The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.īalloon Payment – The final lump sum that is paid at the end of the balloon mortgage.īankruptcy – A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. Bīalloon Mortgage – Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single “balloon” payment. The buyer usually must meet qualification standards to assume a loan. The buyer “assumes” all outstanding payments.Īssumption – Buying property and assuming the responsibility of the exiting mortgage.Īppreciation – Increases in property value due to fluctuations in the market, inflation, et al.Īsset – Valuable items, encumbered or not, owned by a person, corporation, or entity.Īssumable Mortgage – A mortgage that provides for a buyer to “assume” all outstanding payments when a home is sold. Some lenders may apply the cost of the application fee to certain closing costs.Īppraisal – The determination of property value based on recent sales information of similar properties.Īssessment – Determining a property’s value for the purpose of taxation.Īssumable Loan – These loans may be passed on from a seller of a home to the buyer. Payment of this fee does not guarantee that a loan will be approved. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.Īnnuity – A series of income payments of receipts over a period of years.Īpplication – A mortgage application requires borrowers to submit information regarding their income, savings, assets, debts, and more.Īpplication Fee – The fee charged by the lender to the borrower for applying for a loan. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. The APR includes the base interest rate, points, and any other add-on loan fees and costs. The payments are structured so that the borrower pays both interest and principal with each equal payment.Īnnual Percentage Rate (APR) – A figure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The most common adjustment intervals are one, three or five years.Īdjusted book basis – The purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.Īmortization – Literally to “kill off” (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). Also called a variable rate mortgage.Īdjustment_date – The date the interest rate changes on an ARM (adjustable rate mortgage).Īdjustment Interval – For an adjustable rate mortgage, the time between changes in the interest rate charged. AĪcceleration clause – The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagee defaults under the terms of the contract.Īcquisition cost – Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.Īdjustable Rate Mortgage (ARM) – A mortgage in which the interest rate is adjusted periodically based on an index. The index is published on the last day of the month and reflects the cost of funds for the prior month. The 11th district covers Arizona, California and Nevada. #ġ1th District Cost of Funds –A monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts. Add our Mortgage Terms Glossary to your Favorites for quick look-ups throughout your mortgage application process. Our glossary of mortgage loan terminology defines a variety of terms used by loan officers and real estate professionals. Use our Mortgage Terms Glossary to help understand every step of the process. Whether you are buying a home or refinancing, applying for a mortgage is a big step.
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