REAL ESTATE GLOSSARY
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margin
The difference between the interest rate and the index on an
adjustable rate mortgage. The margin remains stable over the
life of the loan. It is the index which moves up and down.
maturity
The date on which the principal balance of a loan, bond, or
other financial instrument becomes due and payable.
merged credit report
A credit report which reports the raw data pulled from two
or more of the major credit repositories. Contrast with a
Residential Mortgage Credit Report (RMCR) or a standard
factual credit report.
mortgage
A legal document that pledges a property to the lender as
security for payment of a debt. Instead of mortgages, some
states use First Trust Deeds.
mortgagee
The lender in a mortgage agreement.
mortgage insurance
(MI)
Insurance that covers the lender against some of the losses
incurred as a result of a default on a home loan. Often
mistakenly referred to as PMI, which is actually the name of
one of the larger mortgage insurers. Mortgage insurance is
usually required in one form or another on all loans that
have a loan-to-value higher than eighty percent. Mortgages
above 80% LTV that call themselves "No MI" are usually a
made at a higher interest rate. Instead of the borrower
paying the mortgage insurance premiums directly, they pay a
higher interest rate to the lender, which then pays the
mortgage insurance themselves. Also, FHA loans and certain
first-time homebuyer programs require mortgage insurance
regardless of the loan-to-value.
mortgage
insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance,
either to a government agency such as the Federal Housing
Administration (FHA) or to a private mortgage insurance (MI)
company.
mortgage life and disability insurance
A type of term life insurance often bought by borrowers. The
amount of coverage decreases as the principal balance
declines. Some policies also cover the borrower in the event
of disability. In the event that the borrower dies while the
policy is in force, the debt is automatically satisfied by
insurance proceeds. In the case of disability insurance, the
insurance will make the mortgage payment for a specified
amount of time during the disability. Be careful to read the
terms of coverage, however, because often the coverage does
not start immediately upon the disability, but after a
specified period, sometime forty-five days.
multidwelling units
Properties that provide separate housing units for more than
one family, although they secure only a single mortgage.
negative amortization
Some adjustable rate mortgages allow the interest rate to
fluctuate independently of a required minimum payment. If a
borrower makes the minimum payment it may not cover all of
the interest that would normally be due at the current
interest rate. In essence, the borrower is deferring the
interest payment, which is why this is called "deferred
interest." The deferred interest is added to the balance of
the loan and the loan balance grows larger instead of
smaller, which is called negative amortization.
no cash-out refinance
A refinance transaction which is not intended to put cash in
the hand of the borrower. Instead, the new balance is
caculated to cover the balance due on the current loan and
any costs associated with obtaining the new mortgage. Often
referred to as a "rate and term refinance."
no-cost loan
Many lenders offer loans that you can obtain at "no cost."
You should inquire whether this means there are no "lender"
costs associated with the loan, or if it also covers the
other costs you would normally have in a purchase or
refinance transactions, such as title insurance, escrow
fees, settlement fees, appraisal, recording fees, notary
fees, and others. These are fees and costs which may be
associated with buying a home or obtaining a loan, but not
charged directly by the lender. Keep in mind that, like a
"no-point" loan, the interest rate will be higher than if
you obtain a loan that has costs associated with it.
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.
no-points loan
Almost all lenders offer loans at "no points." You will find
the interest rate on a "no points" loan is approximately a
quarter percent higher than on a loan where you pay one
point.
notice of default
A formal written notice to a borrower that a default has
occurred and that legal action may be taken.
original
principal balance
The total amount of principal owed on a mortgage before any
payments are made.
origination fee
On a government loan the loan origination fee is one percent
of the loan amount, but additional points may be charged
which are called "discount points." One point equals one
percent of the loan amount. On a conventional loan, the loan
origination fee refers to the total number of points a
borrower pays.
owner financing
A property purchase transaction in which the property seller
provides all or part of the financing.
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