Mortgage With Interest Rates And Monthly Payments example essay topic

Mortgage Terms Adjustable-Rate Mortgage (ARM): A mortgage with interest rates and monthly payments adjusted at regular intervals based on changes in either a national or regional index. Also called "variable-rate mortgage". Amortization: A loan payment schedule characterized by equal periodic payments that are calculated to meet current interest payments and retire the principal at the end of a fixed period (at maturity if the loan is fully amortized). 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, private mortgage insurance, and loan origination fee (points). Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.

ARM Margin: The spread (or difference) between the index rate and the mortgage interest rate for an adjustable-rate mortgage. Balloon Mortgage: A mortgage in which the debt service (the regular payments of principal and interest) will not result in the complete payment of the loan by the end of the mortgage term. 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. Closing: The completion of a real estate transaction that transfers rights of ownership to the buyer.

Also called "settlement". Condominium: A type of property ownership within a multiunit complex in which the homeowner owns a unit and a proportionate interest in certain common areas, such as the grounds of the complex. Contingency: A condition that must be met before a contract is legally binding. Conventional Mortgage: A loan that is not insured or guaranteed by the federal government.

Credit Report: A report from an independent agency that verifies a loan applicant's information on previous debts and liabilities. Deed: The legal document conveying title to a property. Down Payment: The part of the purchase price which the buyer pays in cash and does not finance with a mortgage. Earnest Money: A deposit made by the potential home buyer to show that he or she is serious about buying the house. Easement: A right of way giving persons other than the owner access to or over a property.

Equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of a property and the amount still owed on the mortgage. Escrow: The holding of documents and money by a neutral third party prior to closing; also, an account held by the lender (or service) into which a homeowner pays money for taxes and insurance. FHA Mortgage: A mortgage that is insured by the Federal Housing Administration. Also referred to as a "government" mortgage. First Mortgage: A mortgage that is the primary lien against a property.

Fixed-Rate Mortgage: A mortgage in which the interest rate does not change during the entire term of the loan. Flood Insurance: Insurance that compensates for physical property damages resulting from flooding. It is required for properties located in federally designated flood areas. Hazard Insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards. Homeowner's Warranty (HOW): 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.

HUD-1 Settlement Statement: This form, required by federal law, itemizes the services provided and lists the charges to the buyer and the seller. It is filled out by the settlement agent who conducts the closing. Both the buyer and the seller must sign it. 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. 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-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 home buyer 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. Mortgage: Collectively, the security instrument, the note, the title evidence, and all other documents and papers that evidence a lien on property as security for payment of a debt. Mortgage Life Insurance: This type of insurance pays off the mortgage in the event of the borrower's death.

Depending on your circumstances, this may be a prudent investment or may duplicate your existing 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. Offer to Purchase: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Origination Fee: A fee paid to the lender for processing a loan application; it is stated as a percentage of the mortgage amount. PITI: Stands for principal, interest, taxes, and insurance-the components of a monthly mortgage payment. Planned-Unit Development (PUD): A real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project. The owner may have an exclusive easement over some parts of the common areas (for example, a parking space). Points: A one-time charge by the lender to increase the yield of the loan; a point is one 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 home buyer 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. P&I (Principal and Interest): That portion of a home buyer's monthly payments to the lender that composes the debt service on the mortgage. Private Mortgage Insurance: Insurance provided by non government insurers that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value percentages greater than 80 percent. Radon: A radioactive gas found in some homes that in sufficient concentrations can cause health problems.

Secondary Market: The buying and selling of existing mortgages or mortgage-backed securities. This practice replenishes funds for additional mortgage lending by those institutions participating in the primary mortgage market. Servicing: The tasks a lender performs to protect the mortgage investment, including collecting the monthly payments, managing the escrow accounts, monitoring and dealing with delinquencies, and overseeing foreclosures and payoffs. Survey: 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.

T&I (Taxes and Insurance): That portion of a home buyer's monthly payments to the lender that goes into an escrow fund to pay property taxes, the homeowner's insurance premiums, and mortgage insurance, if applicable. 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.

Total Obligation-To-Income Ratio: The percentage of a borrower's debt compared to total income. One of the criteria used by lenders to calculate the risk involved in making a loan to a prospective borrower. Transfer Tax: State or local tax payable when title passes from one owner to another. Treasury Index: An index that is commonly used to determine interest rate changes for ARM plans. It is based on the selling price of Treasury bills and securities.

Underwriting: The analysis of risk, the determination of the appropriate loan amount, and the setting of the interest rate and other terms and conditions based on the underwriter's judgement of both the borrower's creditworthiness and the quality of the real property or other collateral to secure the loan. VA Mortgage: A mortgage that is guaranteed by the Veterans Administration. Verification: Examples: Verification of Employment (VOE) and Verification of Deposit (VOD). The lender will verify the information provided on the loan application as to your income and employment history, your assets (checking and savings accounts, etc. ), and your rent payment history.