"EXPERT REALTOR, EXPERT RESULTS"

ENGLEWOOD COLORADO REAL ESTATE


HOME BUYERS' TERMS


ACCELERATION CLAUSE-A provision in a mortgage that may require the unpaid balance of the mortgage loan to become due immediately if the regular mortgage payments are not made, or if other terms of the mortgage are not met.


AMORTIZATION-Payment of a portion of the principal of a mortgage loan, reducing or amortizing the mortgage amount. A monthly mortgage payment consists in part of an amortization and in part of interest and; possibly, other items such as FHA insurance premium, taxes, and fire or home owner's insurance premiums.


ASSUMPTION OF MORTGAGE-The promise by the buyer of property to be legally responsible for the payment of an existing mortgage. The purchaser's name is submitted for the original mortgagor's (borrower's) name on the mortgage note.


CLOSING-The final step in the sale and purchase of a property when the title is transferred from the seller to the buyer; the buyer signs the mortgage, pays settlement costs, and any money due the seller or buyer is handed over.


CLOSING COSTS (Settlement Costs)-Costs in addition to the price of a house, usually including mortgage origination fee, title search and insurance, attorney's fee, recording fees, and prepayable items such as taxes and insurance payments collected in advance and held in an escrow account.


CONVENTIONAL MORTGAGE-A mortgage loan not insured by FHA, HUD, or guaranteed by the VA. It is subject to the conditions established by the lending institution and state statutes.


DISCOUNT-The difference between the principal balance on a note and the lesser amount the purchaser of the note pays the original lender for it-often referred to as points which are generally paid by the seller of the property to the original lender to reimburse him.


EQUITY-An owner's or buyer's ownership rights in the house as he pays off the mortgage. When the mortgage and all other debts against the property are paid in full, the owner has 100 percent equity in his property.


GRADUATED PAYMENT MORTGAGE (GPM)-Most GPMs are buy downs in which the builder, seller, or buyer pays up front to lower monthly payments for the first three to five years. While initial payments are lower than market rate, and subsequent increases are known in advance, payments might end up higher than with a fixed-rate mortgage, due to negative amortization.


LOAN-TO-VALUE-RATIO-The relationship between the amount of a home loan and the total value of the property. Lenders may limit their maximum loan to 80-95 percent of value.


LOCK-IN-RATE-A rate commitment made by lenders when making a mortgage loan to commit or to "lock-in" that rate, pending loan approval. Lock-in commitment periods vary; loans will specify 30-90 days, for example.


NEGATIVE AMORTIZATION-The principal balance of the loan actually grows, due to payments which are not enough to cover all of the interest due. Often negative amortization accrues during the years of a variable rate or graduated payment mortgage when the payments are less than market rate.


POINTS-Usually paid by the seller, a point is one percent of the loan balance and is charged by the lender to issue a loan. Points can be a negotiable item between buyer and seller or buyer and lender, and usually range from 1 up to 7 or 8.


PREPAYMENT CLAUSE-A condition in a mortgage which allows mortgage payments to be made early without penalty.


PRIVATE MORTGAGE INSURANCE (PMI)-The insurance coverage offered by a private company that protects a lender against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value rations. The borrower pays the premiums. Most loans of 80% (loan to value) do not require PMI.


RATE CAP-Interest-rate cap on an ARM loan; it restricts the upward movement of the loan's interest rate at the time of adjustment.


TITLE-Evidence of a person's legal right to possession of a property, normally in the form of a deed.


TITLE INSURANCE-Special insurance which usually protects lenders from loss of interest in property due to unforseen occurrences that might be traced to legal flaws in previous ownerships. An owner can protect his interest by purchasing separate coverage. (Always keep your title insurance.)


VA LOAN-a mortgage program administrated by the government to make affordable home loans to military veterans. No down payment is required, and the loan is fully assumable. (Check with your Realtor or Loan Officer for further details on this.)


colorado real estateADVERTISER