Common Mortgage/Real Estate Terms
Fannie Mae
Short name for the Federal National Mortgage Association. One of the main
Government Sponsored Agencies which are the companies who sell mortgage
backed bonds to investors. They are the ultimate source of the money that
we lend. Fannie Mae protects its investors by issuing underwriting guidelines
that are to be followed to ensure quality lending; also see schematic
under "commonly asked questions"
Freddie Mac
Short name for Federal Home Loan Mortgage Corporation - see above
FHA Financing
Government backed minimum down financing program which has a lower mortgage
insurance premium and greater credit leeway as compared to conventional
minimum down programs
Fixed Loan
Most common type of financing. Terms ranging from 10 to 30 years. Interest
rate and P&I payment remains constant throughout life of loan.
Floating
Not locking in a rate, but rather choosing to float the interest rate
as the market moves up or down.
Flood Certification
Required document on all loans. Confirms if the property is in or out
of a FEMA designated flood zone
Funds held in Escrow
Generally only applies to new construction. Monies held from the seller
to provide payment for repairs or non completed items.
Good Faith Estimate
Document prepared by lender which estimates and delineates the various
fees and closing costs associated with the home purchase
Government Financing
Financing provided from government agencies such as FHA, VA etc…
HELOC
Home Equity Line of Credit. Second mortgage product, generally characterized
by interest only payments and the ability to draw, pay back, and redraw
Home Inspection
Not required by lender. This is a private inspection done by the buyers
choice to confirm that the property is in acceptable condition.
Homeowners Association Dues
Amount paid by owner of a townhome or condo to cover various amenities
or services provided by the homeowners association (examples -- common
areas, hazard insurance, garbage, mowing, snow removal)
Homeowners/hazard Insurance
Insurance which covers damage or loss to the property. The premium is
usually paid into an escrow account held by the mortgage company, which
then pays the insurance company once a year
HUD-I (Settlement statement)
Document prepared by title company at closing which shows where all of
the money in the transaction was coming from and going to.
Jumbo Loan
Loan with an initial balance greater than $300,700.
Jumbo Pricing
Refers to the fact that rates are generally slightly higher on jumbo loans.
Loan-to-Value (LTV)
Ratio of liens versus value of property or sales price. Ex. 80,000 owed
on a property worth 100,000 equals an 80% LTV
Lock-in Period
Time period that a rate is protected for during the loan process
Locking in
Choosing to protect a particular rate and program for a specific period
of time
Mortgage Insurance (MI)
Insurance which protects the LENDER against default. Generally the higher
the loan-to-value the higher the monthly premium.
Mortgage -- Document. This document signed at closing is the collateralization
of the property to the note or loan.
Note
Document. This document signed at closing is the promise by the signers
to repay the loan.
Origination Fee
1% of the loan amount. Can be avoided by paying a higher rate; typically
is tax deductible.
Odd Days Interest/Per Diem Interest
Collected at closing, it is money collected/refunded to borrower to synchronize
the closing to the monthly payments
Source: www.suwoodard.com
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