Appraisal is the process in which a professional performs an evaluation of the property in question to determine the fair market value. The appraisal value may be used to determine an asking price for sale, appropriate amount of insurance to be carried, or in relation with a short-sale.
An ARM loan is an acronym for Adjustable Rate Mortgage and refers to a mortgage loan that changes with movements in the index, adjusting with a relationship based on prime. Some ARM loans have restrictions on how frequently they can adjust and by how much.
Assets refer to the property or available money, whether it is in cash, investments, materials or inventories. These assets may be called upon to pay overdue debts if the possessor attempts to go through a foreclosure or bankruptcy proceeding. The definitive factor in determining whether something is an asset is whether it has monetary value.
Assumption refers to the process in which a buyer assumes responsibility for an existing loan rather than negotiating a new loan. Assumption relieves the original owner of the loan of all of their responsibility and obligations to the property. The buyer takes over control of payments and possession of the property.
Bankruptcy is a legal process that allows a debtor to discharge certain debts in part or in full, without paying the creditor the full amount owed. Bankruptcy has severe ramifications to the debtor’s credit score and may effect their ability to get financing in the future.
A conventional loan refers to any home loan other than VA or FHA. Conventional loans are secured by a mortgage or deed of trust. A conventional loan is also a mortgage with a fixed interest rate, fixed payments and a fixed term. The terms, interest and payments are all determined at the time of origination and will not change for the life of the loan unless the loan is refinanced.
Credit counseling usually refers to a professional counseling service that assists people in realizing and repairing their outstanding credit debt. These services may either teach the debtor better budgeting and money managing habits or may offer settlements to creditors to greatly reduce the client’s outstanding debt.
Deed-in-lieu of foreclosure is a process in which the lender accepts possession of the property in place of the outstanding debt on the property. This allows homeowners in financial distress to escape the responsibility of their mortgage without undergoing the more significant damage to their credit that comes with a traditional foreclosure.
FHA is part of the US Department of Housing and Urban Development (HUD). FHA insures mortgage loans and sets standards for construction and underwriting. The FHA was established to encourage improvement in housing standards but is not responsible for lending money or constructing buildings.
HUD is a federal department charged with the duty of administering housing programs in the United States . HUD is an acronym for Housing and Urban Development. This agency is responsible for sponsoring subsidized housing, particularly in urban areas. HUD also provides advice and assistance to people who are facing foreclosure.
The interest rate is the amount that a lender charges a borrower for a loan. This rate is usually based on national prime rates, the credit standing of the borrower, the type of loan, and the amount borrowed. The interest payment is usually folded into the monthly payment of the loan and the amount that the borrower pays to interest versus principle may change over time.
A lender, in terms of a home mortgage, is a bank, savings institution, or mortgage company that offers home loans. A lender lends money to purchase a home secured with the title of the property. The money must be paid back, with interest, over a set amount of time, usually 15 or 30 years.
A liability is a debt or obligation for which a person is responsible. Debt obligations are liabilities and, when secured such as with a house, the lender or creditor has a claim on the assets of the borrower until the debt is repaid within the original terms of the loan.
A lien is a legal claim that a lender or creditor has on personal property in relation to an outstanding debt. In the case of home mortgages, a lien is placed on your property for the original loan as well as any additional loans that you may take out that are secured with the property. A lien allows the lender to seize your property if you default on your loan.
Market value is an average of the highest price that a buyer would be willing to pay and the lowest price that a seller would be willing to take on a property. This amount is usually determined by a professional appraiser that compared the property with other similar properties and their selling prices.
Principle is the capital sum borrowed, upon which interest is paid. In the case of a home loan, the principle is the amount that was originally borrowed for purchase of the home. Home owners pay a portion of the principle and a portion of interest in every monthly payment. At the beginning of a loan, the monthly charge for interest is generally much greater than the amount being paid to the principle.
A promissory note is a legally binding contract in which the borrower promises to pay for any indebtedness to a lender. The document is signed by the borrower and generally sets out terms of the loan such as monthly payments, interest rate, due dates and any other payment provisions.
Refinancing is a process in which the borrower takes out a new loan to pay off an existing mortgage. This is often done with home mortgage loans so that the borrower can obtain a lower interest rate, lower monthly payments, additional time to pay off the loan, or to borrow further funds against the equity of the home.
SCRA is an acronym for Servicemembers Civil Relief Act. SCRA is designed to protect active duty military members and reservists. SCRA allows active military members to take advantage of a 6% cap on interest rates for credit cards, home loans, and some student loans. The interest rate cap is only applicable during the time of service.
A second mortgage is a mortgage loan granted against a property that is already indebted to a first mortgage agreement. The second mortgage produces a lien on the property that is secondary to the first mortgage. If the borrower defaults on the loans, the second mortgage will only be paid after the first mortgage is paid in full. Because the loan is less secured, the interest rate is likely to be higher.
Short sales are an option to some homeowner who are facing foreclosure but whose property is worth less than the amount owned on the property. A short sale is an agreement between the borrower and the lender that allows the borrower to sell the property for less than is owed without having to pay back the difference to the lender.
VA stands for Veterans Administration, a federal agency that assists veterans in entering the housing market. The VA guarantees housing loans to veterans and enables them to buy residences with little or no down payment.