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Glossary - Mortgage Definitions and Terms

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Mortgage Terms

Shopping for a home can be exciting but also very confusing. You may have already discovered that there are many unfamiliar terms in the mortgage industry. For example, you've probably heard terms such as "ARM," "discount points," and "escrow account." Because you may be wondering what this terminology means, this web site contains a glossary of the most common terms used during the mortgage financing process. It is important that you completely understand these terms before you sign your mortgage. Your loan officer can explain these terms in greater detail and also provide you with more information.

Adjustable Rate Mortgage (ARM): A mortgage loan in which the market conditions determine fluxuations in the interest rate. Changes in the interest rate are determined by a financial index. ARM loans have a cap or a limit on how much the interest rate can change.

Amortization: Repayment of a mortgage loan with equal periodic payments of both principal and interest. The payments are calculated so that the debt is paid off at the end of a fixed period of time.

Annual Percentage Rate (APR): A term that expresses the cost of a mortgage as an annual rate. The APR is normally higher than the advertised interest rate because it includes interest, points, and other finance charges. The APR is used to compare different types of mortgages.

Appraisal: A report created by a qualified appraiser that is an estimate of the value of the property being purchased.

Assessment: An assessed value given to property which is used solely for determining property taxes.

Asset: An item that has monetary value such as cash, stocks and real estate. Information about your assets is required when applying for a mortgage loan.

Balloon Mortgage: a short-term mortgage loan of equal monthly payments in which a large final payment (balloon) is due on a specified date. The final payment is equal to the remaining balance of the loan.

Biweekly Mortgage: A mortgage loan in which payments are due every two weeks, totaling 26 (or possibly 27) payments each year.

Closing: The final step in the mortgage loan process which follows underwriting. The closing is a meeting between the homebuyer, seller and lender in which mortgage documents are signed and title to the property passes from the seller to the buyer. At the same time, the homebuyers receives the funds needed to purchase the property and pledges the property as security for repayment of the debt.

Closing Costs: Fees paid at closing which are usually 3 to 6 percent of the mortgage amount. Some examples of closing costs are: realtor fees, appraisal fees and taxes.

Collateral: Property pledged as security for repayment of the mortgage loan.

Conventional Loan: A mortgage loan made by an approved lender in which the borrower's ability to repay the debt is not insured by a government agency such as the FHA or VA.

Convertible Mortgage: a type of adjustable rate mortgage loan that can be converted to a fixed-rate mortgage.

Discount Points: Also called "points". A one-time charge paid to the lender at closing to obtain a lower interest rate on the mortgage loan. One point is equal to 1 percent of the loan amount. For example, two points on a $100,000 mortgage would cost $2,000.

Escrow Account: An account often required by the lender to pay taxes and insurance. Every time a mortgage payment is made, a portion goes into the escrow account. When the taxes and insurance bills are due on your own home, the lender pay the bills with funds from this account.

Equity: The amount of the home that you actually own. Equity is the difference between the market value of the home and what you still owe on it.

Federal Housing Administration (FHA): A division within the Federal Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sets standards for construction and underwriting.

FHA Loan: A mortgage loan made by an approved lender in which the Federal Housing Administration insures the borrower's ability to repay the debt.

Good Faith Estimate: An estimate of the fees you will be required to pay at closing. It is required by law that the lender provide the good faith estimate within three days of your initial loan application.

Growing Equity Mortgage (GEM): A type of mortgage loan in which payments increase yearly until the mortgage is paid off. The increasing payments are applied directly to the principal, allowing the homebuyer to acquire equity more rapidly and pay off the mortgage sooner.

Housing-to-Income Ratio: A ratio that compares all your monthly housing expenses to your monthly income. Normally, housing expenses are equivalent to 28 percent of your monthly income. This ratio is used by the loan to see if you qualify for a mortgage.

Mortgage: A legal document that pledges you r property as security for repayment of the Mortgage loan.

Mortgage Broker: A real estate financing professional who brings homebuyers and sellers together arrange funding and negotiate contract.

Mortgage Insurance: Insurance that protects the lender in case the house payments are not made. Typically you would be required to pay a fee for mortgage insurance if your down payment is less than 20 percent.

Mortgage Note: A document that you sign at closing which states your promise to pay a um of money at a specific rate for a fixed period of time.

Mortgagee: the lender

Mortgagor: the homebuyer or borrower

Origination: The first step in the mortgage loan process. During the origination phase, a loan application is filled out with details of your financial position. You will be asked to provide supporting documentation such as W-2s and paystubs. Your loan officer will then be required to provide you with Good Faith Estimate and a Truth-in-Lending disclosure shortly after your initial loan application.

Origination Fee: A fee that the lender charges the homebuyer for the service of creating the mortgage loan. You will not have an origination fee if you are using the services of a Mortgage Broker.

Points: See Discount Points.

Prequalification: A process in which the loan officer calculates the housing-to-income ration and the total debt-to-income ratio to see if you qualify for a mortgage loan.

Principal: The amount owed on a loan, excluding interest.

Private Mortgage Insurance (PMI): Insurance provided by a private mortgage insurance company that protects the lender in case the house payments are not made. Typically, you would be required to pay a fee for mortgage insurance if your downpayment is less than 20 percent.

Processing: The second step in the mortgage loan process which follows origination. During processing, documents are collected and your loan file is examined to ensure that all information is complete and accurate. Verifications, appraisals, credit reports and other necessary documents are ordered at this time.

Recording Fees: Fees that the lender charges for officially recording the signed mortgage documents to make them a public record

Servicing: Activities that the lender performs such as collecting the payments and paying taxes and insurance if you have an escrow.

Title: A document describing the legal owner of a specified piece of property. The title is sometimes called the deed.

Title Insurance: An insurance policy which insures the homebuyer against errors in the title search. The fee for the title insurance policy is paid at closing.

Title Search: An examination of officially recorded documents to determine the legal ownership of property.

Total Debt-to-Income Ratio: A ratio which compares all of your monthly debt payments, such as credit cards and car payments, to your monthly income. Normally, your monthly debt payments are equivalent to 36 percent of your monthly income. This ratio is used by the loan officer to see if you qualify for a mortgage loan.

Truth-in-Lending Disclosure: A document which the lender is required by law to give to the homebuyer shortly after loan application. This disclosure gives detail of the house payments along with the corresponding APR.

Underwriting: The third step in the mortgage loan process which follows processing. During underwriting, the documents in the loan file are evaluated to determine whether the loan should be approved, denied, or approved with conditions.

Veterans Administration (VA): Known as the Department of Veterans Affairs, an agency within the Federal Government which administers benefit programs for veterans.

VA Loan: A long-term, low or no-downpayment mortgage loan in which the Veterans Administration guarantees the homebuyers' ability to repay the debt. Only veterans are eligible for this type of loan.

 

 

 



 

 

Encinitas Real Estate : Situated along six miles of scenic coastline just 25 miles north of downtown San Diego, Encinitas is a charming community of some 60,000 full-time residents. Thanks to its fertile soil and mild climate, Encinitas has emerged as “The Flower Capital of the World.” The annual Encinitas Flower Show has been held continually since 1923 and one of the oldest and most popular on the West Coast. Encinitas' diverse cultures, beautiful beaches, Quail Botanical Gardens, Encinitas Ranch Golf Course and championship surfing make it a vacationers paradise. A drive along the world-famous Pacific Coast Highway reveals many charming Bed & Breakfasts, magnificent restaurants and beautiful campgrounds. A variety of housing types and prices are available to buyers ranging in price from under $200,000 to more than $1 million.

La Costa Real Estate is the ultimate resort community filled with numerous golf and tennis clubs. Located in San Diego County's rolling hills just two miles from the beautiful California coastline, La Costa features moderate year-round temperatures with cool San Diego breezes providing relief during the summer months. It is the perfect destination for those who enjoy the outdoors. Surfing, fishing, cycling, prestigious golf and tennis tournaments, shopping, water sports, the new Legoland amusement park are all available for residents and visitors alike. La Costa is just 30-minute drive from everything downtown San Diego has to offer from the world famous San Diego Zoo to the historic Gaslamp District. In addition, Orange County and all it has to offer is just 30 miles to the north. All of this truly makes La Costa one of the jewels of San Diego County. La Costa features a variety of neighborhoods and property types, from affordable single-family homes all the way up to multi-million-dollar luxury properties.

Carlsbad Real Estate is a unique coastal community located 35 miles north of the city of San Diego and is surrounded by mountains, lagoons and the Pacific Ocean. Although the "village" dates back more than 100 years, the city wasn’t incorporated until July 16, 1952. At that time, Carlsbad had a population of approximately 7,000 people and covered 7.5 square miles. Since its incorporation, the city has grown to more than 83,472 and 42 square miles. Carlsbad's great beaches, local attractions, world class resorts, shopping and restaurants set the standard for being a complete vacation destination and a great place to call home. The city offers a wide variety of home styles and prices. Older model single-family homes can be found for less than $300,000. Newer homes and estates start near $400,000 and run into the millions.

Cardiff-by-the-Sea Real Estate: Cardiff-by-the-Sea is a peaceful coastal village within the southern city limits of Encinitas in northern San Diego County. The community features local hospitality, fine dining, great surfing, pristine beaches and spectacular Pacific Ocean views and sunsets. Cardiff offers some of the finest dining on the West Coast, along with a variety of international cuisines from which to choose. Cardiff's Restaurant Row is located on Pacific Coast Highway, ensuring an ocean view with every meal. The community is a popular area for young families and features quality schools, safe neighborhoods and plenty of employment opportunities. Thanks to its location just 25 miles north of San Diego and 95 miles south of Los Angeles, residents have easy access to all of Southern California and Mexico on Interstate 5. The real estate market in this upscale community features some of the best ocean views in the county and offers a diverse range of styles and sizes in beach-close and inland homes. Condominiums begin in the low $300,000s and range up to $650,000. Single-family homes start in the mid-$400,000s and run up to $1.5 million for custom homes with panoramic ocean views.

Leucadia Real Estate : Leucadia is a quaint, seaside community located along Highway 101 in northern San Diego County. In Greek, Leucadia means "Sheltered Paradise," which still describes the unique area that is home to some 6,500 residents. The community - which was incorporated into the city of Encinitas in 1986 -- is home to an eclectic mix of surfers, artists and families who enjoy a laid back California lifestyle. Leucadia has retained its small-town charm while its residents have access to all the amenities of a metropolitan area. The community is located on the northern end of Encinitas, just south of Carlsbad. The city’s downtown shopping district, adjacent to coastal Highway 101, is more than 100 years old and features historic architecture, quaint shops, sidewalk cafes, and restaurants framed by beautiful flower baskets. The beaches in the area are outstanding and considered some of the best in the world for surfing with contests held throughout the year. The real estate market offers a mix of older homes, condominiums and townhouses, and custom homes and waterfront estates. Prices for condominiums range from $200,000 to more than $1 million. Single-family properties start at $300,000 and run up to $5 million and more for homes with spectacular ocean views.

Rancho Santa Fe Real Estate: Located in the rolling foothills of San Diego County, Rancho Santa Fe lies just seven miles east of the Pacific Ocean. The exclusive community features several country clubs, riding trails and is heavily wooded with eucalyptus trees that were planted in the 1920s by the Santa Fe Railway for future use as railroad ties. Rural Rancho Santa Fe is distinguished by its open spaces. Sidewalks and streetlights are banned from residential areas. Winding driveways lead to traditionally styled Spanish, Mediterranean or Ranch-style homes flanked by fragrants, citrus and native foilage. Elaborate landscaping protects the privacy that is integral to the Rancho Santa Fe way of life. The community encompasses some 8,560 acres with approximately 2,000 home sites that average about three acres each. The city was named as the best place to live in the United States recently by Luxury Media Corporation's Robb Report and the school system is consistently rated among the best in the state. In fact, the high school is one of the few to be named a California Distinguished School. The real estate market is exclusive with many spectacular properties. A limited number of condominiums and townhouses are available beginning at $350,000 and running up to $750,000. Single-family homes begin at $600,000 and range up to $10 million and more for magnificent hilltop estates and mansions with spectacular views and acreage. Land and lots are also available for custom homes.

Olivenhain Real Estate : If you’re looking for a charming, upscale community featuring magnificent homes and incredible ocean views, Olivenhain should be on your list. The community - which was incorporated into the city of Encinitas in 1986 - is nestled in San Diego County’s coastal foothills between La Costa and Rancho Santa Fe, just minutes from the area’s spectacular beaches. Olivenhain is of German origin, meaning "olive grove," and refers to the area’s rich agricultural history. Active flower and nursery growers continue the agricultural tradition in the area, but they are slowly being replaced by residential properties. Residents of the family oriented community enjoy a rural lifestyle with access to all of the amenities that Southern California has to offer. Olivenhain students attend the Rancho Santa Fe School District, one of the top rated districts in the state. The real estate market is made up almost exclusively of single-family homes. Properties range in price from $500,000 to $5 million and more for large estate homes with hilltop views. Many homes have equestrian facilities. Land is also available for custom homes.

Solana Beach Real Estate: Solana Beach, located on the northern coast of San Diego County, takes great pride in its two miles of pristine coastline, majestic bluffs, secluded coves, white sandy beaches, clear waters and challenging surf. Incorporated as a city in 1986, Solana Beach is home to approximately 14,000 residents. This charming seaside community features a unique blend of businesses including light industrial; commercial and professional services, neighborhood shopping centers with retail chain stores, boutiques, coffeehouses and restaurants. For those who enjoy antiques or design items, South Cedros Avenue is a true end-destination design district. There are the studios of award winning designers, art galleries, furniture emporiums and stores selling antiques, custom clothing, handcrafted items and jewelry. Solana Beach is an entrepreneurs dream. Many residents are engaged in proprietorships, management, professions or sales occupations. The lay of the real estate land starts at the ocean front bluff which ranges from stunning single-family estates to quaint beach cottages, some investment properties and large security gated condominium complexes with direct beach access. (This is the only place in San Diego that you will find the large complexes on the bluffs). Working east from the bluff you will first find the older neighborhoods with good-sized lots (average 1/3 acre), many with dynamic ocean views. The most eastern areas are newer and are adjacent to Del Mar and Rancho Santa Fe, some of which feature estate-sized lots. Prices for condominiums currently range from the high $200,000s to over $1 million. Single-family homes start in the $500,000s. With very little land left for development, Solana Beach represents an excellent place to live and invest your real estate funds.

Del Mar Real Estate, Spanish for "by the sea", began to grow when its two founders began selling 50x140 foot lots in the midst of a land boom in the late 1880's. When the South Coast Land Company bought the vacant land and built a resort with the Stratford Inn being the centerpiece, Del Mar began to flourish and finally received electricity from San Diego Gas and Electric in the late 1920s. It was at this time that Del Mar started developing its residential areas. It wasn't until 1958 that Del Mar residents began to debate whether the area should stay as an area of the county of San Diego, become part of the City of San Diego, or attempt independence through incorporation. In 1959, residents chose incorporation and established a five-member City Council.
Today, the City of Del Mar is two square miles of coastal land with a population of about 5000. The main attraction of visitors is still the beach and sunny weather. Of course, the annual Del Mar Fair and the well-known Del Mar Racetrack bring in people from the surrounding area and beyond.

 

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