Glossary of Mortgage Terms
Confused by all the words and phrases you run in to when apply for a mortgage, home equity line of credit, refi, etc.? Here's some definitions to help you out:
Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered
Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.
Conventional loans are mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).
Escrow is the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
Fixed-rate loans generally have repayment terms of 15, 20, or 30 years. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan.
The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.
Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.
Lock-in refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.
A mortgage is a document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off on the loan.
Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.
Points are fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.
Private mortgage insurance (PMI) protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.
Thrift institution is a general term for savings banks and savings and loan associations.
Transaction, settlement, or closing costs may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.
June 4, 2005 in Glossary & Definitions | Permalink | Comments (0)
What is HELOC
HELOC
stands for home equity line of credit, or simply "home equity line." It is a loan set up as a line of credit for some maximum draw, rather than for a fixed dollar amount.For example, using a standard mortgage you might borrow $150,000, which would be paid out in its entirety at closing. Using a HELOC instead, you receive the lender’s promise to advance you up to $150,000, in an amount and at a time of your choosing. You can draw on the line by writing a check, using a special credit card, or in other ways.
HELOCs are convenient for funding intermittent needs, such as paying off credit cards, making home improvements, or paying college tuition. You draw and pay interest on only what you need.
The major disadvantage of the HELOC is its exposure to interest rate risk. All HELOCs are adjustable rate mortgages (ARMs), but they are much riskier than standard ARMs. Changes in the market impact a HELOC very quickly.
February 26, 2005 in Glossary & Definitions, HELOC | Permalink | Comments (0)
Home Equity Loans Tips & Info
What is a home equity loan?
When you borrow money and put up the equity in your house as collateral, it’s called a home equity loan. These loans can be easier and larger than other loans you may be able to get, but they also put your home at risk.
What protection to I have against losing my home with a home equity loan?
The most important protection you have is to insure you get an honest lender and that you are capable of paying back the loan under the terms you agree to. Remember it is he equity in your house providing the loan, meaning the lender knows if you can't repay they can put a claim on the house.
YOU HAVE 3 DAYS TO CANCEL A HOME EQUITY LOAN
A federal credit law gives you three days to reconsider a signed credit agreement and cancel the deal without penalty. Your "right to rescind" or "right to cancel" is guaranteed by the Truth In Lending Act.
You can cancel the loan for any reason but only if you are using your principal residence as collateral, not a vacation or second home.
October 3, 2004 in Glossary & Definitions, Home Equity, Learning & Tips | Permalink | Comments (0)
HEL or HELOC Defined
What is a HELOC Loan?
You my hear of a HEL or a HELOC. HELOC is just the short form of Home Equity Line of Credit meaning an open-end line of credit. A home equity line of credit (Heloc) is a revolving line of credit with an adjustable interest rate indexed to the prime rate. Another form of a Heloc is a fixed-rate loan that allows you to leverage the equity in your home into cash, refinancing or to consolidate debt. Home equity lenders give you a line of credit up to 85% of your appraised homes value, minus the current mortgage loan balance. This of course is decided on your credit and your amount of debt.
What can a Heloc do for you? You can get a loan at a lower interest rate than other loans and be able to get cash to use the way you want:
Benefits of the HELOC loan
Low Interest Rate
Large sum of cash to spend, A HELOC is normally considered the cheapest source of cash
Different ways to access your line of credit including checks or credit cards
Drawbacks of the HELOC loan
You must use your home as collateral
Large final payment, ballon payment
Could put you more in debt if you do not plan ahead
Comparing Rates with HELOC:
Home Equity Line of Credit is the rate on open-ended lines of credit based on a $10,000 line, or on the minimum to borrow if it is above $10,000. The LTV is 80%. Introductory rates may be included, but only if the introductory rate applies to a $10,000 credit line or to the minimum line offered if it is above $10,000. Home equity loan (HEL) is a 60-month fixed rate, fixed term secured loan based on a $10,000 loan or on the minimum to borrow if it is above $10,000. The LTV is 80%. A lien must be placed on the property for this type of loan.
HELOC, Home Equity Loans, Home Equity Line of Credit
August 28, 2004 in Glossary & Definitions, HELOC, Home Equity | Permalink | Comments (0)
Glossary of Mortgage Terms
Confused by all the words and phrases you run in to when apply for a mortgage, home equity line of credit, refi, etc.? Here's some definitions to help you out:
Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered
Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.
Conventional loans are mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).
Escrow is the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
Fixed-rate loans generally have repayment terms of 15, 20, or 30 years. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan.
The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.
Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.
Lock-in refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.
A mortgage is a document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off on the loan.
Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.
Points are fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.
Private mortgage insurance (PMI) protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.
Thrift institution is a general term for savings banks and savings and loan associations.
Transaction, settlement, or closing costs may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.
June 17, 2004 in Glossary & Definitions | Permalink | Comments (0)
