Northeast Community Mortgage: Glossary

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ANNUITY: Fixed payments an individual receives for a lifetime or specified number of years at consistent intervals. For example, a customer may receive an annuity from a pension plan or from an investment.
AMORTIZATION: Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. Amortization is the process of reducing principal and interest in equal installment payments at specific intervals over a set term. For example, a fully amortized loan payment is a portion of which will be applied to pay the accruing interest on the loan with the remainder being applied to principal. Over time, the interest portion decreases as the loan balance decreases and the amount applied to principal increases so that the loan is paid off in the specified term.
ANNUAL PERCENTAGE RATE: The Annual Percentage Rate ("APR") is a measure of the cost of credit, expressed as a yearly rate. The APR takes into account the amount financed, the finance charge, and the amounts and timing of the payments. Under the Truth in Lending Law, the APR must be disclosed and labeled.
APPRAISAL: Opinion as to the monetary value of the property. For example, an appraisal of property provides an idea of how much money the property is worth in the housing market at a given time.
APPRECIATION: An increase in value. Example: An increased value of property due to either a positive improvement of the area or the elimination of negative factors.
ASSESSED VALUE: Value placed upon property for property-tax purposes by the tax assessor.
ASSUMPTION: An act that occurs when the buyer of a property assumes the seller's debt or obligation without obtaining new financing. This must be approved by the lender and be permitted under the terms of the note that the seller executed with the lender.
ATTORNEY CLOSINGS: This practice is prevalent in states where attorneys' opinions are used in place of title reports. Closings by attorneys follow much the same procedures as escrow closings. The lender delivers to the attorney the settlement statement and the net loan proceeds, as well as instructions for their use.
BALLOON PAYMENT: A large payment due at the end of a loan contract. Equal to the remaining principal balance plus any interest and charges due.
BORROWER: One who borrows money and is responsible for repaying it to the lender. Also known as obligor. If the loan is secured by a mortgage, the borrower is known as a mortgagor.
BROKER: One who acts as an intermediary between parties to a transaction in exchange for a fee or commission.
CEILING: The highest interest rate that may be assessed or an adjustable-rate loan during the life of the loan based on the start rate and lifetime cap.
CERTIFICATE OF OCCUPANCY: A certificate issued by a local city government to the property owner stating the building is in proper condition to be occupied.
CLOSING: A meeting between a lender and borrower or a buyer, seller and lender or their agents when the loan documents are signed and the funds legally change hands. Also known as settlement.
CLOSING COSTS: Money paid by the borrower to effect the closing of a mortgage loan, including such costs as title insurance premiums, appraisal fees, lender fees, closing agent fees, recording fees, etc.
COVENANTS, CONDITIONS AND RESTRICTIONS (C C & Rs): Limitations placed on the use and enjoyment of real property. Usually intended to maintain a certain look within a neighborhood and common in subdivisions, PUDS or condominium communities.
CREDIT HISTORY: The history of whether the borrower has met financial obligations on time in the past.
CREDIT SCORE: A numerical assessment assigned to the customer by credit bureaus that represents a measurement of the customer's overall credit rating. The scores are weighted and range from approximately 365 to 840. Low scores reflect a "high risk", while higher scores reflect a "lower risk". Each credit bureau has its own credit score system.
DEED: A written instrument by which a property owner, the "grantor," conveys and transfers to a "grantee" an ownership interest in real property.
DEPRECIATION: A decrease in value to real property improvements caused by age, deterioration or functional obsolescence.
EARNEST MONEY: The cash deposit paid by the prospective buyer of real property, as evidence of good faith intentions, to complete the purchase transaction.
ENCUMBRANCE: A claim, lien, charge or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title subject to such encumbrances.
EQUITY LINE OF CREDIT: A combination of a line of credit and equity loan secured by real property. A maximum loan amount is established based on credit and equity. A mortgage is recorded against the potential borrower's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the credit line.
ESCROW: Delivery of something of value by a grantor to a 3rd party for delivery to the grantee upon the happening of a contingent event. In some states, all instruments necessary to the sale are delivered to a 3rd party, with instructions as to their use.
FIXED-RATE MORTGAGE: A mortgage having a rate of interest that remains the same for the life of the mortgage.
FLOOR: The lowest an adjustable-rate mortgage rate can ever be during the life of the loan.
FULLY INDEXED RATE: The fully indexed rate is equal to the rate index plus the loan's margin and is used with adjustable-rate mortgages. Example: If LIBOR is 6.50% and the margin on the loan is 4.00%, the fully indexed rate is 10.50%.
GRANTEE: One who received property rights when a grant is made. Generally, the buyer or purchaser of real property.
GRANTOR: One who grants property or property rights to another.
GROSS MONTHLY INCOME (BORROWER): The total amount the borrower earns per month, before any expenses are deducted.
HOMESTEAD: Status provided to a homeowner's principal residence by some state statutes; protects a home against judgments up to specified amounts.
INTEREST BEARING: A form of interest calculation in which the loan is charged at a daily or monthly rate on the current outstanding balance.
INVESTMENT INCOME: Money earned from investments of money, such as stock dividends and annuity payments.
INVESTMENT PROPERTY: Property used for investment purposes.
JOINT OWNERSHIP: Legal title shared by 2 or more persons or entities. Such as joint tenancy, tenancy in common and community property.
JOINT TENANCY: A form of holding title in which the property is owned by 2 or more persons who may have rights of survivorship.
LIFETIME CAP: This is the cap that limits how high an interest rate can increase over the life of an adjustable-rate mortgage loan . Example: Start rate + 6% = lifetime Cap.
LIQUID ASSETS: Cash or assets, such as checking/savings accounts, stocks/bonds, that are immediately convertible to cash.
LOAN TERM: The loan term is the period of time over which the loan will be paid. First mortgage loans typically have terms of 30, 20 or 15 years.
MARKET VALUE: The highest price 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.
MIXED-USE PROPERTY: A property in which a portion is used for commercial or retail purposes and the other portion is used for residential purposes. A property can also be considered mixed use if different combinations of uses are present such as commercial/industrial or residential/industrial. For example, a multi-unit dwelling with the front unit used as a commercial store and the back unit used as a dwelling.
MORTGAGE: A written instrument that creates a lien upon real estate as collateral for the payment of a specified debt. The borrower retains possession and use of the property.
MORTGAGE BANKER: A non-depository financial institution that specializes in originating and servicing loans. They generally sell their loans to investors, but may continue to service them.
MORTGAGE BROKER: A mortgage broker is one who arranges financing for a borrower by placing loans with lenders. Mortgage brokers are paid a fee by the borrower or the lender when the loan closes.
NEGATIVE AMORTIZATION: Amortization means that monthly payments are large enough to pay the interest and reduce the principal on a mortgage loan by its maturity date. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means even after making many payments, a borrower may owe more than was owed at the beginning of the loan.
NET WORTH: The difference between total assets and total liabilities of an individual, corporation, etc.
NON-RECURRING CLOSING COSTS: Fees and costs associated with the closing of a loan, such as title, appraisal, notary fees, etc., that occur only once in the transaction and don't recur.
ORIGINATION FEE: A 1-time setup fee charged by the lender. One of the lender's charges to a borrower for handling a loan transaction.
POINTS: Each point is an amount equal to 1% of the principal amount of an investment or note.
POWER OF ATTORNEY: An authority by which 1 person authorizes another to act on his or her behalf. A power of attorney can be limited to specific areas or be general.
PRELIMINARY TITLE REPORT (PRELIM): A report showing all current claims against a property before a sale or loan transaction and identifying those items that must be removed to obtain a 1st lien position. After completion of the transaction, a title insurance policy is issued.
PREPAID INTEREST CHARGE: The portion of interest, added on at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 retroactively pays interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.
PREPAYMENT PENALTY: A charge which is assessed when the loan is paid before it's due to compensate the investor for the loss of anticipated interest income.
PRIVATE MORTGAGE INSURANCE (PMI): Insurance against a loss by a lender normally required in the event the lender has lent more than 80% of the value of the property securing the loan. The premium is paid by the borrower and is included in the mortgage payment.
REFINANCE (REFI): The creation of a new loan to pay off existing debts.
RELEASE OF LIEN: When a lien against the property is satisfied, the note holder records a document that reflects the discharge of the obligation and releases the lien recorded against the property.
RELEASE OF MORTGAGE: A recordable instrument that transfers title from a mortgagee to the mortgagor when title is held as collateral security for a debt. Most commonly used upon payment in full of a mortgage.
RIDER: A rider is an addition to the security instrument.
SCHEDULE A: A section of the Preliminary Title Report/Title Commitment that lists the name of the proposed insured, amount of title insurance, estate or interest in the land, how legal title is vested and the legal description of the property.
SCHEDULE B: A section of the Preliminary Title Report/Title Commitment that lists exceptions to title if any.
SIMPLE INTEREST: Interest computed on the unpaid principal balance of a loan, as opposed to compounded interest.
SOLE OWNERSHIP: Legal title in a single individual or an entity.
SOLE PROPRIETORSHIP: Ownership of a business, with no formal entity as a vehicle or structure. The sole proprietorship reports its tax information on Federal tax form 1040.
SUPPLEMENTAL TAXES: Additional taxes assessed by the city and/or county on property. These taxes are in addition to any taxes impounded in an escrow account.
SURVEY: A document prepared by a licensed surveyor that verifies the accuracy of a property's legal description, plat maps, easements or other information found in a title search.
TAX LIEN: A lien for outstanding or delinquent property, IRS or state taxes. Tax liens for delinquent property taxes are the most common and attach only to the property upon which the taxes are unpaid. Property tax liens always take priority over other liens.
TITLE: The right or ownership in land; also, the evidence of such ownership.
TITLE INSURANCE: Insurance against certain loss resulting from undisclosed defects of title to a specifically described parcel of real property.
TITLE SEARCH: A review of all recorded documents affecting a specific piece of property to determine the present condition of claims against the property.
TRUTH-IN-LENDING DISCLOSURE: This disclosure is required by law under the Federal Truth in Lending Act, which requires a full disclosure of a loan amount, finance charges and APR.
UNDERWRITING: The analysis of a customer's credit capacity and the loan's collateral upon which a risk is given.
VARIABLE INTEREST RATE: An interest rate that fluctuates as a result of changes in a controlling index rate . With adjustable-rate mortgages, there are usually maximums as to the frequency and amount of fluctuation.
VESTING: Names of the borrowers and the manner in which they hold legal title to the property. May include marital status.
WARRANTY DEED: A deed used in many states to convey fee title to real property. A deed in which the grantor or seller warrants or guarantees good title is being conveyed as opposed to a quitclaim deed that contains no representation or warranty as to the quality of title being conveyed.
ZONING: The division of a city or county by legislative regulations into areas specifying the permitted uses allowable for the real property in these areas.

As a broker, we arrange but do not make loans. MA#'s MB 3943 and MB 4845. Maine License No. ME 339814. Florida License No. FL-ML 496851. Licensed by the New Hampshire Banking Department. Programs available to qualified borrowers on approved credit. Rates and terms subject to change without notice. Entire contents copyright Morgan Capital Company, LLC, 2007. All rights reserved. Northeast Community Mortgage Company is a trade name of Morgan Capital Company, LLC.