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| "A" Loans Loans that conform to all investor specifications including credit and debt requirements. "A" loans carry a premium when sold in the secondary market. | |
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| AIM The Asset Integrated Mortgage is a conventional loan that allows borrowers to have a portion of their down payment invested in a tax deferred annuity that can actually repay the entire principal amount at the end of the loan term. Generally, 15% to 20% of the purchase price is invested in the annuity. This loan program is Fannie Mae approved. | |
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| Appraisal The process through which appropriate property values are established. Appraisers are certified and provide to the lender a report comparing die purchased property with comparable properties. The appraisal is not to be confused with a property inspection. | |
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| ARMs* Adjustable Rate Mortgages have note rates that can change from time to time. The most common adjustment period is one year, however some ARMs can adjust every month, some don't adjust until after three years. ARMs carry lower note rates than fixed rate loans. Many times ARMs can be used to qualify for a larger loan. ARMs always have quoted indexes and margins. Indexes (the basis for a particular ARM) almost never vary from lender while Margins (the add-on to the index used to determine your adjusted rate) vary widely. *Not available at present. | |
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| "B" Loans Loans that do not necessarily conform to property or credit standards set by investors. These loans are generally regarded as higher risk loans and carry higher costs, both for interest rate and discount points. | |
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| Balloon Loans Loans that require complete repayment at the end of the term. The loan can be refinanced and many have conversion options at the end of the term. Balloon loans can offer huge savings over thirty year fixed rate loans and may be preferable for conventional buyers that will only be in the home for three to seven years. | |
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| Conforming Loans or properties that meet the requirements of standard investor loan programs. | |
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| Convertible Loans that have a conversion feature. For example, a loan might be convertible from fixed to adjustable, or vice versa, at the end of a certain time period. | |
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| Conventional Fannie Mae (FNMA) Freddie Mac (FHLMC) loans that meet standard loan requirements. Often used to refer to loan amounts above FHA limits. FHA limits have increased in several Colorado counties. Conventional loans offer more options than FHA or VA loans but usually have stricter requirements. | |
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| CHFA Often referred to as CHAFA... stands for The Colorado Housing and Finance Authority. CHFA is a revenue bond funded program that provides down payment assistance and Mortgage Credit Certificate Assistance to first-time homebuyer. Down payment assistance programs offer up to one-half of the down payment and all closing costs as part of a second loan associated with the property. | |
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| Discount Points A point is equal to one percent of your loan amount (not your purchase price). Discount points are paid to investors to purchase a note rate below the going market rate. Discount points and rates can change daily, sometimes several times per day. | |
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| Earnest Money Monies paid to the Seller and held in a Real Estate Brokers escrow account. This seals the contract and is deducted from your total cash to close. | |
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| Escrow Account These monies represent prepaid closing costs. Generally Hazard Insurance is paid in advance (at closing) for a period of one year plus two months. Mortgage Insurance and taxes are usually paid two months in advance and interest is prepaid for the number of days from closing until the end of the month. | |
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| Equal Credit Opportunity Act Your assurance that discrimination of ANY type is not allowed in the Mortgage Industry. | |
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| Fannie Mae FNMA is is a semi-governmental, semi-private institution that sets the credit and property standards for most conventional loans. | |
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| Freddie Mac FHLMC sets the standards for many conventional loans that do not fit Fannie Mae standards. Many condominiums and rural properties may be written as Freddie Mac loans. | |
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| Funding Fee The term for VA's Mortgage Insurance. | |
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| Good Faith Estimate The lender's quotation of the down payment, prepaids and closing costs associated with a specific loan program. The Good Faith estimate should show the estimated monthly payment and the total cash to close. | |
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| Hazard Insurance Protection against general hazards including fire, tornado and other uncontrollable destruction. Homebuyers are responsible for obtaining their own hazard insurance, but premiums are escrowed by the lender and become a part of the monthly payment. | |
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| HOA Dues Most townhomes and condominiums have Homeowner's Associations. These HOAs are responsible for the physical mid fiscal maintenance of the common areas. These fees vary greatly in amount and exactly what they cover. Most cover some type of hazard insurance. HOA fees are calculated into your payment (for qualifying) but paid directly to the HOA, not the investor. Sometimes HOA fees are escrowed at closing. | |
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| Jumbo Loans Loans that exceed $227,150. | |
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| Junk Fees Fees associated with your loan for various lender services. Associated loan fees should always be disclosed on your Good Faith Estimate. Be careful of lenders that charge excessive junk fees. | |
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| Loan to Value The ratio between your loan amount and the lesser of the sales price or appraised value. If you secured a mortgage for $80,000 on a house that you purchased for $100,000, your LTV is 80%. | |
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| Mortgage Insurance Premium An FHA cost that insure the lender in the event of default. MIP is currently 2.25% of the base loan amount and is amortized over the term. FHA loans also require a monthly mortgage insurance payment. | |
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| Conventional No up-front, yes monthly if under 80% LTV. No up-front on condos. Conventional has no up-front MIP but it does have monthly mortgage insurance for higher than 80% LTV. There is no up-front MIP for condos. | |
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| MCC The MortgageCredit Certificate is a revenue bond certificate (issued through CUFA) that allows first-time homebuyers to qualify for a large loan by reducing a buyer's income tax liability. The MCC is offered to moderate income homebuyers and requires an up-front application fee. | |
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| Non-Owner Occupied Term used for second or vacation homes but mostly properties to be held for investment or rental. Non-owner loans generally carry higher interest rates, higher loan costs and require a greater down payment. | |
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| Pre-Qualifying The Mortgage Network's program that helps potential homebuyers determine the purchase price, types of loan and payments they qualify for. A homebuyer will qualify for different purchase prices under different loan programs. What you should contact your Mortgage Network Pre-qualification desk to do. | |
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| Premium Points The opposite of discount points. By agreeing to accept a higher than market interest rate, lenders can help you with down payment and closing costs. There are specific guidelines outlining exactly how much a lender can pay. | |
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| Private Mortgage Insurance PMI is required on all conventional loans greater than 80% loan to value. This is similar to the FHA Mortgage Insurance Premium but just applies to conventional loans. Several options are available. | |
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| Ratios The Front End Ratio is the proposed PITI (principal, interest, taxes, insurance) divided by the borrower's qualifying income. The Back End Ratio is the proposed PITI plus monthly recurring debt divided by the qualifying income. FHA Ratios are 29% / 41% while most conventional Ratios are 33% / 38%. | |
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| Residential Mortgage Credit Report This credit report combines the information from three major credit information repositories, generally TRW, TransUnion and Equifax. Information regarding rental history is usually verified. An attempt is made by the credit reporting agency to obtain the most up-to-date data. The borrower is interviewed and usually requested to respond in writing to this report. | |
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| Settlement Statement A document often referred to as the HUD-1 which shows all buyers and sellers associated purchase and sale costs. | |
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| Secondary Market The place where loans go when they are sold. The majority of all mortgages are sold or securitized in the secondary market. The secondary market sets the standards for the loans that will be purchased. Different types of loans are sold into different types of secondary markets. | |
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| Seller Paid Closing Costs With most conventional and VA loans, sellers can pay a portion of the buyer's closing costs. In real estate negotiations, Seller Paid Costs can be a substitute for a reduction in sales price. FHA has strict limitations on Seller Paid Costs. | |
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| Survey On most properties (not Condos), a survey is performed to certify that the metes and bounds ("legal description") of the property agree with the recorded instruments. Easements and flood certifications are also checked. | |
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| Title Insurance Required by all investors, title insurance insures the conveyance of title process. Title insurance is a cost generally paid by the buyer. | |
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| Title Policy Also required by investors, the title policy insures the title against defect. The title policy assures the investor that good and clear title is secured. | |
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| Truth In Lending The lender's requirement, usually within three days of your application to disclose to you the "annual percentage rate". This rate is generally higher than the note rate as it includes most loan costs. | |
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| Underwriting The process where an underwriter approves the loan certifying that it meets the investment criteria. Property appraisals are also underwritten. | |
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| VA Loan A mortgage strictly for veterans and active U.S. Military. The VA loan can be done with $0 down and closing costs can be paid by the seller or the lender. The Mortgage Network is a VA Automatic Lender. | |
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