Adjustable-Rate Mortgage (ARM)
Annual Percentage Rate (APR)
The annual rate that is charged for a loan, expressed in a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees, points or additional costs associated with the transaction.
A payment plan by which the borrower gradually reduces the balance of the mortgage by making monthly payments of principal and interest.
A balloon payment mortgage is one which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon because of its large size.
The maximum interest rate on an adjustable rate mortgage that may be charged.
An agreement or written promise from a lending institution to provide a loan of a specific amount on specified terms to finance a home purchase.
Any mortgage loan other than a governmental loan.
A report compiled by one or more credit bureaus that details credit history, credit inquiries, and facts about all credit accounts outlining on-time or late payment behavior.
Fixed Rate Mortgage
Mortgage loan in which the interest rate will not change throughout the duration of the loan.
An owner’s financial interest in a property, representing the property’s current market value minus the mortgage balance.
A mortgage loan guaranteed or insured by a government agency such as the Veterans Administration (VA) or the Federal Housing Administration (FHA).
A legal hold or claim on property as security for a debt or charge.
Loan To Value Ratio (LTV)
The comparison of the loan amount to the value of the property that is collateral for the loan.
The fee that is charged by the lender for their services in the evaluation, preparation, and submission of a mortgage.
One percent of the loan amount paid to the lender, usually in exchange for a lower interest rate on the loan.
A commitment by the lender to a mortgage loan applicant to make a loan for an amount specified based upon the applicants income and debt information, credit reports, and funds available for down payment. The lender’s approval is subject to underwriter review of the borrower’s qualifications and collateral again at the time of purchase.
Principal and Interest Payment (P&I)
The monthly payment of interest and part of the principal loan balance. With taxes and insurance included, this makes up the monthly mortgage payment (PITI).
Private Mortgage Insurance (PMI)
A policy that protects the lender in the event of default, and insures repayment of the loan in case of the borrower’s death or disability. PMI is generally required if the buyer’s down payment is less than 20 percent of the purchase price or appraised value.
The limit of how much the interest rate may change on an Adjusted Rate Mortgage at the time of each adjustment as well as over the life of the loan.
A guarantee by the proposed lender of a specific current interest rate through the closing date if it occurs within a specific time period.
CONTRACT / CLOSING TERMS
The opinion of an appraiser in estimating the market value of a home; usually required by a mortgage lender.
Estimate of property value by a public tax assessor used as the basis for calculating property tax.
The final step in the sales agreement where property ownership is transferred from seller to buyer.
Fees and expenses, other than the cost of a property, charged to transfer ownership.
The financial disclosure summary accounting for all funds received and expended at closing, including deposits for taxes, hazard insurance, and mortgage insurance.
A condition that is agreed upon by both parties that must be satisfied before a contract is binding. A contingent contract is a contract to do or not to do something if some event does or does not happen.
A written document, which has been signed and delivered, by which one individual conveys title to real property to another individual.
A down payment the buyer gives the seller up front as a show of good faith, indicating the buyer’s intent to purchase the property.
A right conferred by grant or agreement that allows use of another owner’s land for a specific purpose. Easements are used for roads, for example or given to utility companies for the right to bury cables or access utility lines. Landlocked home owners sometimes pay for an easement to cross the land of another to reach their home.
Arrangement between a buyer and seller to place the down payment and other monies or documents with the third party until the completion of the contract closing.
A portion of the monthly mortgage is placed in an escrow account to pay taxes and mortgage insurance.
Also called hazard insurance, covers physical damage to the property, as well as theft and personal liability. It does not cover flooding; flood insurance must be purchased separately.
Service performed by an inspector to identify any possible structural or mechanical problems.
An agreement between a homeowner and an agent authorizing the agent to offer the owner’s property for sale.
The highest price a buyer would pay and the lowest price a seller would accept.
Seller or Owner Disclosure
Legal requirement that the seller disclose in writing any known defects or repairs that have been made to the property.
Required by the lender, a process whereby the property is measured and a scaled blueprint of the land and its property lines, structures and easements are drawn.
A document that refers to the ownership of a particular piece of property.
Policy that protects the holder from any loss resulting from defects in the title.
Research of public records to identify ownership, liens and encumbrances affecting the property.
REAL ESTATE TERMS
A term used to describe the legal relationship between a seller and a broker, or a buyer and a broker.
Term used to describe a real estate salesperson licensed by the State who, under the supervision of a broker, represents a buyer or seller in the purchase or sale of a home.
A person licensed by the Texas Real Estate Commission who acts as the fiduciary agent of the seller or buyer in real estate transaction.
Agency relationship in which a buyer contracts with a broker to represent the buyer’s interests in real estate transactions.
A form of real estate ownership in which the owner has title to a particular unit of a multi-unit complex and also has a proportional interest in certain common areas. The unit’s interior surfaces generally serve as boundaries of the owned space.
Multiple Listing Service® (MLS)
A computerized list of all properties for sale by member brokers.
A licensed agent or broker who is a member of the National Association of Realtors®, through local affiliates such as Houston Association of Realtors®. Realtor® membership is voluntary and represents a commitment to the highest levels of professionalism.