Mortgage Terms
Adjustable-Rate Mortgage (ARM): A mortgage with interest rates and monthly payments adjusted at regular intervals based on changes in either a national or regional index. Also called "variable-rate mortgage."
Amortization: A loan payment schedule characterized by equal periodic payments that are calculated to meet current interest payments and retire the principal at the end of a fixed period (at maturity if the loan is fully amortized).
Annual Percentage Rate (APR): The total yearly cost of a mortgage stated as a percentage of the loan amount; includes such items as the base interest rate, private mortgage insurance, and loan origination fee (points).
Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.
ARM Margin: The spread (or difference) between the index rate and the mortgage interest rate for an adjustable-rate mortgage.
Balloon Mortgage: A mortgage in which the debt service (the regular payments of principal and interest) will not result in the complete payment of the loan by the end of the mortgage term.
Cap: A provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease.
Cash Reserve: A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments.
Closing: The completion of a real estate transaction that transfers rights of ownership to the buyer. Also called "settlement."
Condominium: A type of property ownership within a multiunit complex in which the homeowner owns a unit and a proportionate interest in certain common areas, such as the grounds of the complex.
Contingency: A condition that must be met before a contract is legally binding.
Conventional Mortgage: A loan that is not insured or guaranteed by the federal government.
Credit Report: A report from an independent agency that verifies a loan applicant's information on previous debts and liabilities.
Deed: The legal document conveying title to a property.
Down Payment: The part of the purchase price which the buyer pays in cash and does not finance with a mortgage.
Earnest Money: A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Easement: A right of way giving persons other than the owner access to or over a property.
Equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of a property and the amount still owed on the mortgage.
Richard Romano is one of the three principals at Cruickshank, Gath, & Romano. With eight years of experience and recognized by industry insiders as one of Canada's leading real estate experts, Richard wants to complete the appraisal according to his best estimate of the pro...
Loan Flipping: A lender refinances a loan with a new long-term, high cost loan. Each time the lender "flips" the existing loan, the borrower is required to pay points and assorted fees.
Collateral for the defaulted loan. Distressed real estate involves making a distressed purchase. According to Financial Crisis (2011), “[A] distressed purchase is whereby the property owners are usually in a foreclosure/short sale situation.” Foreclosure applies to a residential real estate loan in which a bank or creditor repossesses a home because of nonpayment. The institution will legally possess the right to resell the property as collateral for the defaulted loan. The selling price can be sold at a price equal to or greater than the original loan. The reason distressed properties can be bought at a lower price is the institution has already received a series of payments toward the original home loan. In many situations the lender can sell the house for a lower cost than the normal market value, leaving the buyer the opportunity to make a purchase at a lower selling price than market value and reselling the property at a profit (Demand Media, 2011).
Assessment of the Statement that Property is a Power Relationship Between People Property is the right to possess, enjoy or use a determinant thing, and includes the right of excluding others from doing the same. The concept of ownership or property has no single or widely accepted definition. Like any other concept it has great weight in public discourse and the popular usage varies broadly. Property is frequently conceived as a 'bundle of rights and obligations.' Property is stressed as not a relationship between people and things, but a relationship between people with regard to things.
Owning a house can be exceedingly expensive. Just for the down-payment on the house, which you have to come up with, you’ll be spending an average of 20-25% of the buying price. That means that the down payment for a $30,000 house can range from $60,000 to $75,000. Thus, you need to be prepared to put down that kind of money if you’re planning on buying. Let’s take a look at what owning a house can cost you on a monthly or yearly basis.
Amortization basically means that your loan was set up in a way that will take a specific amount of time to repay it. As time passes, some of the payments will go to the interest, and some will go to the principal. Usually with the mortgage amortization, people pay more for the interest other than principal in the beginning of the year. Therefore, the faster people can start to pay off the principal, the faster the debt owner can pay off the balance.
It is normal practice for financial companies to charge consumers with credit history issues higher interest rates. It is justifiable because consumers with credit history issues that have had problems paying other creditors back in the past are more of a credit risk. Mortgage subprime loans are no different. Subprime loans become an ethical issue when financial companies use unethical practices to make subprime loans just in order to make more money.
Owning a home means gaining equity. If the owner keeps the house long enough for it to rise above the initial cost of its purchase, then that is profit. This is one of the most essential and superb matters associated with home ownership.
When subprime mortgages began to flourish, the term housing bubble came into existence. The term relates to the time in which houses sharply increased in value, and consumers often borrowed at less than the lowest rates. People believed that the price of their homes would rise and they could then refinance for lower payments. The problem with that mentality is many people didn’t just refinance for lower payments, they also refinanced for personal spending. Inflation of home prices meant homeowners suddenly had more equity and were able to spend the money as they chose.
Buying a home is more complex then most think. A purchaser of a home doesn't pay in cash when buying a house. If that were so, then nobody would be able to afford one. A potential buyer must get a loan. The bank doesn't lend their money to just anybody, so there are prerequisites before a buyer should consider buying a home. The potential buyer must have enough money for a down payment which is 3% to 20% of purchase price, a steady job with for at least two years or more, must have a decent credit score with at least a 640 or better. That is standard for the market. (1) The credit score is based on the FICO score. FICO stands for, Fair Isaac Corporation, a company that has been in business since the early 1950's and monitors consumers' credit ratings and put a scoring system on it. (2) Conventional loans are usually financed up to eighty to ninety percent with a down payment required of ten to twenty percent. The potential buyer must also have a debt ratio not exceeding 28/39 of their income. The first number 28 refers to your new mortgage payment that cannot exceed 28% for your gross combined income and 39 refers to your mortgage payment plus revolving and installment debt as well as taxes and insurance cannot exceed 39% of you total combined gross income (3).
Buying and owning your home is part of the American dream. Although the dream itself has since changed, the home still remains the main focal point. Today owning a home doesn’t necessarily mean a house. People now buy duplexes, cooperative apartments, and condominiums. For some families it could take up to a couple of generations before it’s able to have the capabilities of buying a home. To many people it means a certain achievement that only comes after years of hard work. It is a life altering decision and one of the most important someone can make in their lifetime. The reasons behind the actual purchase could vary. Before anything is done, people must understand that it’s an extraneous process and it is a long term project.
A mortgage is a form of debt, secured by the warranty of a specific real estate property. The borrower is required to pay back the debt in predetermined payments. The most common reason for acquiring a mortgage is to purchase real estate when it cannot be paid for up front. The homebuyer, in a residential mortgage, pledges their home to the bank. Over a period of years, the borrower pays back the loan with interest. Once the mortgage is paid in entirety, the owner retains the property free of any charges. However, in case of foreclosure, the bank has an entitlement on the house, as a form of insurance should the buyer default on repaying the mortgage. The bank can then sell the house, and use the capital to pay back the remaining mortgage.
Mortgage brokers are yet another type of mortgage originator. They will often represent a large variety of lenders, including mortgage banks and traditional banks and are so influenced, directly and indirectly, by the lenders that they now feel that they can strengthen their own
In the past year home values, along with home sales, have declined. At the same time many homeowners who had adjustable rate mortgages saw their monthly mortgage payments dramatically increase. This has created financial hardships for homeowners who are both unable to pay their increased mortgage payments
Floating-rate mortgages begin with lower interest rate for first few yrs and then change according to the market conditions after the initial period is over. Caps are placed on how much interest rate can change at any one time, as well as on how much the rate can increase over the life of the loan. This means the principal and interest amount of monthly payments change repeatedly throughout the loan.