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Adjustable Rate Mortgage: or ARM - is a mortgage that has an initial rate which adjusts periodically. The initial rate adjusts based upon the movement of an underlying index. There are number of different indexes (i.e.; LIBOR or London Interbank Offer Rate, 11th District cost of funds, T-Bill, etc.). On ARMs, a predetermined margin is added to the index to compute the interest rate.
Administration Fee: - a American Nationwide Mortgage Funding fee that includes the following: Processing fee, underwriting fee, and document preparation fee. Amortization: - gradual reduction of a mortgage debt through periodic payments according to a schedule over a specified mortgage term.
Appraisal: - a report that sets forth an estimate or opinion of fair market value: also refers to the process by which a value estimate is obtained.
Arms-Length Transaction: - is a transaction
negotiated by unrelated parties, each acting in
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Back-End Ratio: - total debt-to-income ratio.
Total monthly obligations divided by gross
monthly income. Monthly obligations include:
mortgage payment, property taxes, insurance
premiums, installment loans, and revolving debt.
Balloon Mortgage: - a mortgage that has
level monthly payments over a stated term but
which provides for a lump-sum payment to be due
at the end of an earlier specified time (i.e.; 5
& 7 year balloon mortgages, where the payment is
fixed for 5 or 7 years then becomes due and
payable at the end of the term).
Bankruptcy: - a proceeding in a federal
court in which a debtor (one who owes more than
his/her assets) is relieved from the payment of
debts.
Buy Down: - an arrangement where a party
pays a lender an up-front fee, or premium, to
"buy down" the interest rate on a loan for a
temporary time period, usually one to three
years: usually expressed as two numbers. For
example, 2/1 where the two represents a 2% rate
buydown the first year and the one represents 1%
buy down the second year, the third year the
rate would revert to the "straight" note rate.
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Cash-Out Refinance: - a transaction that
provides cash proceeds to the borrower in excess
of 1% of the mortgage amount or provides cash
that is used to pay-off consumer debt.
Cash Reserves: - the amount of liquid assets
the borrower has remaining after the mortgage
loan transaction is completed.
Closing Costs: - money paid by borrowers and
sellers to effect the closing of a loan: could
include origination fees, discount fees, title
insurance, survey fees, attorney's fees,
appraisal fees, credit report fees, and prepaid
items such as taxes and insurance.
Combined Loan-to-Value (CLTV): - the ratio
of the total mortgage liens against the subject
property to the lesser of either the appraised
value or the sales price.
Compensating Factors: - borrower strengths
that mitigate or compensate for a borrower's
weakness (i.e.; length of employment,
considerable cash reserves, etc.).
Conforming Loans: - loans that do not exceed
the maximum loan amount and LTV limitations
established by FNMA or FHLMC:
- $214,600 1 unit
- $274,550 2 units
- $331,850 3 units
- $412,450 4 units
Co-borrower: - is a person who is
jointly and equally liable for repayment of the mortgage obligation. A
co-borrower completes an application and submits all documentation and may
not be on the security instrument.
Construction Perm: - construction-to-permanent financing involves the
granting of a long term mortgage for the purpose of replacing interim
construction financing that the borrower obtained to fund the construction
of a new residence. The transaction may be considered as a purchase or a
refinance.
Convertible ARM: - a type of ARM that includes an option for the
mortgagor to change the mortgage to a fixed rate mortgage at specified
intervals during a predetermined time.
Cost of Funds Index: or COFI - is an index that is used to determine
interest rate changes for certain ARMs. It represents the weighted average
cost of savings, borrowing's, and advances of the 11th District members of
the Federal Home Loan Bank of San Francisco.
Credit Bureau Repository: - an organization that compiles credit
history data directly from lenders and creditors to build in-file credit
reports for individuals: the main repositories are TRW, TransUnion, &
Equifax.
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Debt-to-Income Ratio: - is the ratio of
the borrowers total monthly obligations,
including housing expenses and recurring debts
to monthly income. It is used to determine the
borrower's capacity to repay the mortgage and
all other debts.
Deed of Trust: - in certain states, a legal
instrument that secures a note and perfects a
security interest upon real property.
Discount Points: - are payable to the lender
by the borrower or seller to decrease the
interest rate. One point is equal to 1% of the
loan amount.
Drive-by Appraisal: - is an estimate of
value given that is based mainly on recent
comparable sales.
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Escrow Account: - is held by the lender
on behalf of the borrower for the payment of
taxes, insurance or special assessments: also
called an impound account.
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Federal Housing Administration (FHA): -
is a government mortgage insurance agency under
direction of the Department of Housing and Urban
Development (HUD) that insures lenders against
loss from default of borrowers on residential
properties.
Federal National Mortgage Association (FNMA) AKA
Fannie Mae:- is a tax-paying corporation,
created by Congress to support the secondary
mortgage market.
Federal Home Loan Mortgage Corporation (FHLMC)
AKA FreddieMac: - is a tax-paying
corporation, created by Congress that purchases
conventional mortgages in the secondary mortgage
market.
Fixed Rate Mortgage: - a mortgage with one
set interest rate for the entire term of the
mortgage.
Foreclosure: - the legal process by which a
borrower is in default under a mortgage or deed
of trust, loses his/her interest in the
mortgaged property: this process usually
involves a forced sale of the property at public
auction with the proceeds of the sale being
applied to the mortgage debt.
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Gift Funds: - funds donated on behalf of
the borrower from certain eligible sources to
assist the borrower in meeting closing costs.
Generally eligible sources are: relatives,
church, municipality, or a nonprofit
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Hazard Insurance: - insurance coverage
that compensates for physical damage by fire,
wind or other natural disasters to the property.
HOA: or homeowners association - is a
nonprofit association, whose directors and
officers are elected by the unit owners of a
condominium or PUD project; primary
responsibilities are to manage the common areas,
expenses and services of the project.
Home Equity Line of Credit: or HELOC - is a
real estate loan, usually in a subordinate
position, usually in a subordinate position,
that allows a borrower to withdraw equity in
real estate owned with specific limitations.
Housing Debt-to-Income Ratio: - the sum of
all monthly housing mortgage expenses such as
PITI, homeowners dues, private mortgage
insurance and any special assessments as a
percentage of gross qualifying income.
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Impound Account: - see "Escrow Account"
Index: - a published interest rate, such as
the prime rate, LIBOR, T-Bill rate or the 11th
District COF. Lenders use indexes to establish
interest rates charged on mortgages or to
compare investment returns. A predetermined
margin is added to the index to compute the
interest rate on the ARM.
Installment Debt: - borrowed money that is
repaid in successive payments, usually at
regular intervals; the monthly debt service can
be excluded for D/I purposes if 10 or fewer
payments remain to be made.
Investment Property: - a non-owner occupied
residential property used for the generation of
income.
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Junior Lien: - any lien that is
subordinate or subsequent to the claims of a
prior lien. |
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Margin: - the amount that is added to
the index to create the mortgage interest rate
for an ARM.
Mortgage: - a note or other evidence of real
property being pledged as the security for a
debt; also referred to as a "Deed of Trust",
"Trust Deed", or "Security Instrument"
Mortgage Insurance: or MI - is insurance
that protects a mortgage lender against loss in
the event of default by the borrower. This
insurance allows lenders to make loans with
lower down payments (LTVs above 80%, in most
cases).
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Negative Amortization: - a gradual
increase in the mortgage debt caused by unpaid
interest that is added to the mortgage principal
because the payment is not sufficient to cover
the full amount of interest due.
Non-Conforming Loans: - those loans that
exceed the conforming loan limits. Generally,
loans above $214,600 (Jumbo).
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Origination Fee: - a fee charged to the
borrower to reduce the interest rate; this fee
is usually stated as a percentage; see "Discount
Points"
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Prepaid Items: - items that generally
must be paid for at the time of closing and are
generally recurring charges. Prepaid items may
include the following:
- First year premiums for hazard, flood
and mortgage insurance.
- Prorated interest.
- Any special assessments which must be
prepaid (i.e.; water/sewer connection, etc.).
- Escrow account for any of the above.
Private Mortgage Insurance: or PMI -
insurance coverage that lenders require the
borrower to obtain to protect the lender against
loss in the event of a mortgage default for
higher LTV mortgages.
PUD: or Planned Unit Development - is a real
estate project in which each unit owner has
title to a residential lot and a non-exclusive
easement on the common areas of the project.
Purchase Money Mortgage: - a mortgage used
to purchase real property where title is
conveyed from one individual to another.
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Qualifying Ratios: - the percentage of
payment to income (P/I) and debt-to-income (D/I)
that is used to measure the borrower's capacity
to repay the mortgage debt.
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Rate & Term Refinance: - a refinance of
any mortgage in which the new mortgage amount is
limited to the unpaid principal balance of the
existing first mortgage plus any closing costs.
Revolving Debt: - a debt that does not have
a fixed payment, although repayment is usually a
percentage of the outstanding balance and made
at regular intervals; most common are credit
cards issued by banks and department stores.
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Second Mortgage: - a mortgage that is in
a second position behind the first mortgage; see
"Junior Lien."
Self Employed Borrower: - a borrower whose
income is derived from a business source in
which he/she has an ownership interest of 25% or
more.
Servicing: - the administration of a loan
that includes, but is not limited to, the
collection of the monthly payments, and/or
related fees, and disbursement of the
collections to the investor who owns the loan.
Upon selling the loan, servicing may either be
retained or released. If retained, the selling
lender will be paid a fee for managing the loan
account. If servicing is released, the seller is
not responsible for the loan administration.
Settlement Costs: - see "Closing Costs."
Single Family Residence: or SFR - is a
structure that is intended to house one family.
Subordinate Financing: - secondary financing
secured by a lien that is junior to the first
mortgage or senior claim.
Supplemental Income: - income derived from
sources such as interest/dividends, capital
gains, and rental properties; these incomes
require tax returns to support the qualifying
income.
Sweat Equity: - the exchange of labor or
services in lieu of paying cash for the purpose
of receiving credit towards the down payment:
this generally is not an eligible source of down
payment.
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Tax Service Contract: - the lender's
verification of payment of property taxes.
Temporary Buydown: - a loan on which the
interest rate has been "bought down" for a
temporary period of time at the beginning of the
loan by escrowing funds at the time of closing,
which will be applied to the total monthly
mortgage payment as each becomes due. See "Buy
Down."
Timeshare: - a real estate development in
which a buyer can purchase the exclusive right
to occupy a unit for a specified period of time
each year, not eligible for financing with
American Nationwide Mortgage. Funding.
Title Insurance: - a type of insurance that
insures against defects in title that were not
listed in title work or abstract.
Townhouse: - an architectural type of
construction; a row house on a small lot that
has exterior limits common to other similar
units; title to the unit and it's lot is vested
in the individual owner with a fractional
interest in common areas.
Two-step ARM: - an ARM that has a fixed
interest rate for the first five or seven years
of the mortgage term, then adjusts at the
current market rate plus a predetermined margin,
then remaining fixed at that rate for the
remainder of the term.
Two-to-Four Family Properties: - consists of
a structure that provides dwelling units for
two, three or four families, although ownership
is evidenced by a single deed.
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Underwriter: - an analyst who reviews
the supportive documentation to determine the
risk associated with the loan request. The
person who gives final loan approval.
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Veterans Administration: or VA - is a
government agency designed to encourage mortgage
lenders to offer long term, low down payment
financing to eligible veterans by partially
guaranteeing the lender against loss from
default.
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Zoning: - the creation of districts by
local governments in which specific types of
property uses are authorized (e.g., commercial,
industrial, residential, high density, mixed
use). |
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American Nationwide Mortgage Company,
Inc  |
