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Federal Housing Administration
(FHA). A federal agency which insures mortgages that have
lower downpayment requirements than conventional loans.
Fixed Rate Mortgage. A
mortgage whose interest rate remains constant over the life of the
loan. The payments are not necessarily level. (See Graduated Payment
Mortgage and Growing Equity Mortgage).
Fixed Schedule Mortgage.
A mortgage whose payment schedule for the life of the loan is
established at closing. The payments and interest rate are not
necessarily level.
Graduated Payment Mortgage (GPM).
A fixed-rate, fixed-schedule loan which starts with lower payments
than a level payment loan; the payments rise annually over the first 5
to 10 years and then remain constant for the remainder of the loan.
GPMs involve negative amortization.
Growing Equity Mortgage (Rapid Payoff Mortgage). A
fixed-rate, fixed-schedule loan which starts with the same payments as
a level payment loan; the payments rise annually, with the entire
increase being used to reduce the outstanding balance. No negative
amortization occurs, and the increase in payments may enable the
borrower to pay off a 30-year loan in 15 to 20 years, or less.
Hazard Insurance.
Protection against damage caused by fire, windstorm, or other common
hazards. Many lenders require borrowers to carry it in an amount at
least equal to the mortgage.
Housing Finance Agency.
A state agency which offers a limited amount of below-market-rate home
financing for low-and moderate-income households.
Index. The interest
rate or adjustment standard which determines the changes in monthly
payments for an adjustable rate loan.
Infrastructure. The
public facilities and services needed to support residential
development, including highways, bridges, schools, and sewer and water
systems.
Interest. The cost
paid to a lender for the use of borrowed money.
Joint Tenancy. A form
of ownership by which the tenants own a property equally. If one dies,
the other would automatically inherit the entire property.
Level Payment Mortgage.
A mortgage whose payments are identical for each month over the life
of the loan.
Mortgage Broker. A
broker who represents numerous lenders and helps consumers find
affordable mortgages; the broker charges a fee only if the consumer
fins a loan.
Mortgage Commitment. A
formal written communication by a lender, agreeing to make a mortgage
loan on a specific property, specifying the loan amount, length of
time and conditions.
Mortgage Company (Mortgage
Banker). A company that borrows money from a bank, lends it
to consumers who want to buy homes, then sells the loans to investors.
Mortgagee.
The lender who makes a mortgage loan.
Mortgage Loan. A
contract in which the borrower’s property is pledged a s collateral
and which can be repaid in installments over a long period. The
mortgagor (buyer) promises to repay principal and interest, to keep
the home insured, to pay all taxes, and to keep the property in good
condition.
Mortgage Origination Fee.
A charge by a lender for the work involved in preparing and servicing
a mortgage application (usually 1 percent of the loan amount).
Negative Amortization.
An increase in the outstanding balance of a loan when a monthly
payment is not large enough to cover all of the interest due.
Note. A formal
document showing the existence of a debt and stating the terms of
repayment.
PITI. Principal,
interest, taxes, and insurance (the 4 major components of monthly
housing payments).
Point. A charge of 1
percent of the mortgage amount. Points are a one-time charge assessed
by the lender at closing to increase the interest yield on a mortgage
loan.
Prepayment. Payment of
all or part of a debt prior to its maturity.
Principal. The amount
borrowed in a loan, excluding interest and other charges.
Property Survey. A
survey to determine the boundaries of your property. The cost will
depend on the complexity of the survey.
Rapid Payoff Mortgage.
(See Growing Equity Mortgage).
Recording Fee. A
charge for recording the transfer of a property, paid to a city,
county, or other appropriate branch of government.
Real Estate Settlement
Procedures Act (RESPA). A federal law requiring lenders to
provide home buyers with information about known or estimated
settlement costs. The act also regulates other aspects of settlement
procedures.
R-Value. The
resistance of insulation material (including windows) to heat passing
through it. The higher the number, the greater the insulating value.
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