Appraisal: A report written by a qualified expert that states an opinion on the value of a property based on its characteristics and the selling prices of similar properties or comparable properties in the area.
Appreciation: An increase in the value of a house due to changes in market conditions or other causes.
Clear Title: Ownership of the property that is free of liens and legal questions as to ownership of the property.
Closing: The final step after a lender approves an application. The occasion when a borrower signs loan documents, including the mortgage or deed of trust, and when closing costs are paid. Also referred to as the “settlement.”
Closing Agent: Usually an attorney or title agency representative who oversees the closing and witnesses the signing of the closing documents.
Closing Costs: The costs to obtain a mortgage loan. Closing costs cover any services and charges – such as title search and insurance, appraisals, surveys, credit histories, required inspections, taxes, and recording fees – that are necessary to complete the transaction.
Counseling Session: Before a homeowner can apply for a reverse mortgage, they are required to attend a consumer education session with a HUD-approved counseling agency. The purpose of the session is to explain the legal and financial consequences of obtaining a reverse mortgage.
Credit Report: A report issued by an independent agency that contains certain information concerning a mortgage applicant’s credit history and current credit standing.
Deed of Trust: The legal document conveying title to a property.
Equity: Your ownership interest, or that portion of the value of the property that exceeds the current amount of your home loan. For example, if the property is worth $100,000 and the loan is for $75,000, then you have $25,000, or 25% equity in your home.
Good Faith Estimate: A document that tells mortgage borrowers the approximate costs they will pay at or before closing based on common practices in the locality.
Home Equity Conversion Mortgage (HECM): A type of FHA-insured reverse mortgage.
Homeowner’s Insurance (also called Hazard Insurance): A real estate insurance policy required of the buyer protecting the property against loss caused by fire, some natural causes, or vandalism. May also include added coverage such as personal liability and theft away from the home.
HUD-1 Settlement Statement: A standard form used to disclose costs at closing.
Interest Rate: The interest that is paid to the lender for the use of the money, usually expressed as an annual percentage rate.
Lien: A legal claim against a property as security for a payment of an obligation.
Loan Balance: The outstanding balance of a reverse mortgage loan. Equal to principal plus financed fees plus all accrued interest.
Loan Conditions: These are terms under which the lender agrees to make the loan. They include the interest rate, length of loan agreement, and any requirements the customer must meet prior to closing.
Loan Proceeds: Payments to a customer through a reverse mortgage.
Loan Settlement: The conclusion of the mortgage transaction. This includes the delivery of a deed, the signing of notes, and the disbursement of funds necessary to the mortgage transaction.
Loan-to-Value (LTV): The ration of the amount borrowed to the appraised value or sales price of real property expressed as a percentage.
Margin: The number of percentage points added to the index to calculate the interest rate for a variable-rate mortgage at each adjustment period.
Mortgage Insurance Premium (MIP): – The fee paid by a borrower to FHA or a private insurer for mortgage insurance that protects the lender against the risk that the loan balance might at some time exceed the value of the home.
Mortgage Points: The number of percentage points added to the index to calculate the interest rate for a variable-rate mortgage at each adjustment period.
Mortgage Specialist: The Cornerstone First Financial employee responsible for collecting the completed application – and all supporting documents – before the entire loan packet is submitted to underwriting. Also known as a processor.
Note: The agreement that states the home mortgage amount to be borrowed and the terms and conditions of the loan. It also includes a completed description of how the loan should be repaid and the time frame for repayment.
Origination Fee: The amount collected by the lender for making a loan. It is generally equal to a percentage of the principal amount borrowed. It is charged to cover the lender’s costs in preparing the initial loan application and the processing of the loan.
Principal: The amount of a loan, or the remaining balance of a loan, excluding interest.
Principal Residence: The property that is considered the primary residence of the borrower.
Processing: The completion of a mortgage loan application and supporting documents.
Rate Cap: The limit of how much the interest rate may change on a variable-rate mortgage at each adjustment and over the life of the loan.
Refinance: The process of paying off one loan with the proceeds from a new loan secured by the same property.
Reverse Mortgage Consultant: The Cornerstone First Financial representative a prospective customer initially consults about a reverse mortgage loan. Sometimes called a loan officer, account executive, or sales representative.
Servicing Fee: The fee paid by the borrower to cover record keeping and other administrative costs of processing mortgage payments. This flat fee will be added to the outstanding loan balance each month.
Title: A legal document establishing the right of ownership.
Title Search: A check of title records to ensure that a person is the legal owner of a property and that there are no liens or other claims outstanding on the property.
Truth-in-Lending Statement: Required by federal regulations, this statement tells borrowers the costs of financing their loan expressed as the annual percentage rate (APR)
Underwriting: The process of a lender reviewing the application, documentation, and property prior to rendering a loan decision.
Variable-Rate Mortgage: A loan with an interest rate that changes with market conditions on pre-determined dates.
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