other
mortgage originator guaranteeing a specified interest
rate for a specified period of time at a specific cost. |
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Refinance
Transaction
The process of paying off one loan with the proceeds from
a new loan using the same property as security. |
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Secured
Loan
A loan that is backed by collateral. |
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