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ARM = Adjustable Rate Mortgage – A mortgage (loan) secured by a piece of property that has an interest rate that is not FIXED, meaning that the interest rate can fluctuate (move up or down) depending on the prime interest rate:  which means the monthly amount owed can fluctuate over the life of the loan.

ARV = After Repair Value – This is an estimate, based on comparable properties near the subject property, of the value of the home after it has been repaired and remodeled to a level that is comparable to nearby properties.

Annual Percentage Rate (APR) – the annual rate charged or earned through a loan which is expressed as a percentage that represents the actual cost of the loan over the course of a loan.

Annual Percentage Yield (APY) – Effective annual rate of return taking into account

Assumable Loan – A loan in which the lender is willing to “transfer” from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan can make your home more attractive to buyers when you want to sell.

Closing Costs – Costs both parties, the buyer and seller, must pay at the time of closing for their share of the transaction:

  • Buyer: in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc. Closing costs average 3 percent -4 percent of the loan amount. If you’re buying a HUD Home, you can request they be paid by HUD, if the sales incentive is offered.
  • Seller: Realtor fees, title policy, property taxes, home warranty, escrow fee

Contingency Clause – A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or her sale of a present home.  A contingency clause often gives the buyer to right to cancel a contract under certain circumstances that are negotiated between the buyer and seller.  Example:  contract is contingent upon completion and satisfactory results of an inspection performed by a licensed property inspector.

Conventional Mortgage – A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a 10 percent – 20 percent down payment. (HUD Homes may be purchased with a conventional mortgage.)

Deed of Trust – a deed wherein legal title in real property is transferred to a trustee who holds the property as security for a loan (debt) between a lender and a borrower.  In most cases the equitable title remains with the borrower.

Earnest Money – A deposit of funds made to a seller indicating the buyer’s good-faith promise to purchase a property.  (HUD generally requires an earnest money deposit of $500-$2,000.)

Escrow – A procedure in which documents or transfers of cash and property are put in the care of a third party, other than the buyer or seller.

FHA Financing – Financing for a loan which will be insured against loss by the Federal Housing Administration—a part of the U.S. Department of Housing and Urban Development (HUD). Such financing allows for a lower down payment than required by most lenders.

Hard Money –asset-based loan financing usually secured by real property/ real estate and issued to investors or entities that invest.

Homeowners Insurance – Insurance that protects the homeowner from “casualty” (losses or damage to the home or personal property) and from “liability” (damages to other people or property). This insurance policy should be REQUIRED by every lender.

In-Service Distribution or Withdrawal – withdrawals (distribution) from a qualified employer sponsored retirement plan like a 401(k) or 403(b) before a plan participant experiences a qualifying event:  reaching 59.5 years of age, termination of employment, death or becoming disabled.

Loan Origination Fee – A fee charged by the lender for evaluating processing a loan application.  A fee for preparing, and submitting a proposed mortgage loan.

LTV = Loan To Value - expressed as a ratio or percentage of the amount of the loan compared to the value of the property or asset being purchased.

PITI – Principle, Interest, Taxes and Insurance:  usually the components that make up the monthly payment on a retail mortgage

Point(s) – 1% of the principal amount being of a loan/mortgage. The lender may charge the borrower several “points” in order to underwrite and provide the loan.

Promissory Note – a written, legal document wherein one party promises to pay another party a determined amount of money for a set period of time.

Property Taxes – Taxes that are usually based on the assessed value of the home and paid by the homeowner for community services and benefits as well as local/state government expenses. Property taxes are usually “escrowed”, meaning they constitute a portion of a monthly mortgage payment.

Real Property – usually land and buildings (improvements)

Renter’s Insurance – An insurance policy that covers the personal property of the tenant from such perils as fire, theft, vandalism, and other disasters

RMLO (Residential Mortgage Loan Originator)

Legal Definition:  An individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain is considered a RMLO.

Layman’s/Street Definition:  the loan originator who vets a perspective borrower for an owner financed sale of property. The RMLO insures that the investor and/or lender who is selling via owner financing remains compliant with federal and state lending laws:  think Dodd-Frank (Mortgage Reform and Anti Predatory Lending Act).

Title Insurance Policy– An insurance policy that covers loss of ownership, outstanding liens, encumbrances and title defects for a piece of real property. Be sure to read what the title policy does not cover – also known as the policy exclusions.

VA Loan – A loan guaranteed by the Department of Veterans Affairs against loss to the lender and made through a private lender. (HUD Homes may be purchased with a VA loan)

Warranty – A binding promise that some product or service will be provided in the future.

Warranty Deed – a deed (document) that guarantees a clear title to the buyer of real estate.


Remember:  you should always read books and learn something new

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