Margin:
A fixed percentage point added as profit margin to a mortgage rate
Marketable Title:
A title to a real estate or mortgage, free from any encumbrances or liens, or overdue debts
Market Value:
An estimate based on current market conditions, after factoring in comparable property sale prices demographics’ etc On some occasions buyers may decide to pay more or less for a property based on personal preferences, size of home, year built, location, accessibility etc
Mechanic’s Lien:
Sometimes when a building contractor has not paid it’s contractor’s for materials used to build , one or a group of contractors can palace a lien through the courts or a court appointed arbitrator for the amounts unpaid
Mortgage OR Mortgage Note:
A written instrument that records the lien on a property, commercial or residential, stating amount of payment procedure upon default and stating the mortgage bank as the borrower. It should also state the initial monthly payment amount
Mortgage Banker:
A bank specialist or individual employed by a financial institution specializing in mortgage lending products.
Also a lending institution who is licensed to offer and fund loans in its own name, and is not an intermediary as is the case with a mortgage broker.
Mortgage Insurance:
Insurance designed to secure a real estate property and ensure the mortgage contract is fulfilled. In case the borrower defaults in payment the lender has right to possess the property and recover outstanding balances.
Mortgage or Mortgage Note:
A legal document stating purchase terms for a property, including payment
term, interest rate, agreement to make payments, and the total amount to be paid.
Mortgage Insurance Application Fee:
A fee paid to the lender for processing a new loan application
Mortgage Insurance Premium:
Monthly fee paid to keep mortgage insurance in force through the life of
the loan
Mortgage Lender:
The bank responsible for providing funding for a mortgage, lender is
different from mortgage company although some mortgage companies
could also serve as lender.
MLA – (Mortgage Licensing Act or Safe Act of 2008):
MLA is an act by federal government designed to enhance consumer protection and reduce mortgage lending fraud
Mortgage Rate:
Interest rate for a Mortgage Note
Mortgage Backed Security (MBS):
Some investments by themselves, stocks, bond, etc without additional shield from the unstable investment and stock market may be unreliable in the long run, to reinforce these they are bundled into blocks or chunks of stocks and used to buy blocks of real estate on the stock market, hence they are termed mortgage backed security
Mortgage Broker:
A is not a sales person in the simple or popular application, but an intermediary between the lender and the borrower. The broker is a sub of the lender and may employ other loan officers who may work directly with the borrower to secure a loan package. Borrowers share a percentage of the loan fees and commission with the loan officers
Negative Amortization:
An increase in principal balance which occurs when monthly payments amounts are limited and less than the required amounts to cover principal, interest and any other fees. Principal then increases instead of reducing, although the payments are on time and current
Net effective Income:
In calculating income for borrowers lenders will calculate total receipts from all income sources, and deduct taxes from federal, state, and local governments using applicable tax tables to arrive at “Net Income”
Net Monthly Income:
Total wages less all taxes, federal and state.
Non Conforming Loans:
Loans written outside streamlined guidelines for Freddie Mac, Fannie Mae, Ginnie Mae, HUD OR VA (Entities charged with administering and disbursing mortgage loans). These are becoming less and less popular as evolving legislation is restricting excesses by banks and lenders. Non conforming loans include No-doc loans, loans based on the reputation of large corporations, or credit worthy business persons
Note:
A mortgage note is a written instrument that acknowledges or expressly states that a borrower accepts responsibility to pay when due on a loan, and a commitment by the lender or bank agreeing to fund the loan in its’ entirety and on time
Notice of Default:
A letter written note or memo sent to the defaulting borrower informing them of a missed dead line, the default date and amount required to correct the default
Offer:
A written commitment to purchase. After a borrower is satisfied that the property they are inspecting is the right fit for their needs, they may make an offer in writing “a commitment to purchase the propert at a specified price. Almost always the borrower adds a token amount to hold the property
Offeree:
The one who receives the offer, both the buyer and the seller can be the Offeree depending on who makes the offer
Offeror:
The one who makes the offer
Non Recurring costs:
Are one-time cost necessary to obtain the loan from lender and the sale from the property owner and the realtor and may vary according to market, location, lender rates etc. Common examples are
- Title Insurance fees
- Escrow Fees
- Appraisal and / OR Inspection fees
- Property taxes and Hazard or Fire Insurance etc.
Open House:
A day or time set aside for prospective buyers to tour the property for sale, accompanied by the realtor
Open End Mortgage: A mortgage loan permitting the borrower to obtain a loan with the permission to increase the borrowed amount without requesting a new loan
Origination fee:
A fee charged by mortgage banks and lenders, a percentage of the loan principal which serves as the wages for your loan officer
Origination Year:
The year your new loan was obtained.
Oral Contract:
Verbal agreements spoken with detail or without details they are usually very difficult to enforce in a court of law
Owner of Record:
The person or persons named on the property deed at the country recorders office
Owner Occupant:
Any residence who’s owner lives in the house he or she owns
Payment Cap:
Limit on possible interest rate increase through the life of a loan, commonly added to adjustable rate mortgage contracts
Prepaid Interest:
Pro-rated interest counted “from the date the loan documents are signed by the buyer, and lender representatives (Loan Officer), and realtor and to the end of the month”. An example for a closing date of the 15th of the month is [$200 monthly Interest divided by 30 X 15] OR [200 / 30 x 15 = $100.00]
Pre-Approval Letter:
Formal letter from lender to a borrower stating a loan amount is approved and available to purchase any property of the borrower’s choosing.
Property Taxes:
Are local taxes and they vary according to geographical, market and governmental edict and rules. Common examples are: Fire, Insurance, Home Owners Insurance, according to state or Country
Private Mortgage Insurance:
PMI serves an additional security to back mandatory insurance procured by the lender from the government in the United States. Common reason for requiring the PMI is a loan that is more than 80% of the loan , here is an example: Property value – $250,000.00 = 100% Loan Value – $202500.00 = 81%
The PMI is almost always prorated monthly and the contract requires a lump sum
payment of at least the sum of two months payments along with the first month’s
payment due at closing. Sometimes a PMI escrow account is required
Prime Rate:
A special rate the lender will allow you if your credit rate, credit history and business volume is A+. Prime rate is based partly on government lending rate, bank revenue versus bank reserve requirements, and bank to customer revenue expectations.
Principal:
The base amount of a loan excluding the increase which will be added to the loan through the life of the loan
Package Mortgage:
A mortgage loan contract which cover real landed property and residential property
Paper:
A mortgage loan or contract provided in lieu of cash payment of funding by the bank
A Partial Release:
When a property is used as a backup or collateral for a loan, and the value of the loan is equal to the value of the property, the property can not be used as a collateral for another loan, until some of the principal has been repaid and then a “partial release” can be given by the lender, partial release allows the same property to be used as a collateral for another loan
Participation Mortgage:
A mortgage that allows the lender to share in rental or lease profits or sales profits
Pass through certificate:
An investment tool given to investors by mortgage bankers as a proof of their stake in a bundle of real estates or properties, monies collected as monthly rents and / or leases is distributed to all investors holding certificates according to their stake percentages
Permanent Loan Or Mortgage:
A specialized mortgage that stays in force until all fees for a construction or property is completely paid
Permit:
A legally tenable document that proves government permission or access to a service or property
PITI:
Abbreviation for “principal, Interest, Taxes, and Insurance. PITI is an important fixture in a mortgage contract
Planned Unit Development – PUD:
A zoning permit classification that allows builders, designers and owners in a group or unit to alter designs to fit specific needs and still conform to the common goals and purpose of the unit
Plat:
Detailed map of specific and or landed property, drawn and approved by local and or state government
Plat Book:
A book of maps, showing details like roads, streets, blocks, and lots, confirming accurate measurements for each lot or plot
Points:
Fee’s paid to lenders. Points are additional fees in addition to origination fees, and are almost always paid to loan officers and discount points are payable to lenders either to reduce principal or monthly payments
Portfolio Loan:
A bundled loan consisting of varying unit sizes, but not available to the public OR to investors, it’s an investment by the bank in the bank. The bank is the investor obtaining the loan
Prepaid Interest:
Is interest required by the lender to be deposited in an escrow account to cover the period between prior to the full monthly payment date of the loan. Example, a loan is approved and closed on the 26th of a month and is funded by the bank on 30th of the month. The period between 26th and 1st of the next month is prepaid interest.
Prepayment:
Payment before the due date of a loan, either partial or full payment
Prepayment Penalty:
Extra fee’s paid to a lender when a loan is paid up before its due date. Since the lender expects the total sum of all monthly interests up to the end of the contract. A prepayment will reduce the number of months interest is paid hence the penalty
Primary Mortgage Market:
PMM consists of banks mortgage companies, savings loans or credit unions, all with one function in common “originate and serving mortgage loans.
Prime Rate:
The lowest interest rate available to the commercial sector, for any borrower who meets the credit criteria
Principal:
The Net cost of a loan minus the sum of all interest, insurance and taxes and the total payment to date
Private Mortgage Insurance:
PMI is extra insurance that is otherwise not needed except when the borrower does not provide the standard 20% down-payment but provides maybe 2% of the required down payment. The PMI insures both parties, Lender and Borrower against default
Probate:
Court or Judicial hearing to discuss and establish the instructions of a deceased. To ensure a deceased estate is properly distributed to legal inheritors, and prove the validity of the Will left by the deceased
Property Tax:
Local government tax on the property different from any component of PITI which goes to lenders
Public Sale:
Auction of properties sold “as is”. For properties placed on sale by owner or business entity or government
Quit Claim Deed:
To “Quit” or “give away” your claim to a property, quit claim deed can be prepared by the county registrar. If a buyer that there are defects the title of property and is unwilling to proceed with a purchase, a quit claim deed can be requested from the person with such claim or supposed stake. The quit claim deed releases all claims to the buyer who then assumes responsibility for all risks of purchasing the property.
Recurring costs:
Are prorated as part of the main contract and will include private mortgage Insurance, Home Owners Insurance, Mortgage Interest, and sometimes Home Owners Association fees
Realtor and (Real Estate Agent ):
A person who helps potential home owners to find and select adequate properties, a realtor is a professional who is a member of the National Association of Realtors
RESPA:
Guidelines issued by congress to ensure lenders are fair to the home buyer for properties with 1 unit or 1-4 units. Lender is liable to the legal system for either failing to provide the buyer with a copy of the Respa 1-3 days applying for a loan OR not fulfilling terms of the RESPA.
Redlining:
Mortgage banks and lenders practice of isolating a specific a specific neighborhood refusing them loans, as in “Red zone”, OR ‘No go zone”.
Refinancing:
Obtaining a new loan to pay off an existing loans principal and interest outstanding
Re-conveyance:
A mortgage loan allows the bank to keep title ownership of the property until the loan is paid in full. When the loan is paid in full the ownership title is returned OR reconvened back to the owner
Recording:
The process of recording the mortgage on a property at the state or county records office
Rescission:
The three days breather given to a mortgage holder to accept the refinance contract or reject the refinance contract. “Rescission” applies only to refinances
Recourse:
The secondary option or extra option available to a mortgage bank or lender, after reclaiming from a defaulting mortgagor fails, a recourse is the additional option to make collect on the debt
Right of Survivorship:
A joint owners right to obtain sole custody of the jointly owned property from a deceased joint owner
Reverse Mortgage:
A mortgage which pays the home owner a monthly amount until death. The payments increases’ the principal and then gives title to the mortgage bank, at the death of the mortgagor
Roll Over Loan:
A stipulation in a mortgage contract allowing refinance of the principal balance of a loan every few years, through the life of the loan, “roll over” indicating “rolling” the outstanding loan balance into a newly refinance loan principal.
Rate Cap see (Capitalization Rate OR CAP Rate)
Reinstatement:
A process of avoiding the foreclosure and resuming normal mortgage payments after your lender begins a foreclosure procedure. Many state governments have foreclosure avoidance and reinstatement programs to help distressed home owners.
Repayment Plan:
An agreement between lender and borrower to readjust payment amount and length of terms, to accommodate a financially distressed borrower
Restrictive Covenants:
A note or clause in the contract restricting specific use, modification or change in existing size or shape in texture of a property
