Real Estate - General Answers
- What You Should Expect From Any Agent You Work With
- How To Find Out What An Agent Is REALLY Like!
- Glossary of Real Estate Terms, Wizard!
- How to Cancel the Private Mortgage Insurance (PMI) in your Loan!
- Federal consumer publications, available thru the Consumer Information Center.
- All you want to know about mortgages "Mortgage 101"
You should expect to be treated with respect, not like a number. You should feel like the agent's only client, not like transaction #34. You should expect to have your best interests represented. The whole moving process should be as painless as possible. Your agent's eye shouldn't be on your wallet, but on serving you selflessly. Your agent should not think of you as a transaction that will be gone in a few months, but more like a friend and a client for life.
You should expect your agent to work as hard for you as he would if he were buying or selling his own house. You should expect the highest skills available. Your calls should be returned promptly, you should be kept up to date, and not feel like you were forgotten by your agent.
If any problems do arise, your agent should go overboard to fix them and document everything diligently so that you are protected. After the transaction, you should expect your agent to be a trusted advisor that you can consult anytime. You should feel like you were represented professionally, and that you came out the better for it.
Why We Have a Lot to Lose!
Our business is built on referrals. What this means to you is that we don't spend a lot of time on prospecting activities to find new clients as other agents do. So you get all of our attention and energy. We feel that by providing you with the best real estate experience you ever had, you will naturally want your friends and associates to have the same benefit. When this happens, we can devote even more time to making our service the best available.
Since we don't knock on doors or make cold telephone calls, we depend on referrals to grow our business. We HAVE TO give you excellent service. You MUST be happy, or there will be no referrals from you, and our business will suffer. So we don't see you as just a transaction, here today and gone tomorrow. We're not superstars, pushing people through some kind of assembly line, but we see ourselves as super servants. We treat your business with great respect, and want to be your REALTORs for life.
Selling your home is a BIG decision. It can go smoothly and get you to a new and better part of your life, or it can leave you feeling frustrated and defeated. Your choice of an agent is the first step in determining which outcome you will have.
The way to find out what an agent is really like is to call some of the people he has helped in the past. Most people feel awkward about calling someone they don't know. They don't know what to say.
To make it easier, I've prepared a list of questions that you can use when calling your agent's references. They do have references, don't they? These eight questions will help you find out what you need to know about your agent!
- What was he like to deal with?
- How hard did he work for you?
- Did he get you a good price?
- Were there any complications?
- Did he always tell you the truth?
- Was he always looking out for you or just interested in getting paid?
- What did he do that you liked best?
- Would you use his services again?
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.
Adjustable rate mortgage (ARM)
Is a mortgage in which the interest rate is adjusted periodically based on a preselected index. Also sometimes known as the re negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.
Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
Annual percentage rate A.P.R.
Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account point and other credit cost. the APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
An estimate of the value of property, made by a qualified professional called an "appraiser".
A local tax levied against a property for a specific purpose, such as a sewer or street lights.
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.
Balloon (payment) mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
A mortgage covering at least two pieces of real estate as security for the same mortgage.
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers us ally charge a fee or receive a commission for their services.
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility
Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property's current market value
Certificate of veteran status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans.
The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount. commitment an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. construction loan (interim loan): A loan to provide the funds necessary to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.contract sale or deed: A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.
A short term interim loan for financing the cost of construction. The lender advance funds to the builder at periodic intervals as the work progresses.
A mortgage not insured by FHA or guaranteed by the VA ordeferred interest: When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.
A report documenting the credit history and current status of a borrower's credit standing.
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.
Deed of trust
In many states, this document is used in place of a mortgage to secure the payment of a note.
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.
see negative amortization
Failure to make payments on time. this can lead to foreclosure.
Department of Veterans Affairs (VA)
An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.
Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on conventional.
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.
A clause inserted in a mortgage that allows the lender to call the loan due and payable at its option upon the transfer of the property also known as paragraph "17" in FNMA/ FHLMC Mortgage.
The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.
The value an owner has in real estate over and above the obligation against the property.
Funds that are set aside and held in trust, usually for payment of taxes and insurance on real property. Also earnest deposits held pending loan closing.
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
Equal Credit Opportunity Act (ECOA)
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
The difference between the fair market value and current indebtedness, also referred to as the owner's interest.
Refers to a neutral third party who carries out the instruction of both the buyer and seller to handle all the paperwork of settlement or closing." Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.
The Federal Home Loan Mortgage Corporation provides a secondary market for saving and loans by purchasing their conventional loans. Also known as "Freddie Mac."
A promise by FHA to insure a mortgage loam for a specified property and borrower. A promise from a lender to make a mortgage loan.
Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.
The federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.
seeFederal National Mortgage Association.
Farmers Home Administration (FmHA)
provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
Federal Home Loan Bank Board (FHLBB)
A regulatory and supervisory agency for federally chartered savings institutions.
Federal Home Loan Mortgage Corporation(FHLMC) also called "Freddie Mac",
is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.
Federal National Mortgage Association (FNMA) also know as "Fannie Mae"
A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.
a loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($124,875), they are generous enough to handle moderately-priced homes almost anywhere in the country.
FHA mortgage insurance
Requires a small fee (up to 3.8 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed rate FHA loan, this fee would amount to either $2,850 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.
A mortgage on which the interest rate is set for the term of the loan.
A legal procedure in which property securing debt is sold by the lender to pay the defaulting borrower's debt.
see Federal Home Loan Mortgage Corporation
see Government National Mortgage Association.
Government National Mortgage Association (GNMA) also known as "Ginnie Mae,
provides sources of funds for residential mortgage, insured or guaranteedby FHA or VA.
Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
Apromise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.
Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See debt-to-income ratio.
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.
A money source for a lender.
A construction loam made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
a loan which is larger (more than $191,250) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
MIP: Mortgage Insurance Premium
is the one-half percent borrowers pay each month on FHA insured mortgage loans. It is insurance from FHA to the lender against incurring a loss on account of the borrower's default. On September 1, 1983, the MIP was changed to a one-time charge to the borrowers.
Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.
The borrower or homeowner
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. the danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
Net Effective Income
The borrower's gross income minus federal income tax.
Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.
The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property usually computed as a percentage of the face value of the loan.
A long term mortgage, usually ten years or more. Also called an "end loan."
Principal, Interest, Taxes and Insurance. Also called monthly housing expense.
Pledged account Mortgage (PAM):
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.
Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.
A privilege in a mortgage permitting the borrower to make payments in advance of their due date.
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.
Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan association, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.
The amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on you loan's structure. On a $75,000 house with a 10 percent down payment, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors®.
REBAC (Real Estate BUYER'S AGENT Council)
REBAC is North America&euro&trades largest association of real estate professionals focusing specifically on representing the real estate consumer. There are more than 18,000 active members of the organization throughout the United States and Canada. REBAC awards the ABR® and the ABRM designations.
The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.
Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.
Negotiable Rate Mortgage (RBM)
a loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.
short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.
Reverse Annuity Mortgage (RAM)
a form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home asSatisfaction of Mortgage: The document issued by the mortgagee when the mortgage loam is paid in full. Also called a "release of mortgage."
A mortgage made subsequent to another mortgage and subordinate to the first one.
Secondary Mortgage Market
The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders security.
all the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
see closing/closing costs
Shared Appreciation Mortgage (SAM)
a mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.
Interest which is computed only on the principle balance.
A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any buildings.
Equity created by a purchaser performing work on a property being purchased. term mortgage see balloon payment mortgage.
a document that gives evidence of an individual's ownership of property.
a policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usally a function of the value of the property, and is often borne by the purchaser and/or seller.
an examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.
a federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.
a mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. the lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. also called "Super * Seven" or "Premier"mortgage.
The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.
Interest charged in excess of the legal rate established by law.
a long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.
VA Mortgage Funding Fee
a premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.
Variable Rate Mortgage (VRM)
see adjustable rate mortgage
Verification of Deposit (VOD)
a document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.
Verification of Employment (VOE)
a document signed by the borrower's employer verifying his/her position and salary.
Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee. wraparound results when an existing assumable loan is combined with anew loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.
All information provided is deemed reliable but is not guaranteed and should be independently verified.
Are you needlessly paying for private mortgage insurance (PMI)? Analysts estimate that up to $700 million dollars each year is being paid to private mortgage insurance companies by homeowners who are actually qualified to cancel this coverage. Many lenders allow cancellation of this portion of your mortgage payment when your equity reaches 20% (80% loan to value). This can be achieved by paying down the mortgage balance over a period of time and/or property value appreciation from home improvements, inflation, or rising sales prices in your area. Your first step should be to contact your lender or current loan servicer to inquire about exact procedures and requirements.
Most likely your request to have the PMI dropped will have to be made in writing.
- Have the lender provide to you in writing the minimal amount the property will have to be valued at to qualify to have the PMI canceled.
- Typically the lender will require an original copy of a recent (no older than 180 days) Fannie Mae form 1004 appraisal performed by a State Certified appraiser who is licensed in the State where the property is located. You will be required to obtain and pay for the appraisal.
- If you notify the lender that the property in question has been converted from owner-occupied to tenant-occupied the lender may raise the required equity position to 30% or 40%. Recent payment history may be factored into the lenders decision to drop the PMI.
- Most lenders will require that a period of one year has passed since the origination of the loan. Since the process of PMI cancellation can take several months from start to finish it behooves you to start the process as soon as possible.
- While some States have laws requiring lenders to notify homeowners when their equity reaches 20%, Texas does not.
Private Mortgage Insurance Related Links
- Glossary of mortgage terms
- PMI Frequently Asked Questions
- Federal National Mortgage Association - Fannie Mae
- Federal Home Loan Corporation - Freddie Mac
- Federal Housing Administration (FHA)
- U.S. House of Representatives press release on PMI
- U.S. Senator D'Amato (R-NY press release on PMI
All information provided is deemed reliable but is not guaranteed and should be independently verified.