If you multiply the cost per thousand
number by the number of thousands of the loan amount you are
considering, you will get the payment for that loan.
An IRS form that allows the possessor
to obtain a copy of your Federal tax returns. With the advent of
computer gererated tax returns, there is the possibility that
people can create fradulent returns. This allows the lender to
check the accuracy of what has been submitted to them.
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 Clause(the mortgage must be paid when the property is sold).
Is a mortgage in which the interest rate is adjusted
periodically based on a preselected index and time adjustment (1 month, 6 months 1 year). Also sometimes
known as the variable rate mortgage. See
One Year Adjustable.
As a result of the 2008 Stimulus Package, the agencies (Fannie Mae & Freddie Mac)
were able purchase mortgages greater that $417,000 in certain high cost areas.
Depending on the home values, mortgages of up to $729,000 were available. That legislation is expiring and the new Agency regulator (Federal Housing Finance Agency)
will allow mortgages up to $625,500 in those high cost areas,such as Metro New York.
The payoff of a loan over a specific period of time.
A loan payment, by equal periodic payments, calculated to
pay off the debt at the end of a fixed period (eg - 30 years), including accrued
interest on the outstanding balance (a payment greater than the interest being charged).
See negative amortization. This is the more traditional type of loan.
Application fee
A fee charged by the broker or lender at application.
This can be paid at application or by closing.
Appraisal
An estimate of the value of property. An appraisal, made by a qualified
professional called an "appraiser" that is acceptable to the lender, is usually required.
See Appraisal.
A calculation including the rate,
points, odd or daily interest and other closing costs that are used to
determine an average annual cost on the loan over the full term of
the loan. The APR would truly represent that average cost only if
you hold the loan for the full term. It is useful in comparing
fixed rate loans with the same rate but different points.
Assumption
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. If the assumption is executes without bank approval,
the seller is still responsible for the loan payments.
Balloon Mortgage
A loan which is amortized for a longer period than the term of the loan.
It can, for example, reflect a thirty-year amortization and a five year term.
At the end of the term of the loan (5 years), the remaining outstanding principal
on the loan is due. This final payment is known as a balloon payment.
Bank attorney
The attorney that represents the bank's intrests in the transaction.
The attorney can, on occassion, also represent the borower.
Bankruptcy Search
The title company will search the public records to see if there has been a bankruptcy
for any parties of the transaction.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as
security for the same mortgage.
COFI
An index, often the 11th District
Cost of Funds (California & Nevada), that represents the average cost of funds such as bank cd's etc..
Co-op (Cooperative Apartment)
An apartment whereby the purchaser
buys shares in a corporation (which owns the apartment or complex)
and receives a lease ("proprietary lease") to occupy the apartment.
This is a common form of ownership in New York City.
Conforming Loan limits/Jumbo loans
Loans are usually originated to
be sold in the secondary market. The major purchasers are FNMA
(Fannie-mae) and FHLMC (Freddie-mac) which are companies currently taken over by the Federal Government with some form of
Federal guarantee (effective not implicit) supporting their purchases from banks and other
lenders. The maximum loan amount these companies will purchase on
single family home is $417,000 at this time. Above that loan
amount, the loan is considered a Jumbo loan (except in some high cost areas).
Two Family - up to $533,850,
Three Family - up to $645,300,
Four Family - up to $801,950.
A numerical score that is computer generated
at the time the credit report is drawn. FICO is a model used by TRW.
Trans-Union and Equifax use different models. The higher the number,
the better the credit. Visit www.fairisaac.com for more information.
See Credit
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 expenses-to-income ratio, qualifying ratios.
Deferred interest
When a mortgage is written with a monthly payment that is less than
required to satisfy the note rate (interest being charged), the unpaid interest is deferred by adding
it to the loan balance.See negative amortization
Document Preparation
A fee charged by the lender to prepare the closing documents.
This charge can be seperate or included in the lender processing fee.
Escrow
An account held by the lender into which the home buyer pays money for tax or insurance payments.
The lender then pays these items when they are due from the escrow account. If any errors are made, it is the lenders responsibility.
Also, earnest deposits usually held in escrow by the sellers attorney, pending the loan closing.
See Escrows.
Fannie Mae
seeFederal National Mortgage Association.
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 mortgage bankers,
recently taken over by the Federal Government.
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 underwriting mortgages.
Federal National Mortgage Association (FNMA) also know as "Fannie Mae"
A corporation created by Congress that purchases and sells
conventional residential mortgages as well as those insured by FHA or
guaranteed by VA. This institution, now controlled by the Federal Government, provides funds for over 50% of
residential mortgages.
They set the standards that others (pension funds, insurance companies etc.) may require for loan purchase.
FHLMC
The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans, etc. by purchasing their conventional loans.
Also known as "Freddie Mac."
Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.
Flood Search
A flood search is required by federal law. The flood search firm will look at the federal flood maps (FEMA)
to determine if the property is in a flood zone. Flood insurance will be required if it is in a flood zone.
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
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
Hazard Insurance
A form of insurance in which the insurance company protects
the insured from specified losses, such as fire, windstorm and the like.
See Insurance.
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.
Index
A published interest rate which lenders will use to structure adjustable loans (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings
and loan institutions, the monthly average costs-of-funds incurred by
savings and loans and LIBOR). The index is the part that changes (to which the margin is then added)
and is then used to adjust the interest rate on an
adjustable mortgage up or down.
Indexed rate
The sum of the published index plus the margin.
For example if the index were 8% and the margin 2.75%, the indexed rate would be 10.75%.
Often, lenders charge less than the indexed rate the first year of an adjustable-rate mortgage.
Interest only programs are now available where only the interest is required to be paid during a set initial term.
After that initial term, the loan is amortized over the remaining years in order for the loan to be paid off.
An example would be a 5 year interest only where interest only is paid for the first 5 years then amortized for the remaining 25 years.
The payment would probably be higher.
Jumbo Loan
A loan with an amount greater than the "conforming" loan limit, currently $417,000 for a single family home.
Lien
A claim upon a piece of property for the payment or satisfaction of a
debt or obligation.
The mortgage amount divided by the value
or purchase price.
Lock
Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from the date of
the lock execution.
Mansion Tax
A tax of 1 % asessed by New York State on purchases of $1,000,000 or greater.
This included houses, condos and coops.
Margin
The amount a lender adds to the index on an adjustable rate mortgage
to establish the adjusted interest rate.
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.
A tax on the amount of the mortgage which is only assessed in New York. Outside of New York City, the tax is usually .75%.
In New york City, the tax is 1.75%. Coops are not taxed because you purchase shares in a corporation. Where the tax is
assessed, the lender also pays .25%.
Mortgagee
The lender
MTA Index
A treasury based index representing a 12 month average of the 1 year treasury.
Mortgagor
The borrower or homeowner
Municipal Search
The title company's representative will search the local municipality records for any code violations on the property.
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 potential danger of negative amortization
is that the home buyer ends up owing more than the original amount of the loan in the short term.
These loans usually have a payment adjustment that eventually is sufficient to amortize the loan over the original term.
Odd Interest
Interest calculated and charged on a daily basis to the end of the month of closing.
This way, all mortgage payments are due the 1st of the month.
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.
PITI
Principal, Interest, Taxes and Insurance. Also called monthly housing expense.
Points
a percentage of the loan amount which the borrower pays in
order to reduce the rate/payment on the loan. Points can be called by a
variety of names such as oringination fee, discount points, warehouse fees
and broker fees. We consider "points" as points and consider any other
description as confusing to the borrower. Please note that the points
quoted by Benchmark are inclusive of all variations. On purchases,
these fees are "deductible" in the year that you pay them, but on a
refinance, the deduction must be spread out over the life of the loan.
PMI (Private Mortgage Insurance)
When the downpayment (or
remaining equity in a property) is than 20% of the value, the
lender feels "exposed". You are required to get private mortgage
insurance that protects the lender against your default on the
mortgage. The lender obtains this coverage at your expense. Please
remember, the bank does not want to own your property and
statistically, the lower the downpayment, the more likely a borrower
under financial stress will walk away from the property.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Prepayment
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 (Usually the entire loan or an amount in excess of a set percentage of the loan balance).
Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.
Principal
The amount of debt, not counting interest, left on a loan.
Processing Fee
A fee charged by the broker or lender to cover miscellaneous charges such as express mail, telephone, fax etc.
Private Money / Hard Money
Is financing that is available from non bank sources.
Typically, an individual or group people will pool money and make it available for mortgage lending. The loans are typically not sold to anyone else.
This is usually short term financing and quickly available and at higher rates of up to 15%.
Qualifying ratios
A percentage of your gross monthly income
(before deductions) is used to qualify for the loan. Two ratios are typically used, the first would
cover your housing debt (principle, interest, taxes and insurance)
and the second (back ratio) would cover the housing debt plus all other monthly
debt (auto loans, leases, credit card, student loans, etc.).
Some loans have specific required ratios that can't re exceeded, and some are more flexible.
LP (loan prospector) and DO (desktop originator), which are automated underwriting engins that
provide conditional secondary secondary market approvals, may allow higher ratios.
Rate Locks
Rates must be locked prior to closing. Rate lock periods can vary from a few days to several months.
The pricing on the lock may be affected by the length of the lock period, longer locks usually cost more.
If a rate lock expiries prior to closing, you may be subject to current rates. If the current rates are lower than the original rate,
your rate may be extended at no charge. If the current rate is higher,
there may be a charge to hold that rate for an additional period to get through closing. It is in your best interest
to lock your loan with a long enough period to go several days past your expected closing date.
Recording Fees
Money paid to the title company for recording a home sale with the local authorities, thereby making it part of the public records.
Refinance
Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.
Simple Interest
Interest which is computed only on the principle balance.
Survey
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.
Survey Inspection
An inspection of an existing property by a title
company representative to compare it to an existing survey.
Sweat Equity
Equity created by a purchaser performing work on a property being purchased.
Tax Search
The lender will use a search firm to independently verify the amount of the real estate taxes and when they are due.
Sometimes this company will also be used to pay the taxes. In some ares of New York, the school taxes could be
due to two different town entities, village taxes to the village and county taxes to the county and all at different times.
Title
a document that gives evidence of an individual's ownership of property.
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(owner's policy).
Policies are also available to protect the lender's interests(mortgage policy).
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.
