If you are looking to finance the purchase of your Oahu home, here are 25 terms you should know, for better or worse ……ha!
ADJUSTABLE RATE MORTGAGE (ARM)
A mortgage loan subject to changes in interest rates; when rate change,
ARM monthly payments increase or decrease at intervals determined by
the lender; the change in monthly-payment amount, however, is usually
subject to a Cap.
AMORTIZATION
Repayment of a mortgage loan through monthly installments of principal
and interest; the monthly payment is based on a schedule that will allow
you to own your home at the end of a specific time period (for example, 15
or 30 years)
ANNUAL PERCENTAGE RATE (APR)
Calculated by using a standard formula, the APR shows the cost of a loan;
expressed as a yearly interest rate, it includes the interest, points, mortgage
insurance, and other fees associated with the loan.
APPRAISAL
A document that gives an estimate of a property’s fair market value; an
appraisal is generally required by a lender before loan approval to ensure
that the mortgage loan amount is not more than the value of the property.
ASSESSOR
A government official who is responsible for determining the value of a
property for the purpose of taxation.
ASSUMABLE MORTGAGE
A mortgage that can be transferred from a seller to a buyer; once the loan
is assumed by the buyer the seller is no longer responsible for repaying it;
there may be a fee and/or a credit package involved in the transfer of an
assumable mortgage.
BALLOON MORTGAGE
A mortgage that typically offers low rates for an initial period of time (usually
5, 7, or 10) years; after that time period elapses, the balance is due or is
refinanced by the borrower.
BANKRUPTCY
A federal law whereby a person’s assets are turned over to a trustee and
used to pay off outstanding debts; this usually occurs when someone owes
more than they have the ability to repay.
BORROWER
A person who has been approved to receive a loan and is then obligated to
repay it and any additional fees according to the loan terms.
CAP
A limit, such as that placed on an adjustable rate mortgage, on how much a
monthly payment or interest rate can increase or decrease.
CASH RESERVES
A cash amount sometimes required to be held in reserve in addition to the
down payment and closing costs; the amount is determined by the lender.
CERTIFICATE OF TITLE
A document provided by a qualified source (such as a title company) that
shows the property legally belongs to the current owner; before the title is
transferred at closing, it should be clear and free of all liens or other claims.
CLOSING
Also known as settlement, this is the time at which the property is formally
sold and transferred from the seller to the buyer; it is at this time that the
borrower takes on the loan obligation, pays all closing costs, and receives title
from the seller.
CLOSING COSTS
Customary costs above and beyond the sale price of the property that must
be paid to cover the transfer of ownership at closing; these costs generally
vary by geographic location and are typically detailed to the borrower after
submission of a loan application.
CONVENTIONAL LOAN
A private sector loan, one that is not guaranteed or insured by the U.S.
government.
CREDIT HISTORY
A record that lists all past and present debts and the timeliness of their
repayment; it documents an individual’s credit history.
DEBT-TO-INCOME RATIO
A comparison of gross income to housing and non-housing expenses; With
the FHA, the monthly mortgage payment should be no more than 29% of
monthly gross income (before taxes) and the mortgage payment combined
with non-housing debts should not exceed 41% of income.
DEED
The document that transfers ownership of a property.
DEFAULT
The inability to pay monthly mortgage payments in a timely manner or to
otherwise meet the mortgage terms.
DELINQUENCY
Failure of a borrower to make timely mortgage payments under a loan
agreement.
DISCOUNT POINT
Normally paid at closing and generally calculated to be equivalent to 1% of
the total loan amount, discount points are paid to reduce the interest rate on a
loan.
DOWN PAYMENT
The portion of a home’s purchase price that is paid in cash and is not part of
the mortgage loan.
EARNEST MONEY
Money put down by a potential buyer to show that he or she is serious about
purchasing the home; it becomes part of the down payment if the offer is
accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls
out of the deal.
EQUITY
An owner’s financial interest in a property; calculated by subtracting the
amount still owed on the mortgage loan(s) from the fair market value of the
property.
ESCROW ACCOUNT
A separate account into which the lender puts a portion of each monthly
mortgage payment; an escrow account provides the funds needed for such
expenses as property taxes, homeowners insurance, mortgage insurance,
etc.
Entries (RSS)