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Category Archives: Loan
To understand why mortgage rates change we need to know why do interest rates change and there is not one interest rate, but many interest rates!
|Prime rate: The rate offered to a bank’s best customers.|
|Treasury bill rates: Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of 3 months, 6 months and 1 year. Each treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).|
|Treasury Notes: Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.|
|Treasury Bonds: Long debt instruments used by the U.S. Government to finance its debt. Treasury bonds come in 30-year denominations.|
|Federal Funds Rate: Rates banks charge each other for overnight loans.|
|Federal Discount Rate: Rate New York Fed charges to member banks.|
|Libor: : London Interbank Offered Rates. Average London Eurodollar rates.|
|6-month CD rate: The average rate that you get when you invest in a 6-month CD.|
|11th District Cost of Funds: Rate determined by averaging a composite of other rates.|
|Fannie Mae Backed Security rates: Fannie Mae, a quasi-government agency, pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae backed securities. The rates on these securities influence mortgage rates very strongly.|
|Ginnie Mae-Backed Security rates: Ginnie Mae, a quasi-government agency, pools large quantities of mortgages, securitizes them and sells them as Ginnie Mae-backed securities. The rates on these securities affect mortgage rates on FHA and VA loans.|
Interest-rates move because of the laws of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more people who want money, buyers, so people who are willing to lend it, sellers, can command a better price, i.e. higher interest rates. If you have questions about your mortgage please contact me or visit my web site at www.mortgagelinkhome.com.
Title: Ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances which could impair the title.
Title Insurance Policy: A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.
Title Search: A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.
Transfer Tax: In some areas city, county or state taxes imposed when property passes from one person to another.
Truth-In-Lending: Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.
Underwriting: The process of evaluating a loan application to determine the risk involved for the lender.
That’s it, that’s all I have. You are now one step closer to being a savvy mortgagor! For more mortgage information, go to my web site at Mortgage Link!
Second Mortgage: A loan issued on property that is already encumbered by an existing mortgage (ie: the first mortgage). The second mortgage is subordinate to the first.
Secondary Mortgage Market: The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.
Survey: A map prepared by an engineer or surveyor charting a particular piece of real estate.
Qualifying Ratios: Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt-to-income ratios (or DTI).
Real Estate Settlement Statement: Final settlement statement often referred to as the HUD-1 form, used to itemize buyer, seller, broker, and lender charges and credits at closing.
Realtor: A real estate broker or sales associate affiliated with the National Association of Realtors.
Recording Fee: The charges made by the register of deeds to record the legal documents.
Refinancing: Repaying a debt with the proceeds of a new loan, using the same property as collateral.
PITI: An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.
Plat: A map of a piece of land showing boundary lines, streets, actual measurements and easements.
Point: A fee paid to the lender on closing day to increase the effective yield of the mortgage. A point is one percent of the amount of the mortgage loan. Also called a discount point.
Prepayment Penalty: A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.
Pre-Approval: A commitment by a lender to extend credit provided that specific conditions are met.
Pre-Qualification: A preliminary assessment of a buyer’s ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.
Prime Rate: The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.
Principal: The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
PMI (Private Mortgage Insurance): Insurance written by a private mortgage insurance company to protect the lender against losses caused by mortgage default. This is commonly required on loan transactions involving less than a 20% down payment or equity position.
Negative Amortization: A loan in which the outstanding principal balance goes up instead of down because the monthly payments are not large enough to cover the full amount of interest due. Also called deferred interest.
Offer to Purchase: A written proposal to buy a piece of real estate that becomes binding when accepted by the seller. Also called a sales contract.
Origination Fee: A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.
Owner Financing: A purchase in which the seller provides all or part of the financing.