Gulf & Southern 

Mortgage

Definitions

 Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

TERMS YOU SHOULD KNOW:

 ACCELERATION CLAUSE--Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

ADJUSTABLE RATE MORTGAGE (ARM)--Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also known as the renegotiable rate mortgage, or the Canadian rollover mortgage.

ADJUSTMENT INTERVAL--On an adjustable rate mortgage the time between changes in the interest rate and/or monthly payment, typically one, three, or five years, depending on the index.

AMORTIZATION--Means loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period including accrued interest on the outstanding balance.

ANNUAL PERCENTAGE RATE (APR)--An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows the homebuyer to compare different types of mortgages based on the annual cost for each loan.

APPRAISAL--An estimate of the value of property, made by a qualified professional called an "appraiser."

ASSUMPTION--The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from a seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, possibly higher, market-rate interest charge will apply.

BALLOON (PAYMENT) MORTGAGE--Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

BROKER--An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not lend money himself. Brokers usually charge a fee or receive a commission for their services.

BUY-DOWN--When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

CAPS (INTEREST)--Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

CAPS (PAYMENT)--Consumer safeguards limiting amount monthly payments on adjustable rate mortgage can change.

CLOSING--The meeting between the buyer, seller, and lender or their agents where the property and funds legally change hands. Also called settlement.

CLOSING COSTS--Usually include an origination fee, discount points, appraisal fee, title search, and insurance, survey, taxes, deed recording fee, credit report charge, and other costs assessed at settlement. The costs of closing usually are about 3 to 6 percent of the mortgage amount.

COMMITMENT--An agreement, often in writing, between a lender and a borrower, to lend money at a future date subject to the completion of paperwork or compliance with stated conditions.

CONSTRUCTION LOAN--A short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

CONVENTIONAL LOAN--A mortgage not insured by FHA, or guaranteed by VA or Farmers Home Administration (FmHA).

CREDIT RATIO/DEBT RATIO--The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (Conventional loans). See housing expenses-to-income ratio.
 

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

DEED OF TRUST--In many states, this document is used in place of a mortgage to secure the payment of a note.

DEFAULT--Failure to meet legal obligations in a contract, specifically, failure to make the monthly mortgage payments.

DEFERRED INTEREST--See NEGATIVE AMORTIZATION.

DELINQUENCY--Failure to make payments on time. This can lead to foreclosure.

DEPARTMENT OF VETERANS AFFAIRS (VA)--Independent agency of the federal government which guarantees long-term, low- or no-down payment mortgages to eligible veterans.

DISCOUNT POINTS--See points.

DOWN PAYMENTS--Money paid to make up the difference between the purchase price and mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional loans, and no money down up to 5 percent on FHA and VA loans.

DUE-ON-SALE CLAUSE--A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

EARNEST MONEY--Money given by a buyer to a seller as part of the price to bind a transaction or assure payment.

EQUAL CREDIT OPPORTUNITY ACT (ECOA)--A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public programs.

EQUITY--The difference between the fair market value and current indebtedness, also reeferred to as the owner's interest.

ESCROW--Refers to a neutral third party who carries out the instructions of both the buyer and the seller to handle all the paperwork of settlement or "closing." Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

FANNIE MAE--See Federal National Mortgage Association.

FARMERS HOME ADMINSTRATION (FmHA)--Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)--Also called "Freddie Mac," is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

FEDERAL HOUSING ADMINISTRATION (FHA)--A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) Also knows as "Fannie Mae." Originally a tax-paying corporation created by Congress that purchases and sells conventional mortgages as well as those insured by FHA or guaranteed by VA. This privatized institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FHA LOAN--A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($144,336), they're generous enough to handle moderate-priced homes almost anywhere in the country.

FHA MORTGAGE INSURANCE--Requires a small fee (currently 1.5 percent of the loan amount added to the mortgage) paid at closing or a portion of this added to each monthly payment of an FHA loan to insure the loan with FHA.

FIXED-RATE MORTGAGE--A mortgage on which the interest rate is set for the term of the loan.

FORECLOSURE--A legal procedure in which property securing debt is sold by the lender to pay the defaulting borrower's debt.

FREDDIE MAC--See Federal Home Loan Mortgage Corporation.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

GINNIE MAE--See Government National Mortgage Association.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) -Also known as "Ginnie Mae," provides siources of funds for
residential mortgages, insured or guaranteed by FHA or VA.

GRADUATED PAYMENT MORTGAGE (gpm)--A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

GROSS MONTHLY INCOME--The total amount the borrower earns per month, before any expenses are deducted.

GUARANTEE--A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

HAZARD INSURANCE--A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm, and the like.

HOUSING EXPENSES-TO-INCOME RATIO--The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income ratio.

IMPOUND--That portion of a borrower's monthly payments held by the lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

INDEX--The published rate, verifiable by the borrower, uncontrollable by the lender. This rate is added to the Margin (or spread). The Margin is a percentage needed to cover all lender costs (overhead and profit). The Margin usually remains constant over the life of the loan, while the Index may move up
or down with fluctuations in the economy.

INVESTOR--Money source for a lender.

JUMBO LOAN--A loan which is larger (currently more than $300,700) than the limit set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

LIEN--A claim upon a piece of property for the payment of satisfaction of a debt or obligation.

LOAN-TO-VALUE RATIO--The relationship between the amount of the mortgage loan and the appreciated value of the property expressed as a percentage.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

MARGIN--The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

MARKET VALUE--The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MORTGAGE INSURANCE--Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

MORTGAGEE--The lender.

MORTGAGOR--The borrower or homeowner.

NEGATIVE AMORTIZATION--Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the homebuyer ends up owing more than the original amount of the loan.

NET EFFECTIVE INCOME--The borrower's gross income minus federal income tax.

NON-ASSUMPTION CLAUSE--A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

ORIGINATION FEE--The fee charge by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property, usually computes as a percentage of face value of the loan.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

PITI--Principal, interest, taxes, and insurance. Also called monthly housing expense.

POINTS (LOAN DISCOUNT POINTS)--Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

POWER OF ATTORNEY--A legal document authorizing one person to act on behalf of another.

PREPAIDS--Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance, and special assessments.

PREPAYMENT--A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

PREPAYMENT PENALTY--Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

PRINCIPAL--The amount of debt, not counting interest, left on a loan.

PRIVATE MORTGAGE INSURANCE (PMI)--In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment--as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance.

REALTOR--A real estate Broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

RECISION--The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three business days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as equity.

RECORDING FEES--Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

RENEGOTIABLE RATE MORTGAGE (RRM)--A loan in which the interest is adjusted periodically. See adjustable rate mortgage.

RESPA--Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish information after application only.

REVERSE ANNUITY MORTGAGE (RAM)--A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

SERVICING--All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections, and the like.

SETTLEMENT/SETTLEMENT COSTS--See closing/closing costs.

SHARED APPRECIATION MORTGAGE (SAM)--A mortgage in which a borrower receives a below-market interest rate in return for which a lender (or another investor, such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgages where the borrower shares the monthly principal and interest payments with another party in exchange for a part of the appreciation.

SURVEY--A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings.

TERM MORTGAGE--See balloon payment mortgage.

TITLE--A document that gives evidence of an individual's ownership of property.

TITLE INSURANCE--A policy, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or the seller.

TITLE SEARCH--An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

TRUTH-IN-LENDING--A federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for a loan.

TWO-STEP MORTGAGE--A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7 to 10 years), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the
loan, due within 30 days notice at the end of 7 to 10 years. Also called "Super Seven" or "Premier" mortgage.
 

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W

UNDERWRITING--The decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate or loan amount.

VA LOAN--A long-term, low- or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FUNDING FEE--A premium of 2% of loan amount on first loan use, or 3% on subsequent loans, paid on a VA guaranteed loan. On a $75,000 30-year fixed-rate mortgage with no down payment, this would amount to $1,500 either paid at closing or added to the amount financed (or $2,250 for later loans.)

VERIFIABLE RATE MORTGAGE (VRM)--See adjustable rate mortgage.

VERIFICATION OF DEPOSIT (VOD)--A document signed by the borrower's financial institution verifying the status of his/her financial accounts (Form 1006).

VERIFICATION OF EMPLOYMENT (VOE)--A document signed by the borrower's employer verifying his/her position and salary (Form 1005).

WRAPAROUND--Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Click on the letter to link to the words beginning with the letter or letters.  A  B  C  D E   F   G   H I J   M N O   P Q R   S T   U V W