Mortgage Terminology Part 2
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Mortgage Terms Continued
Deed of Trust : An instrument that makes real property security for a loan; unlike a mortgage, may be foreclosed nonjudicially
Loan to Value Ratio: Also known as LTV ratio. The loan to value is the percentage of equity that you are borrowing from your home. For example:
If your home is worth $200,000 and you wanted a mortgage of $150,000, the Loan to Value ratio would be 75%, because you would be borrowing 75% of the home's value. Generally speaking, the higher the Loan to Value ratio, the higher the interest rate of the loan.
Equity: The difference between the current value of the home and the amount the owner still owes on the mortgage. In the example above, the same home valued at $200,000 with a mortgage balance of $150,000 would have $50,000 equity in the home.
Quit Claim Deed
: A deed coveying the title to real property with the title in an "as is" condition. In other words, there are no expressed or implied guarantees or waranties that you will have clear and/or marketable title included with the deed.
Deficiency Judgment : a court judgment ordering a debtor to pay the difference between the amount of a debt and the proceeds raised by foreclosure and sale of the security property
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.
: 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 become due. Also known as reserves.
FHLMC : Federal Home Loan Mortgage Corporation, "Freddie Mac," a government agency that performs a similar function to that of FNMA
FNMA : the Federal National Mortgage association, "Fannie Mae," a private corporation supervised by HUD;
FNMA is a major secondary market investor
GNMA : Government National Mortgage Association, "Ginnie Mae," a government agency supervised by HUD; GNMA promotes investment in real estate by guaranteeing payment on FHA,
FMHA and VA loans
Negative Amortization : an increase in an outstanding loan balance brought about by deferred interest
Note Rate : the interest rate specified in a promissory note; also called the coupon rate
Origination : the process of making a new loan
Margin : the difference between the index rate and interest charged on an ARM
Mortgage : an instrument wherein property is pledged as security for a debt, creating a lien on the security property; must be foreclosed
Mortgage-Backed Securities : instruments issued by various agencies such as GNMA and FHLMC to raise investment funds
Mortgagee : the one who receives a mortgage, usually the lender
Mortgagor : the person who gives a mortgage; the borrower
FHA : a government agency designed to aid the construction and real estate industries by providing mortgage insurance, among other programs
Gross Income : a person's income before deductions for income taxation
Interest Rate Cap : a limit on the amount that interest rates may be increased in an ARM
: 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.
: 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.
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Information listed above is to be used for educational purposes only and is not guaranteed