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203b FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase of new or existing one to four family housing; characterized by low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.
203k FHA mortgage insurance program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan. .
ABR, Accredited Buyer Representative The Accredited Buyer Representative designation, conferred by the Real Estate Buyer's Agent Council (REBAC), confirms an agent's mastery of buyer representation. Agents who have earned the ABR designation have demonstrated experience in buyer representation. Two key areas emphasized in ABR training are how to identify potential problems with a property and how to negotiate the best price on behalf of the buyer. REBAC is an affiliate of the National Association of Realtors. www.rebac.net A professional designation gained by a member of the National Associaiton of REALTORS who has successfully completed extensive training on buyer agency practices and submitted practical experience as a buyer representative rebac.net
Adjustable-rate mortgage (ARM). A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden).
Amortization. The gradual repayment of a mortgage by installments.
Amortization schedule. A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the balance remaining.
Annual percentage rate (APR). The total yearly cost of a mortgage stated as a percentage of the loan amount; includes such items as the base interest rate, primary mortgage insurance, and loan origination fee (points).
Application The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Appraisal. A professional opinion of the market value of a property: A document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
Appreciation. An increase in the value of a property due to changes in market conditions or other causes.
ARM Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.
Assessed value. The valuation placed upon property by a public tax assessor for purposes of taxation.
Assessor: A government official who is responsible for determining the value of a property for the purpose of taxation.
Assisted Housing. Housing where the monthly costs to the tenant are subsidized by federal or other programs.
Assumable mortgage. A mortgage that can be taken over ("assumed') by the buyer when a home is sold.
Assumption. The transfer of the seller's existing mortgage to the buyer.
Balloon Mortgage: A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
Bankruptcy: A federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
Binder. A preliminary agreement, secured by the payment of earnest money, under which a buyer offers to purchase real estate.
Block Grants. Grants made by the federal government on a formula basis, usually to a state or local government.
Borrower: A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.
Borrowing Authority: Authority to incur indebtedness for which the federal government is liable, which authority is granted in advance of the provision of appropriations to repay such debts. Borrowing authority may take the form of authority to borrow from the Treasury or authority to borrow from the public by means of the sale of federal agency obligations. Borrowing authority is not an appropriation since it provides a federal agency only with the authority to incur a debt, and not the authority to make payments from the Treasury under the debt. Appropriations are required to liquidate the borrowing authority.
Building code: Based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.
Budget:A detailed record of all income earned and spent during a specific period of time.
Cap. A provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease.
Cash reserve. A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments.
CCRs - Covenants, Conditions and Restrictions. A document that controls the use requirementsd restrictions of a property. Usually available from a Title company.
Clear title. A title that is free of liens or legal questions as to ownership of property.
Cloud On The Title. Any condition which affects the clear title to real property.
Closing. A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
Closing costs. Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."
Commitment letter. A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.
Condominium. A form of property ownership in which the homeowner holds title to an individual dwelling unit, an undivided interest in common areas of a multi-unit project, and sometimes the exclusive use of certain limited common areas.
Community Development Financial Institution. A specialized financial institution that works in market niches that have not been adequately served by traditional financial institutions. CDFIs provide a wide range of financial products and services, including mortgage financing, commercial loans, financing for community facilities, and financial services needed by low income households. Some CDFIs also provide technical assistance. To be certified as a CDFI by the CDFI Fund of the Treasury Department, an institution must engage in community development, serve a targeted population, provide financing, have community representatives on its board, and be a non-governmental organization.
Contingency. A condition that must be met before
Conventional mortgage. Any mortgage that is not insured or guaranteed by the federal government.
Convertible ARM. An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative. A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Covenant. A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
Credit report. A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Deed. The legal document conveying title to a property.
Deed of trust. The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower.
Default. The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage.
Definitions of HUD. HUD - Department of Housing and Urban Development. Federal agency responsible for encouraging housing development
Delinquency. A loan in which a payment is overdue but not yet in default.
Deposit. See Earnest money.
Depreciation. A decline in the value of property; the opposite of "appreciation."
Discount points. See Points.
Down payment. The part of the purchase price which the buyer pays in cash and does not finance with a mortgage.
Due-on-sale clause. A provision in a mortgage allowing the lender to demand repayment in full if the borrower sells the property securing the mortgage.
Earnest money: Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.
EEM: Energy Efficient Mortgage; an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase
Equity: An owners financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.
Escrow account: A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.
Fair Housing Act: A law that prohibits discrimination in all facets of the homebuying process on the basis of race, color, national origin, religion, sex, familial status, or disability.
- in the sale or rental of housing or residential lots
- in advertising the sale or rental of housing
- in the financing of housing
- in the provision of real estate brokerage services
- in the appraisal of housing
- blockbusting is also illegal
Fair market value: The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.
FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
First Time Home Buyer: A person with no ownership interest in a principal residence during the three-year period preceding the purchase of the security property.
Fixed rate mortgage: A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Flood insurance: Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
Foreclosure: A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.
FSBO: For Sale By Owner, owner advertises property for sale without the help of a professional.
Ginnie Mae: Government National Mortgage Association (GNMA); Dovernment-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.
Good faith estimate: An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
Hazard insurance. Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Homeowners insurance. An insurance policy that combines personal liability coverage and hazard insurance coverage for a dwelling and its contents.
HUD. the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.
HUD home May be a single family or any multifamily residence which has been deeded back to HUD/FHA by mortgage companies who had foreclosed on FHA-insured mortgages in return for mortgage benefits.
Homeowners warranty. A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.
Interest. The fee charged for borrowing money.
Interest rate cap. A provision of an ARM limiting how much interest rates may increase or decrease per adjustment period or over the life of a mortgage. See also Lifetime cap.
Joint tenancy. A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship.
Late charge. The penalty a borrower must pay when a payment is made after the due date.
Lease-Purchase Mortgage Loan. An alternative Fannie Mae financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payments consists of PITI payments on the first mortgage, plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.
Lien. A legal claim against a property that must be paid off when the property is sold.
Lifetime cap. A provision of an ARM that limits the highest rate that can occur over the life of the loan.
Loan commitment. See Commitment letter.
Loan servicing. The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
Loan to value percentage (LTV). The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.
Lock in. A written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
Making an offer The process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.
Mandatory Delivery Commitment. an agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.
Mortgage. A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage banker. A company that originates mortgages exclusively for resale in the secondary market.
Mortgage broker An individual or company that for a fee acts as an intermediary between borrowers and lenders.
Mortgage insurance. See Private mortgage insurance.
Mortgage insurance premium (MIP). The fee paid by a borrower to FHA or a private insurer for mortgage insurance.
Mortgage margin. The set percentage the lender adds to the index value to determine the interest rate of an ARM.
Mortgage note. A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time-, the mortgage note is secured by a mortgage.
Mortgage interest rate. The rate of interest in effect for the monthly payment due.
Mortgagee. The lender in a mortgage agreement.
Mortgagor. The borrower in a mortgage agreement.
Negative amortization. A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the unpaid principal balance to create "negative" amortization.
Notice of default. A formal written notice to a borrower that a default has occurred and that legal action may be taken.
One America Principles Dr. Martin Luther King Jr. left us a leagacy which reminds us that in a multiracial, multicultural society no one group can make it alone. We must become One America. Housing plays a decisive role in the achievement of One America, and home ownership remains at the center of the American Dream. I am personally committed to helping create One America, a nation free of housing discrimination, welcoming cultural diversity, with equal opportunity for all.
I welcome you and want to do business with you.
I will base my decision and opinions of you on who you are, not on any preconceived stereotypes or ingrained value judgements.
I subscribe to the federal Fair Housing Act and its principles.
I embrace and celebrate the strength that diversity brings to our communities and the nation.
I will help you find opportunities to buy the home you choose.
I will market homeownership to the public and reach out to people who may not know that homeownership is a real option.
I will make sure you know there is a full range of housing choices available to you and encourage you to consider all communities and neighborhoods.
I will make every effort so that we can communicate with each other. If we do not share a common language, I will work with you to find someone who can interpret.
I have incorporated these principles in my daily operations and my overall business plan. I would be proud to share it with you.
I am here to help you meet your real estate needs, because you are the reason I am in business.
Origination fee. A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.
Owner financing. A property purchase transaction in which the property seller provides all or part of the financing.
Payment cap A provision of some ARMs limiting the amount by which a borrower's payments may increase regardless of any interest rate increase; may result in negative amortization. See Adjustable-rate mortgage.
PITI Stands for principal, interest, taxes, and insurance - the components of a monthly mortgage payment.
Planned unit developments (PUDs). A planned unit development is a project or subdivision that consists of common property that is owned and maintained by an owners' association for the benefit and use of the individual PUD unit owners.
Points. A one-time charge by the lender to increase the yield of the loan; a point is I percent of the amount of the mortgage.
Prepayment penalty. A fee that may be charged to a borrower who pays off a loan before it is due.
Prequalification. The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.
Principal. The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Private mortgage insurance (PMI). Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with can-to-value (LTV) percentages greater than 80 percent.
Purchase and sale agreement. A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Qualifying ratios. Guidelines applied by the lenders to determine how large a loan to grant a homebuyer.
Radon. A radioactive gas found in some homes that in sufficient concentrations can cause health problems.
Rate lock. See Lock-in.
Real estate sales professional. 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.
Refinancing. The process of paying off one loan with the proceeds from a new loan using the same property as security.
Rent with option to buy. See Lease-Purchase Mortgage Loan.
Second mortgage. A mortgage that has a lien position subordinate to the first mortgage.
Secondary mortgage market. The buying and selling of existing mortgages.
Seller take back. An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Settlement. See Closing.
Settlement sheet. The computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment.
Special Forbearance: a loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
Survey. A drawing or map showing the precise legal boundaries a property, the location of improvements, easements, rights of way encroachments, and other physical features.
Tenancy by entirety. A type of joint ownership of property that provides right of survivorship and is available only to a husband and wife.
Tenancy in common. A type of joint ownership in a property without right of survivorship.
Title. A legal document evidencing a person's right to or ownership of a property.
Title company. A company that specializes in examining and insuring titles to real estate.
Title insurance. Insurance to protect the lender lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property.
Title search. 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.
Transfer tax. State or local tax payable when title passes from one owner to another.
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