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| GLOSSARY SELECTION | ||
 | SECTION 01: DEFINITIONS A - D | |
| SECTION 02: DEFINITIONS E - H | |
| SECTION 03: DEFINITIONS I - L | |
| SECTION 04: DEFINITIONS M - P | |
| SECTION 05: DEFINITIONS Q - T | |
| SECTION 06: DEFINITIONS U - Z | |
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MATURITY The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. At the maturity of a 30-year loan the principal balance will be paid in full. MAXIMUM FINANCING The maximum amount a lender will lend on a specific loan program. MAXIMUM RATE The maximum interest rate that can accrue on a variable rate loan MERGED CREDIT REPORT A credit report that contains information from more than one credit reporting agency. When the report is created, the information is compared for inconsistencies and duplicate entries. Any duplicates are combined to provide a summary of a your credit. MODIFICATION The act of changing any of the terms of the mortgage. MONEY MARKET ACCOUNT A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account MONTHLY MORTGAGE INSURANCE (MI) PAYMENT Portion of monthly payment that covers the cost of Private Mortgage Insurance. MONTHLY PRINCIPAL & INTEREST (P&I) PAYMENT Portion of monthly payment that covers the principal and interest due on the loan. MONTHLY TAXES & INSURANCE (T&I) PAYMENT Portion of monthly payment that funds the escrow or impound account for taxes and insurance. MONTHLY PAYMENT (P&I) This is the monthly mortgage payment on a home loan, this includes principal and interest, but excludes any amounts that are applied to taxes and insurance. MORTGAGE A legal document that pledges a property to the lender as security for payment of a debt. MORTGAGE BANKER A company that originates, sells and services mortgages exclusively for resale in the secondary mortgage market. MORTGAGE BROKER An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services. MORTGAGEE The lender in a mortgage agreement. MORTGAGOR The borrower in a mortgage agreement. NEGATIVE AMORTIZATION An increase in the outstanding balance of a mortgage that occurs when the monthly payment is not large enough to cover the interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization. NO CLOSING COST LOAN A loan in which the fees the borrower(s) are not required to pay cash out-of-pocket at closing for the normal closing costs. The lender typically includes the closing costs in the principal balance or charges a higher interest rate than for a loan with closing costs to cover the advance of closing costs. NET WORTH The value of all of a person's assets, including cash, minus all liabilities. NON-CONFORMING LOAN See jumbo loan. NON-LIQUID ASSET An asset that cannot easily be converted into cash. NOTARY An official authorized by law to attest and certify certain documents by his or her hand and official seal. NOTE A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. NOTE RATE The interest rate stated on a mortgage note. ORIGINAL PRINCIPAL BALANCE The total amount of principal owed on a mortgage before any payments are made. OWNER FINANCING A property purchase transaction in which the property seller provides all or part of the financing and takes back a security instrument. PARTIAL PAYMENT A payment that is not sufficient to cover the scheduled monthly principal and interest payment on a mortgage loan. PAYMENT (P&I) Your monthly mortgage payment, including principal and interest, but excluding Tax and insurance payments. PAYMENT CHANGE DATE The date when a new monthly payment amount takes effect on an adjustable rate mortgage (ARM). Generally, the payment change date occurs in the month immediately after the adjustment date and the borrower is notified 30 days prior as to the new rate. PAYOFF To pay the outstanding balance of a loan in full. PIGGYBACK A combination of two loans. Example: A loan is made for 90% of the home price. 80% of the purchase price is supplied by a 1st mortgage and 10% by a 2nd mortgage. The 2nd mortgage is piggybacked on the 1st. PITI An abbreviation for the parts of a typical monthly mortgage payment. PITI stands for principal-Interest-Taxes-Insurance. See principal, interest, taxes, and insurance. PITI RESERVES A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months. PMI Stands for Private Mortgage Insurance. PMI is an insurance policy the borrower buys to protect the lender from non-payment of the loan. PMI policies are usually required if you make a down payment that is below 20% of the sales price of the property. PRE-APPROVAL A lender's conditional agreement to lend a specific amount on specific terms to a homebuyer. (subject to satisfactory appraisal and no change in financial condition). You can shop with assurance, because you'll know up-front how large a loan you could qualify for. PREFORECLOSURE SALE A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property, typically for less than the amount that is owed to the lender. PRE-PAID ITEMS (PREPAIDS) Items required by lender to be paid at closing prior to the period they cover such as prorated property taxes, homeowners insurance and pre-paid interest. PRE-PAID INTEREST Mortgage interest that is paid in advance of when it is due. PREPAYMENT Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized. PREPAYMENT PENALTY A fee that may be charged to a borrower who pays off a loan before it is due. Generally, a prepayment penalty is added to a loan in exchange for a discounted rate. PRE-QUALIFICATION A preliminary analysis of a borrower's ability to afford the purchase of a home. An affordability analysis takes into consideration factors such as income, liabilities, and available funds, along with the type of home loan, the likely taxes and insurance for the home, and the estimated closing costs. PRIMARY RESIDENCE The place someone lives most of the time. PRIME RATE The interest rate that banks charge on short-term loans to its most creditworthy customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates. PRINCIPAL The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. PRINCIPAL BALANCE The outstanding balance on a mortgage. The principal balance does not include interest or any other charges. See remaining balance. PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) Four potential components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that may be paid into an escrow account each month for property taxes and mortgage and hazard insurance. PURCHASE AGREEMENT A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. PURCHASE MONEY TRANSACTION A loan used in part as payment for a purchase. A loan that is used to buy a home is called a purchase money mortgage. PURCHASE PRICE The total amount paid for a home. |