Terminology

Question 1

Borrower

Answer 1

An individual who applies for and receives funds in the form of a loan and is obligated to repay
the loan in full under the terms of the loan.

Question 2

Title

Answer 2

Document that gives evidence of ownership of a property. individuals who will have legal ownership in the property are considered “on title” and will sign the mortgage and other documentation

Question 3

Refinancing

Answer 3

The process of paying off one loan with the proceeds from a new loan secured by the same property

Question 4

Escrow Company

Answer 4

n escrow company is a licensed neutral third party that distributes legal documents and funds
on behalf of a buyer and seller

Question 5

Escrow Agent

Answer 5

A person with fiduciary responsibility to the buyer and the seller or the borrower and the lender to ensure the terms of the purchase/sale are carried out

Question 6

Title Company

Answer 6

The title company makes sure that a piece of real estate is legitimate, then issues title insurance
for that property that protects both the lender and the owner from lawsuits as a result of title
disputes

Question 7

Title Insurance

Answer 7

Protects a lender against any title dispute that may arise over a particular property. It is required to close on your home.

Question 8

Lender

Answer 8

The bank that is lending the money. The lender has the biggest role in the process and without them there would be no escrow company or title company

Question 9

Deed of Trust

Answer 9

There are 5 functions:

1. it records who owns the property
2. It records the amount the borrower is borrowing from the bank
3. It records who is lending the money, also known as the lien holder.
4. It records the legal description of the property, how the county recognizes the property location.
5. States the rules and regulations in which the property to abide by.

Question 10

Rider

Answer 10

Amendments to the deed of trust, something the lender wants to add to the deed.

Question 11

Principal

Answer 11

The amount of debt, excluding interest on a loan

Question 12

Note

Answer 12

A contract between the lender and the borrower where it states the loan amount, interest rate and the loan term

Question 13

Interest rate

Answer 13

What the borrower agrees to pay back the bank on the money that it is borrowed.

Question 14

Fix rate Loan

Answer 14

This means that the interest rate will not change for the duration of the loan

Question 15

Adjustable Rate Mortgage Loans (ARM)

Answer 15

A variable interest rate that will change over time, it may start as a low interest rate and then get larger and fluctuate.

Question 16

Home Equity Line of Credit (HELOC)

Answer 16

A line of credit that is tied to the equity of your home. If you have more then 20% equity in your home the bank may approve you to borrow a certain amount of equity in physical cash.

Question 17

Reverse Mortgage

Answer 17

This enables older homeowners (62+) to convert part of their homes into tax-free income without having to sell the home, give up a title or take on a new mortgage payment.

Question 18

Discount Points/Buy Down

Answer 18

Points are an up-front fee paid to the lender at the time that you get your loan to the lower interest rate you qualified for. For example if you get a 5% rate from a lender you could pay them a certain amount of cash upfront in order to get a lower interest rate such as 4.5%

Question 19

Default

Answer 19

This means that the borrower has not lived up to the agreed upon terms with the lender and the lender has the right to take the house from the borrower within 30 days of no payments received.

Question 20

Foreclosure

Answer 20

If the borrower has not lived up to the terms of the loan the bank can foreclose on the home and take the home away from the borrower. Most banks allow the start of the foreclosure process after 3 consecutive missed payments.

Question 21

Lien

Answer 21

A lien is a form of security interest granted over a property to secure the payment of a debt.
Anyone can put a lien against a home as long as they have the homeowners consent.

Question 22

Property Tax

Answer 22

Taxes due to the county where the property is located. This usually happens twice a year.

Question 23

Impound Account/Escrow Account

Answer 23

A savings account that is set up with the lender that the borrower will make a monthly deposit to in order to pay for taxes and insurance.

Question 24

Amortization

Answer 24

Repayment of a loan with periodic payments of both principal and interest calculated to pay the loan by the end of the period

Question 25

Hazard Insurance

Answer 25

Protects the insured against loss due to fire or other natural disasters.

Question 26

PITI

Answer 26

Principal, Interest, Taxes and Insurance, these are the components of a monthly mortgage.

Question 27

FHA Loan

Answer 27

Fixed or adjustable rate loans insured by the US Department of housing and urban development. Home buyers can purchase a home with just 3% down on a property.

Question 28

VA Loans

Answer 28

Fixed rate loans only available for veterans, reservists, active-duty and surviving spouses of veterans. No money down is due at the signing.