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Home Purchase Loans National Mortgage Rates

30 Yr Fixed

4.25%

15 Yr Fixed

3.99%

5/1 ARM

3.75%

30 Yr Jumbo

4.35%

Home Equity

2.99%

Home Loan Refinancing
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Mortgage Terms Glossary

Acceleration Clause
A clause that allows the lender to demand the immediate repayment of the full mortgage loan balance upon the default of borrower, or by using the right vested in the Due on Sale Clause.

Adjustable Rate Mortgage (ARM)
This mortgage loan adjusts based on a formula which usually consists of the margin plus index.  The index is set and may be one of several common indices.  May be called a renegotiated rate mortgage.
 
Adjusted Basis
This is the cost of the property adjusted by subtracting any permanent improvements and adding back in depreciation taken during ownership.

Adjustment Date
A predetermined future date at which time the mortgage may adjust either upward or downward.

Adjustment Interval

The time between changes on an adjustable rate mortgage which may affect the interest rate and/or monthly payment.  May be 6 months, one, three or five years depending on the index.

Adjustment Period
The time between adjustments on an adjustable rate mortgage.

Affordability Analysis
A buyers ability to buy a home based on income, liabilities available funds and expenditures.  The down payment calculation is also a consideration.

Amortization
The loan payment is fixed in this type of calculation with a larger portion of the payment going toward the principal payoff as the loan matures.

Amortization Term
The time usually in months that is used for the amortization calculation.  180 months is 15 years and 360 is 30 years for the calculation.

Annual Percentage Rate (APR)
The calculation to determine the actually cost of the money in terms of interest rate when closing costs are calculated into the rate over the entire term of the mortgage.  It may be used to compare mortgage offers.

Appraisal
The value of the property based on an appraiser's calculations and analysis.  This is the report that is compiled.

Appraised Value
An appraiser’s estimation of value when all factors are taken into account including property condition and comparables.

Assessment
A tax levied against a property for specific purpose such as schools, roads and local improvements.

Assignment

The assignment of a mortgage to a new person responsible for payment.

Assumability

A mortgage that can be assumed by a new owner or borrower under certain qualifying conditions which may require credit approval and ability to repay.

Assumption

When a new borrower or owner assumes responsibility for the note and the transferring borrower is relieved of the financial obligation.  Note must be assumable.

Assumption Fee
A fee required by the mortgage lender to assume the note from the old borrower to the new borrower.

Balloon Mortgage
A loan amortized for a certain period but due full and payable prior to the amortized date.  Usually seen in 5, 7 or 10 year balloon notes amortized over 25 or 30 years.

Balloon Payment
The full payment on the loan when the balloon date arrives.

Biweekly Payment Mortgage
A payment made on the mortgage which is usually the monthly payment divided by two.  More money is paid annually and interest is saved resulting in a substantial interest savings over the full term.

Blanket Mortgage
A mortgage whereby one loan or note is recorded against more than one property.

Borrower (Mortgagor)
A person who applies for a loan and is given credit by another individual or entity.

Bridge Loan
A bridge loan is one in which a borrower is given money to purchase a new home while their current home is still owned.  Usually no payments are made on the bridge loan during the time the property is listed for sale which may allow for 6 months or more.

Broker
A broker assists borrowers in obtaining and negotiating financing from a bank but doesn’t loan the money him or herself.  There is a fee associated with their services in most cases.

Buy Down
The lender or builder buys the rate down for a period of one to two years to make the initial payments less.  The rate then goes upward after the initial period is over.

Cash Flow
The amount of cash left over or required to complete ownership on a monthly basis of a rental property taking into account mortgage, maintenance taxes and insurance and other costs from the rents received.

Caps (interest)
The maximum amount that a rate can change during any given rate adjustment period expressed in terms of interest rate.

Caps (payment)
The maximum amount that a payment can change during any given adjustment period expressed in terms of payment.

Certificate of Eligibility
Applies to qualified veterans and is given to show guarantee by the veterans’ administration.  Qualified veterans should contact their local veterans’ administration to obtain information about getting a certificate.

Certificate of Reasonable Value
(CRV)
The Veterans Administrations report expressing the value of the property as an appraisal.

Certificate of Veteran Status

A certificate given to veterans showing that they are eligible to receive a certificate.  This form shows that a veteran is able to obtain guarantees via the Veterans Administration.
This form may be found using this link: http://www.vba.va.gov/pubs/forms/26-8261a.pdf

Change Frequency The frequency in which an adjustable rate changes typically every 6 months or 12 months (annually) as indicated in the note.

Closing

The finality of the transaction whereby the closing agent or agency disperses funds to the seller and or original note holder, and the property is transferred the buyer.

Closing Costs

The costs associated with closing a transaction which typically include loan origination points, appraisal, document fees, title, escrow, insurance and prepaid interest charges.  Closing costs vary on loan amount, time to close in a month and escrow or attorney fees.

COFI

Called the 11th district Cost of Funds Index and is an index that some loans are written to adjust with.

Construction Loan

A loan allowed to fund phases of a construction project and may cover some or all aspects of the construction costs.  Is usually adjustable and for a period of 6 to 18 months.

Consumer Reporting Agency (or Bureau)

Receives data from creditors and reports this data in a format which is used to determine a borrowers financial strength as it pertains to borrowing money or maintaining payments.

Contract Sale or Deed:

A form used to convey transfer of ownership from one party to another after conditions have been met for the sale.

Conventional Loan

A loan which is typically purchased by the large institutional buyers known as Freddie Mac and Fannie Mae which are not guaranteed by HUD or the VA.

Conversion Clause

A loan which can be converted to a fixed rate loan if certain conditions are met such as paying a processing fee which is predetermined.  The rate may be higher to have the benefit of this option.

Credit Report

A report with a borrower’s credit history that expresses an individual’s history of making monthly payments on borrowed money.  May contain judgments or reports of past tax money still owed or paid.

Credit Risk Score

A risk score associated with a borrower’s credit file that gives a lender a fast way to determine whether or not a borrower may be a good credit risk when making a lending decision.  There are several scoring models and each one is proprietary and considered a trade secret to the respective bureau.  Credit scores can vary from 300 to 900

Debt-to-Income Ratio

The ratio of a borrower’s debt when compared to a borrower’s income.  Debt ratios are considered high when they reach 50 percent of gross income in most cases taking into account housing and other financed expenditures.

Deed of Trust

Certain states use a trust deed to secure a borrower’s obligation to repay a note.

Default

If a borrower fails to repay a note as agreed, he or she may be in a state of default by not following the instructions of the note as it is written.

Deferred Interest

A payment that is less than the interest charged during the same period which is added onto the back of the note (as deferred interest) and will increase the loan balance.  Also called negative amortization.

Delinquency

Note making payments on time as agreed in the note.

Department of Veterans Affairs
(VA)
A federal agency formed to assist veterans obtain benefits granted to them for serving their country.  The VA has a mortgage guarantee program which allows low down payment loans to eligible veterans.

Discount Point

A form of origination fee charged by a lender or broker.

Down Payment

The borrower’s money paid toward the purchase which is the difference between the purchase price and down payment amount

Due-on-Sale-Clause

A clause in the note or trust deed that requires that the note be paid in full upon transfer of ownership of the property.

Earnest Money

The buyers deposit toward a purchase of a home which is usually placed in an escrow account to show good faith toward a purchase.

Entitlement

The benefit given by the VA is called an entitlement as promised by the Veterans Administration.

Equal Credit Opportunity Act
(ECOA)
Federal law which protects borrowers and prohibits lending decisions based on race, color, religion, national origin, marital status, sex or age.

Equity

The difference between the value of a home in current terms minus the mortgages or debts owed against the property.

Escrow

A neutral third party account whereby money is held and dispersed based on mutually agreed instructions.

Escrow Disbursements

Funds used that are previously deposited in the escrow account used to pay taxes, agents, mortgage companies and owners per the instructions agreed by all parties.

Escrow Payment

Part of the monthly payment that is held by the lender in a special account and is used to pay hazard insurance and taxes as they become due and payable

Fannie Mae

A public entity created to purchase and hold mortgage backed debt.  Responsible for holding a large portion of the nation’s housing debt.
See Federal National Mortgage Association.

Farmers Home Administration (FmHA)
Provides farmer’s financing for qualified farmers and farming entities. 

Federal Housing Finance Board (FHFB)
This board oversees and regulates the activities of the 12 Federal Home Loan Banks which were formed to supply funds to local lenders for the purpose of financing mortgage transactions.

Federal Home Loan Mortgage Corporation
(FHLMC) also called "Freddie Mac"
A public corporation with government sponsorship formed to purchase conventional mortgage from insured depository institutions.

Federal Housing Administration (FHA)
Under the Department of Housing and Urban Development, FHA guarantees mortgages should a borrower default resulting in a foreclosure.  FHA sets standards for the loans which they guarantee.

Federal National Mortgage Association (FNMA) also known as "Fannie Mae"
A public corporation with government sponsorship which purchases loans and sells bonds to raise capital.  Holds a large portion of the nation’s mortgage loans.

FHA Loan
Acronym for the Federal Housing Administration.  FHA provides mortgage insurance to lenders by guaranteeing a percentage of equity in a transaction should a borrower default on payments leading to foreclosure.

FHA Mortgage Insurance
Mortgage insurance provided by the FHA that is paid upfront and on an installment basis to provide guaranteed equity to the lender providing financing. 

FHLMC
The Federal Home Loan Mortgage Corporation provides mortgage liquidity for qualified loans by purchasing loans and selling mortgage backed securities to raise capital.  Also called Freddie Mac.

Firm Commitment
A promise by the FHA to provide mortgage insurance on the proposed borrower and loan.

First Mortgage
Mortgage recorded against a property and is in first position.
The primary lien against a property.

Fixed Installment
The payment due on a mortgage that is usually paid monthly.
The monthly payment due on a mortgage loan including payment of both principal and interest.

Fixed Rate Mortgage
A mortgage that has a fixed rate for the term of the loan with a fixed monthly payment as opposed to an adjustable.

Fully Amortized ARM

An adjustable rate mortgage with a payment that covers both principal and interest as calculated over the entire term of the loan.

FNMA
Federal National Mortgage Association, similar to Freddie Mac who purchases and holds closed loans and sells bonds and securities to raise capital. Frequently called Fannie Mae.

Foreclosure

A process whereby the lender holding the note takes back a property from the borrower or owner due to non-payment

Freddie Mac

Also called the Federal Home Loan Mortgage Corporation or FHLMC

Ginnie Mae
Also called the Government National Mortgage Association.

Government National Mortgage Association (GNMA)
Ginnie Mae provides funds for FHA and VA insured mortgages.

Graduated Payment Mortgage
(GPM)
Also known as an option ARM or negative amortization mortgage that’s payment increases annually but has a negative equity potential.  See negative amortization loan.

Guaranty

A borrowers promise to pay a holder of a debt as dictated by a written contract.

Guarantee Mortgage

A mortgage guarantee supplied by a third party to the transaction.

Hazard Insurance
Property insurance covering disasters including fire and certain natural disasters.

Housing Expenses-to-Income Ratio

A ratio of a borrower's monthly housing expenses divided by the total monthly gross income.  Otherwise known as top ratio or debt to income ratio.

HUD-1 Statement

A standard document written by the Department of Housing and Urban Development that covers all costs and dispersement of funds that take place in a normal housing transaction and includes, points, lender fees, title fees, realtor fees and any other third party payments.

Impound

The collection of taxes and insurance and mortgage insurance (if required) on a monthly basis and held to make payments as they are due by the respective third party.

Index
An index is a publically available number that tracks an underlying asset class such as 1 year Treasury bill, 6 month LIBOR, or the prime rate.  Adjustable rates are written to follow a given index with a margin plus the index equating to the fully adjusted rate.  Indices are typically published in the Wall Street Journal or other business publications.

Indexed Rate

Is the rate of the mortgage when adding the margin plus the index together.

Initial Interest Rate

This is the start rate of an adjustable rate mortgage that is usually fixed for a short amount f time. After such time, the rate can adjust up or down. The inital rate is the rate at the close of escrow.

Installment

The regular periodic payment that a borrower agrees to make to a lender.

Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).

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 Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.

Interest Rate Ceiling
A maximum rate cap on an adjustable rate mortgage that is specified in the NOTE.

Interest Rate Floor

A minimum interest rate on an adjustable rate mortgage as specified in the NOTE.

Interim Financing

Financing that is usually a construction loan and is replaced by a permanent loan after construction is completed.

Investor
A person or institution that invests money into a property or holds an equity position.

Jumbo Loan

A large loan that is above the limits set by Fannie Mae and Freddie Mac and is usually sold to a portfolio lender or a Wall Street securities lender.  Rates are usually higher for this type of loan.

Late Charge
A charge imposed by a lender when payment is received after the loan due date published in the NOTE.

 

Lease-Purchase Mortgage Loan
A lease agreement between an owner and a tenant whereby a portion of the rent is applied toward the purchase price that is a agreed to in the lease. This agreement usually requires that the option be exercised before the expiration date.

Liabilities

The amount a borrower owes on all obligations that are financed.

Lien

A recorded instrument on a property that requires payment to be released.

Lifetime Payment Cap

The maximum payment that is allowed to be charged as published in the NOTE.

Lifetime Rate Cap

The maximum interest rate that is allowed to be charged as published in the NOTE.

Loan

A borrowed sum of money that requires repayment.

Loan to Value Ratio

The total amount of outstanding mortgages divided by the appraised value or purchase price whichever is being used to determine value.

Lock

An interest rate guarantee by the lender that is fixed for a certain period of time until the loan is funded and closed.

Margin
The percentage above the index that an interest rate is set on an adjustable mortgage.
Total rate = index + margin.

Market Value

The price of a property that is determined by what a buyer is willing to pay and close a transaction whether or not financing is being used.

Maturity

The due date on a loan when the entire balance is required to be paid.

MIP (Mortgage Insurance Premium)

The monthly cost of mortgage insurance that is paid when mortgage insurance is required on a loan.

Mortgage

An agreement between a borrower and a lender whereby a lender supplies money that is backed by real estate as collateral.

Mortgage Banker

Lenders of money who package loans to be sold to an investor or correspondent lender.

Mortgage Broker

An individual or company who arranges mortgage loans between a borrower and a lender and charges a fee for their services.

Mortgagee

The lender on a given transaction.

Mortgage Insurance
Is required when the borrower is buying with less than twenty percent down toward the purchase price and is either private mortgage insurance or mortgage insurance by FHA.

Mortgage Life Insurance

Term life insurance that pays off a borrower’s loan balance in the event of death of the insured.

Mortgagor

The person borrowing money.

Negative Amortization

Loans that are allowed to negatively amortize may result in a balance that is larger than the original principal balance of the loan.

Net Effective Income

A borrower’s net income after taxes are held from their paycheck.

Non Assumption Clause
With this clause, a loan may not be assumed by a new borrower and must be repaid upon sale.

Note

A document between a borrower and a lender that requires repayment on a principal borrowed sum of money.

One Year Adjustable Rate Mortgage
A mortgage that adjusts after the first year fixed period is complete.  It then follows index plus margin per the NOTE.

Origination Fee

A fee charged by a broker in connection with a mortgage transaction.  This may be used to buy the rate down or simply equate to the commission charged for the arrangement of financing.

Owner Financing

Financing that the owner carries on a property rather than a financial institution

Payment Change Date

The date at which the monthly payment changes on an adjustable mortgage.

Periodic Payment Cap

The amount a mortgage payment can change either up or down at any given adjustment interval.

Periodic Rate Cap
The amount a mortgage rate can change either up or down at any given adjustment interval.

Permanent Loan

A loan taken out usually after a construction loan that is usually fixed for long period of time.

PITI

Acronym for principal, interest, taxes and insurance and is expressed as the monthly payment due.

Points (Loan Discount Points)
Prepaid interest as expressed as a percentage of the loan amount. One point equals one percent of the loan amount.

Power of Attorney

A document that allows one person to perform written acts for another person.

Preapproval

The process of determining how much money you will be eligible to borrow before you apply for a loan.

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.
 
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. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.

Primary Mortgage Market
Lenders, such as savings and loan associations, commercial banks, and mortgage companies, who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to the secondary mortgage markets such as FNMA or GNMA, etc…

Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
 
Principal Balance
The outstanding balance of principal on a mortgage not including interest or any other charges.
 
Principal, Interest, Taxes, and Insurance (PITI)
The four 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 monthly cost of property taxes and homeowners insurance, whether these amounts are paid into an escrow account each month or not.

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 your loan's structure.

Qualifying Ratios
Calculations used to determine if 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.

Rate Lock
A commitment issued by a lender to a borrower or another mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.

Realtor®
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
 
Rescission
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.

Refinance
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.

 

RESPA
Acronym for the Real Estate Settlement Procedures Act. Requires that borrowers have an estimate of costs to close provided by the lender.

Reverse Annuity Mortgage
(RAM)
Also called a reverse mortgage.  Home equity is used to pay a home owner and is a lien on the home.

Revolving Liability

A credit account that is allowed to be drawn against and repaid as needed.

Satisfaction of Mortgage

This document is provided by the lender when a mortgage lien has been paid and satisfied.

Second Mortgage

A mortgage lien that is in 2nd position behind the first mortgage.

Secondary Mortgage Market

A market place for closed loans that are bought and sold for a price.

Security

Collateral for a loan or a property in the case of a mortgage.

Seller Carry Back

Seller carries financing for a portion of the down payment or a seller may carry the entire NOTE.

Servicer

A company who collects payments from the borrower and sends payment to the lender..

Servicing

The act for performing servicing or collecting payment from a borrower and distributing those payments to various entities such as the lender, county tax collector or insurance company.

Settlement/Settlement Costs

See closing/closing costs

Simple Interest
Interest calculated on the outstanding principal only and not on the accrued interest as in compounded interest.

Step Rate Mortgage

A mortgage that has a reset rate at a given interval and that is fixed at that new rate.

Survey

A measurement of an area of land where certain boundaries are determined and a map is produced to show where the land boundaries lie.

Sweat Equity

Equity that is obtained by performing improvements to a home usually by the owner’s personal efforts.

Third Party Origination

Origination where a mortgage company or broker performs all aspects of the mortgage process including processing, underwriting and funding and then sells the closed loan package to an investor.

Title

Proves ownership of a given piece of land or property.

Title Insurance

Issued by a title insurance company to insure that the buyer or owner has rights to claim the property per the documents provided by the title company.  Covers typographical errors and sometimes border disputes.

Title Search

A title examiners efforts to find out who owns the property and any recorded information that may encumber it. 

Total Expense Ratio

Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.
 
Truth in Lending
Discloses Annual Percentage Rate and provides information to the borrower as to the actual cost of the financing if the loan is taken to full term.

Underwriting
The process whereby an underwriter looks at a borrowers information, the appraisal and purchase contract to determine if a borrower is financially capable or repaying a loan.

Usury

Excessive interest or charges beyond what is considered legal.

VA Loan

A loan guaranteed by the Department of Veterans Affairs for qualified service personnel.

VA Mortgage Funding Fee

An upfront cost associated with the loan usually expressed as a percentage of the loan amount on a VA mortgage.

Variable Rate Mortgage
(VRM)
An adjustable mortgage whereby interest rate may change over the life of the loan.

Verification of Deposit
(VOD)
A document by a bank or institution providing proof of deposits and length of time of those deposits as expressed as a two month average.

Verification of Employment
(VOE)
A document verifying a borrower’s employment status at the time it is signed and dated by management.

Warehouse Fee
A fee charged by a warehouse lender to fund a given transaction.

Wraparound Mortgage

A loan whereby a new lender makes a mortgage to a borrower in excess of the existing mortgage.  The new lender collects payment and sends a portion to the original first mortgagee.

 

Mortgage Refinancing Information

Credit Score Factors for Mortgages

Credit Score Factors A credit score can be defined as a number that evaluates the possibility of a person to pay back a loan within a given period of time. When an individual is interested in borrowing money, the lender informs the credit bureau. The bureau comes up with a credit report which is aimed […]

Refinancing Terms

Refinancing Terms If you are in the market looking for refinancing options on your home mortgage, it is important to familiarize yourself with the terms commonly used. Poring over boring mortgage textbooks is not required. Here’s a look at the basic refinancing lingo to get you started. APR: Different lenders calculate the APR or the […]

Mortgage Refinance Tax Implication

Mortgage Refinance and Taxes When you own your home, you get large income tax deduction for mortgage interest. However, when you refinance your mortgage loan into a lower interest rate, you’ll pay less interest but more income tax. HAD vs. HED HAD stands for Home Acquisition Debt and HED stands for Home Equity Debt. HAD […]

Second Mortgage vs PMI

Second Mortgage to offset PMI Many homeowners find it difficult to find the funds for a 20 percent down payment on their homes. Without the down payment, it becomes mandatory for home buyers to go in for PMI (Private Mortgage Insurance). The PMI has to stay in effect until such time that the value of […]

Refinancing for Self Employed

Self-employed people and refinancing While in all other ways, America encourages entrepreneurs, borrowing is one area that most self-employed people face difficulties. Be it a conventional loan or a mortgage on the home, bankers have a problem offering money to the self-employed. This is because the self-employed often show less income than their counterparts in […]


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