Vocabulary I Flashcards

1
Q

acceleration clause

A

A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for
accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

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2
Q

adjustable-rate mortgage (ARM)

A

A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

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3
Q

adjustment date

A

The date the interest rate changes on an adjustable-rate mortgage.

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4
Q

annual percentage rate (APR)

A

This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using
your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual not rate on your loan.

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5
Q

application

A

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

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6
Q

appraised value

A

An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on
comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

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7
Q

appraiser

A

An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work
directly for mortgage lenders, most are independent.

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8
Q

appreciation

A

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

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9
Q

assessed value

A

The valuation placed on property by a public tax assessor for purposes of taxation.

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10
Q

assessment

A

The placing of a value on property for the purpose of taxation.

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11
Q

assessment

A

The placing of a value on property for the purpose of taxation.

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12
Q

assessor

A

A public official who establishes the value of a property for taxation purposes.

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13
Q

asset

A

Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds,
mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

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14
Q

assignment

A

When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.

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15
Q

assumable mortgage

A

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must “qualify” in order to assume the loan.

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16
Q

assumption

A

The term applied when a buyer assumes the seller’s mortgage.

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17
Q

balloon mortgage

A

A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

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18
Q

balloon payment

A

The final lump sum payment that is due at the termination of a balloon mortgage.

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19
Q

bill of sale

A

A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down
payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

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20
Q

bond market

A

Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and
down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

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21
Q

bridge loan

A

Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge
loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders
now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

22
Q

buydown

A

Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the
remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment.
These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A “lender funded buydown” is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to “qualify” at the start rate and can qualify for a higher loan amount. Another
reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

23
Q

cap

A

Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as “caps.” Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that
payment can change each year, and that limit is also referred to as a cap.

24
Q

cash-out refinance

A

When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred
to as a “cash out refinance.”

25
Q

certificate of deposit

A

A time deposit held in a bank which pays a certain amount of interest to the depositor.

26
Q

certificate of deposit index

A

One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

27
Q

Certificate of Reasonable Value (CRV)

A

Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

28
Q

chain of title

A

An analysis of the transfers of title to a piece of property over the years.

29
Q

clear title

A

A title that is free of liens or legal questions as to ownership of the property.

30
Q

closing

A

This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorders office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.

31
Q

closing costs

A

Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid
just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance.
A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the
borrower within three days of receiving a home loan application.

32
Q

closing statement

A

See Settlement Statement.

33
Q

collateral

A

In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed
of trust.

34
Q

collection

A

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to “collection.” As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

35
Q

commission

A

Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan
officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors
generally earn the largest commissions, followed by lenders, then the others.

36
Q

common area assessments

A

In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to
maintain the property and common areas.

37
Q

common areas

A

Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’
association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and
maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

38
Q

common law

A

An unwritten body of law based on general custom in England and used to an extent in some states.

39
Q

community property

A

In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special
circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

40
Q

comparable sales

A

Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”

41
Q

condominium

A

A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the
unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.

42
Q

condominium conversion

A

Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

43
Q

construction loan

A

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

44
Q

contingency

A

A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is
not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

45
Q

contract

A

An oral or written agreement to do or not to do a certain thing.

46
Q

convertible ARM

A

An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

47
Q

cooperative (co-op)

A

A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving
each resident the right to occupy a specific apartment or unit.

48
Q

cost of funds index (COFI)

A

One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings,
borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

49
Q

credit repository

A

An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being
considered for credit.

50
Q

debt

A

An amount owed to another.

51
Q

deed-in-lieu

A

Short for “deed in lieu of foreclosure,” this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu.
Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in lieu
may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.

52
Q

deed of trust

A

Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.