Staten Island Property Real Estate Terms

Index
A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

Initial Interest Rate
The introductory interest rate on a loan; signals that there may be rate adjustments later in the loan.

Joint Tenancy
An equal undivided ownership of a property by two or more persons. Upon the death of any owner, the survivors take the decedent’s interest in the property.

Jumbo Loans
Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines.

Lien
A legal hold or claim on property as security for a debt or charge.

Loan Commitment
A written promise to make a loan for a specified amount on specified terms.

Loan-To-Value-Ratio
The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Lock-in
The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days, and may require a fee or premium in the form of a higher interest rate.

Margin
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Mortgage Insurance Premium (MIP)
The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.

Mortgage Life Insurance
A type of term life insurance often bought by home buyers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.

Negative Amortization
Occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid principal balance, which means that even after several payments the borrowers could owe more than they did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren’t high enough to cover the interest.

Origination Fee
A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to one percent for FHA and VA loans.

Payment Cap
The maximum amount the payment can adjust in any given time frame.

PITI
Principal, Interest, Taxes and Insurance.

Planned Unit Development (PUD)
A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Use may be residential, commercial or industrial.

Point
An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investment.

Prepayment Penalty
A fee charged to a borrower who pays a loan before its due. Not allowed for FHA or VA loans.

Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

Purchase Agreement
A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

Rate Gap
The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.

Regulation Z
The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.

Tenancy In Common
A type of joint ownership of property by two or more persons with no right of survivorship.

Title Insurance Policy
A policy that protects the purchaser, mortgagee or other party against losses.

VA Loans
A loan, made by a private lender, that is partially guaranteed by the Veterans Administration

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