Ann Arbor Area Real Estate News, Savings & Professional Resources

If the payment amount is insufficient to pay the actual amount of
interest due, the unpaid (deferred) interest would then be added
to your loan balance.

A loan, that for qualification purposes, income is not verified.
The loan is underwritten based on credit, assets, and collateral
information. These loans usually have restrictions concerning
loan amount and have credit requirements. These loans also
typically have a higher interest rate. Many lenders allow a
borrower to state the income amount they receive per month.
The lender requires no proof of that number whatsoever. It does
help a borrower's interest rate if he/she has good credit, good
cash reserves, investments, or at least 20-25% down (or equity).

A refinance transaction which is not intended to put cash in the
hand of the borrower. Instead, the new balance is caculated to
cover the balance due on the current loan and any costs
associated with obtaining the new mortgage. Often referred to
as a "rate and term refinance."

Many lenders offer loans that you can obtain at "no cost." You
should inquire whether this means there are no "lender" costs
associated with the loan, or if it also covers the other costs you
would normally have in a purchase or refinance transaction,
such as title insurance, escrow fees, settlement fees, appraisal,
recording fees, notary fees, and others. These are fees and costs
which may be associated with buying a home or obtaining a loan,
but not charged directly by the lender. Keep in mind that, like a
"no-point" loan, the interest rate will be higher than if you obtain
a loan that has costs associated with it. Almost all lenders offer
loans at "no points." You will find the interest rate on a "no points"
loan is approximately a quarter percent higher than on a loan
where you pay one point.

A legal document that obligates a borrower to repay a mortgage
loan at a stated interest rate during a specified period of time.

The interest rate stated on a mortgage note.

A formal written notice to a borrower that a default has
occurred and that legal action may be taken.

The total amount of principal owed on a mortgage before any
payments are made.

On a government loan the loan origination fee is one percent of
the loan amount, but additional points may be charged which are
called "discount points." One point equals one percent of the
loan amount. On a conventional loan, the loan origination fee
refers to the total number of points a borrower pays.

A property purchase transaction in which the property seller
provides all or part of the financing.

A payment that is not sufficient to cover the scheduled monthly
payment on a mortgage loan. Normally, a lender will not accept
a partial payment, but in times of hardship you can make this
request of the loan servicing collection department.

The date when a new monthly payment amount takes effect on
an adjustable-rate mortgage (ARM) or a graduated-payment
mortgage (GPM). Generally, the payment change date occurs in
the month immediately after the interest rate adjustment date.

For an adjustable-rate mortgage where the interest rate and the
minimum payment amount fluctuate independently of one
another, this is a limit on the amount that payments can increase
or decrease during any one adjustment period.

For an adjustable-rate mortgage, a limit on the amount that the
interest rate can increase or decrease during any one
adjustment period, regardless of how high or low the index
might be.

Any property that is not real property.

This stands for principal, interest, taxes and insurance. If you
have an "impounded" loan, then your monthly payment to the
lender includes all of these and probably includes mortgage
insurance as well. If you do not have an impounded account,
then the lender still calculates this amount and uses it as part
of determining your debt-to-income ratio.

A cash amount that a borrower must have on hand after making
a down payment and paying all closing costs for the purchase of
a home. The principal, interest, taxes, and insurance (PITI)
reserves must equal the amount that the borrower would have to
pay for PITI for a predefined number of months.

A type of ownership where individuals actually own the building
or unit they live in, but common areas are owned jointly with the
other members of the development or association. Contrast with
condominium, where an individual actually owns the airspace of
his unit, but the buildings and common areas are owned jointly
with the others in the development or association.

A point is 1 percent of the amount of the mortgage.

A legal document that authorizes another person to act on one’s
behalf. A power of attorney can grant complete authority or can
be limited to certain acts and/or certain periods of time.

A loosely used term which is generally taken to mean that a
borrower has completed a loan application and provided debt,
income, and savings documentation which an underwriter has
reviewed and approved. A pre-approval is usually done at a
certain loan amount and assumptions are made about what the
interest rate will be, as well as estimates for the amount that
will be paid for property taxes, insurance, etc. A pre-approval
applies only to the borrower. Once a property is chosen, it must
also meet the underwriting guidelines of the lender. Contrast
with pre-qualification

A brief review of your income, assets, debts and credit history
is done by a loan salesperson. If the submitted information is
consistent with past approvals, a preliminary approval is issued
subject to the underwriters review and the borrower’s 
responsibility to demonstrate the accuracy of the submitted
information.

This is a non-competitive number that should not be compared.
It ‘is what it is’ based on the lender’s reserve requirements for
paying your taxes, insurance, private mortgage insurance
(if necessary), pre-paid interest (depending on the day you close
during the month), and your homeowner’s insurance cost.

Any amount paid on a loan by the borrower before it is required
to be paid under the terms of the promissory note.

A fee paid by a borrower who pays off the loan before it is due.

Informal estimate of how much financing a potential borrower
might expect to obtain. Done before paying substantial loan
application fees.

The interest rate that banks charge to their preferred customers.
Changes in the prime rate are widely publicized in the news
media and are used as the indexes in some adjustable-rate
mortgages, especially home equity lines of credit. Changes in
the prime rate do not directly affect other types of mortgages,
but the same factors that influence the prime rate also affect
the interest rates of mortgage loans.

The amount of money borrowed, for which interest is charged,
or one of the parties to a contract.

The outstanding balance of principal on a mortgage. The
principal balance does not include interest or any other
charges. See remaining balance.

The four components of a monthly mortgage payment on
impounded loans. 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 amounts that are paid into an escrow
account each month for property taxes, mortgage and hazard
insurance.

Mortgage insurance that is provided by a private mortgage
insurance company to protect lenders against loss if a borrower
defaults. Most lenders generally require PMI for a loan with a
loan-to-value (LTV) percentage in excess of 80 percent.

A legally binding contract between a lender and a borrower.
The promissory note contains the terms and conditions of the
loan, including how and when the loan must be repaid.

Divide or assess proportionately, as in the case of daily
interest accrued prior to closing.

A meeting in an announced public location to sell property
to repay a mortgage that is in default.

A project or subdivision that includes common property
that is owned and maintained by a homeowners' association
for the benefit and use of the individual PUD unit owners.

A written contract signed by the buyer and seller stating the
terms and conditions under which a property will be sold.

The acquisition of property through the payment of money or
its equivalent.

Used by lenders to decide whether to offer an individual a loan.
One kind compares only the amount of the proposed monthly
mortgage payment to the monthly income. Another compares
the amount of all monthly obligations to the monthly income.

Calculations that are used in determining whether a borrower
can qualify for a mortgage. There are two ratios. The "top" or
"front" ratio is a calculation of the borrower’s monthly housing
costs (principle, taxes, insurance, mortgage insurance,
homeowner’s association fees) as a percentage of monthly
income. The "back" or "bottom" ratio includes housing costs as
will as all other monthly debt.

A deed that transfers, without warranty, whatever interest or
title a grantor may have at the time the conveyance is made.

A guarantee that the rate in effect on a given date will be the
final rate on your loan when closed. Usually expires after a
specified period of time.

A person licensed to negotiate and transact the sale of real
estate. In some areas, agents are people who hold a
salesperson's license and not a brokers license. Generally,
the agency relationship is between the broker and the principal,
and salespersons are employed by brokers.

A consumer protection law that requires lenders to give
borrowers advance notice of closing costs.

Land and appurtenances, including anything of a permanent
nature such as structures, trees, minerals, and the interest,
benefits, and inherent rights thereof.

A real estate agent, broker or an associate who holds active
membership in a local real estate board that is affiliated with
the National Association of Realtors.

The public official who keeps records of transactions that
affect real property in the area. Sometimes known as a
"Registrar of Deeds" or "County Clerk."

The noting in the registrar’s office of the details of a properly
executed legal document, such as a deed, a mortgage note,
a satisfaction of mortgage, or an extension of mortgage,
thereby making it a part of the public record.

Negotiation of a new loan in order to pay off an existing loan.
Generally involves new loan costs.

A program that enables defaulted borrowers of federal loans to
bring their accounts current, to remove previously reported
derogatory credit information, and to reinstate the remaining
balance of privileges and benefits of the loan.

The amount of principal that has not yet been repaid.
See principal balance.

The original amortization term minus the number of payments
that have been applied.

Insurance that protects a landlord against loss of rent or rental
value due to fire or other casualty that renders the leased premises
unavailable for use, and, as a result, the tenant is excused from
paying rent.

An arrangement made to repay delinquent installments or
advances.

A fund set aside for replacement of common property in a
condominium, PUD, or cooperative project -- particularly that
which has a short life expectancy, such as carpeting,
furniture, etc.

(Real Estate Settlement Procedures Act) -- A precise breakdown
of closing costs for both sellers and buyers.

A credit arrangement, such as a credit card, that allows a
customer to borrow against a preapproved line of credit when
purchasing goods and services. The borrower is billed for the
amount that is actually borrowed plus any interest due.

A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease the
property before he or she offers it for sale or lease to others.

The right to enter or leave designated premises.

The Federal Government requires all banks and mortgage
companies to allow customers that are refinancing their
owner-occupied home 3 business days to change their
mind and rescind the transaction.

In joint tenancy, the right of survivors to acquire the interest of
a deceased joint tenant.

The home the borrower currently lives in must sell and fund
before closing the new home.

A technique in which a seller deeds property to a buyer for a
consideration, and the buyer simultaneously leases the property
back to the seller.

A mortgage that has a lien position subordinate to the first
mortgage.

The buying and selling of existing mortgages, usually as part of
a "pool" of mortgages.

A loan that is backed by collateral.

The property that will be pledged as collateral for a loan.

An agreement in which the owner of a property provides
financing, often in combination with an assumable mortgage.

An organization that collects principal and interest payments
from borrowers and manages borrowers’ escrow accounts.
The servicer often services mortgages that have been
purchased by an investor in the secondary mortgage market.

The collection of mortgage payments from borrowers and
related responsibilities of a loan servicer.

See HUD1 Settlement Statement

A housing development that is created by dividing a tract of
land into individual lots for sale or lease.

Any mortgage or other lien that has a priority that is lower
than that of the first mortgage.

A drawing or map showing the precise legal boundaries of a
property, the location of improvements, easements,
rights of way, encroachments, and other physical features.

Contribution to the construction or rehabilitation of a property in
the form of labor or services rather than cash.

the use of money on deposit to fund a loan at closing.

As opposed to joint tenancy, when there are two or more
individuals on title to a piece of property, this type of ownership
does not pass ownership to the others in the event of death.

The number of years before your loan is scheduled to be paid off.
15-year and 30-year terms are most common.

A process by which a lender uses another party to completely or
partially originate, process, underwrite, close, fund, or package
the mortgages it plans to deliver to the secondary mortgage market.

A legal document that gives evidence of a person's right to or
ownership of a property.

A company that specializes in examining and insuring titles
to real estate.

A policy which protects the lender and/or purchaser against
loss due to problems or defects in connection with the title.

A check of the title records to ensure that the seller is the legal
owner of the property and that there are no liens or other claims
outstanding.

Any means by which the ownership of a property changes hands.
Lenders consider all of the following situations to be a transfer of
ownership: the purchase of a property "subject to" the mortgage,
the assumption of the mortgage debt by the property purchaser,
and any exchange of possession of the property under a land sales
contract or any other land trust device.

State or local tax payable when title passes from one owner to
another.

An index that is used to determine interest rate changes for
certain adjustable-rate mortgage (ARM) plans. It is based on the
results of auctions that the U.S. Treasury holds for its Treasury
bills and securities. It can also be derived from the U.S. Treasury's
daily yield curve, which is based on the closing market bid yields
on actively traded Treasury securities in the over-the-counter
market.

A federal law that requires lenders to fully disclose, in writing,
the terms and conditions of a mortgage, including the annual
percentage rate (APR) and other charges.

An adjustable-rate mortgage (ARM) that has one interest rate
for the first five or seven years of its mortgage term and a
different interest rate for the remainder of the amortization term.

A property that consists of a structure that provides living space
(dwelling units) for two to four families, although ownership of
the structure is evidenced by a single deed.

A fiduciary who holds or controls property for the benefit of
another.

Guidelines established by a lender to determine whether a
borrower qualifies for a loan.

A mortgage that is guaranteed by the Department of Veterans
Affairs. Veterans Administration is an independent agency of the
federal government created to administer a variety of benefit
programs designed to facilitate the adjustment of returning
veterans to civilian life. The VA home loan guaranty program is
designed to encourage lenders to offer long term, low down
payment mortgages to eligible veterans by guaranteeing the
lender against loss.

A mortgage agreement that allows for adjustment of the interest
rate in keeping with the fluctuating market and terms agreed on
in the note.

Having the right to use a portion of a fund such as an individual
retirement fund. For example, individuals who are 100 percent
vested can withdraw all of the funds that are set aside for them
in a retirement fund. However, taxes may be due on any funds
that are actually withdrawn.

Ratio of income from an investment to total cost of the
investment over a given period of time. Return on investment.