PAGE 38 - REAL ESTATE & HOME BUILDERS GUIDE - APRIL 2015
Adjustable-rate Mortgage (ARM) - A
mortgage for which the interest rate and the
payments change during the life of the loan.
Agreement of Sale - The contract in which
the seller agrees to sell and buyer agrees to
buy, with conditions and terms spelled out
and signed by both parities.
Amortization - A plan for gradually repaying,
in periodic payments, money borrowed.
Balloon Mortgage - A mortgage that has a
large amount of the principle due at the
time of maturity.
Bridge Loan - A loan that finances a
mortgage at the end of one loan and the
start of a new one.
Closing Costs - Expenses and fees that are
added to the price of the property, paid by
the buyer and the seller at the closing. The
Agreement of Sale states who pays which
costs.
Commercial Bank - A financial institution
authorized to provide a variety of financial
services, including consumer and business
loans (generally short-term), checking
services, credit cards and savings accounts.
Condominium - The buyer owns title to a
residential unit, shares common areas with
other unit owners and pays maintenance
fees to the condominium association for
property upkeep.
Conventional Loan - A loan not guaranteed
by the VA or insured by the FHA.
Co-op - In exchange for the right to occupy
a co-op unity, the buyer owns shares in the
co-op corporation (made up of co-op
residents), rather than owning real property.
Debt-to-income Ratio - A percentage
arrived at by dividing the borrower's fixed
monthly obligations by the borrower's
monthly income.
Federal National Mortgage Association
(FNMA or Fannie Mae) - A privately owned
and managed corporation that purchases
mortgage loans originated by other lenders.
Fannie Mae issues stocks and securities to
obtain funds for its purchases.
Fixed-Rate Mortgage - A loan that has one
set interest rate. Installment Debts - A buyer's
long-term debts; they usually extend for
periods longer than nine months.
Intermediate-term Loan - A home loan of
less than 30 years.
Life-of-loan Cap - A consumer protection on
some adjustable loans. It limits the total
upward adjustment that may occur during
the life of the loan. Also known as an overall
cap.
Loan-to-value Ratio - The relationship
between the amount of a home loan and
the total value of the property. Lenders may
limit their maximum loan to 80-95 percent of
value.
Lock-in Rate - A rate commitment made by
lenders when making a mortgage loan to
commit to or "lock in" that rate pending loan
approval. Lock-in commitment periods vary.
Market Value - The highest price the buyer is
willing to pay for a property and the lowest
price the seller will accept.
Mortgage - A lien or claim on property given
by a buyer to a lender as security for money
borrowed.
Mortgage Broker - An individual or company
that obtains mortgages for others by finding
lending institutions, insurance companies, or
private lenders to lend money.
Payment Cap - Limits the amount that a
monthly payment on an ARM loan can
increase at the time of adjustment.
Points - One percent of the amount of the
mortgage loan.
Due-on-sale Clause - A mortgage stipulation
demanding payment of the entire loan
balance upon sale or other transfer of the
real estate securing the loan.
Prepayment - Payment of a mortgage loan,
or portion of the loan, before the due date.
Equity - The ownership interest remaining in
property after payment of all liens or other
charges on the property.
Prime Rate - The interest rate that banks
charge to their preferred customers.
Changes in prime rate are used as indexes in
some adjustable rate mortgages, especially
home equity lines of credit.
Escrow - Funds left in trust with a third party,
to be paid to a designated recipient at a
designated time.
Principal - The basic loan amount, separate
from interest, insurance, and taxes.
Federal Home Loan Mortgage Corporation
(FHLMC or Freddie Mac) - A quasi-
governmental secondary market agency
that purchases whole mortgage loans.
Freddie Mac sells interest in pools of
mortgage loans to obtain funds for
mortgage loan purchases.
Private Mortgage Insurance (PMI) - The
insurance coverage offered by a private
company that protects a lender against loss
on a default mortgage loan. Its use is usually
limited to loans with high loan-to-value
ratios. The borrower pays the premiums.
Title - Proof of ownership.
Federal Housing Administration (FHA) - A
government agency within the Department
of Housing and Urban Development that
administers many programs involving
housing loans made from private funds,
including mortgage insurance for lenders
and rent or interest assistance for low-
income tenants and mortgagors.
Title Search - A check of title records to
assure that the buyer is purchasing property
with no liens, encumbrances, or other claims
which might adversely affect the title's value
or marketability.
Veterans
Administration
(VA)
-
A
government agency that helps veterans of
the armed forces obtain housing.
Eastern Oregon
R eal E state
& H om ebu ilders G u ide