Comprehensive Mortgage and Real Estate Loan Terms for Students

Estoppel certificate

Signed by borrower verifying the amount and interest owned on the mortgage

Mortgage Reduction Certificate

Borrower needs a statement from the lender that details the current amount that is due

Down Payment

Usually 20% of price

Principal

The original loan amount and money you agree to pay back

Loan-to-value ratio

principal/price = LTV %

Interest

The cost of borrowing money shown as a percentage that accrues each year

Usury

Banks giving you higher interest on mortgage loans

Points

Fees a homebuyer pays directly to the bank for a reduced interest rate

Annual Percentage Rate

Yearly interest rate paid + additional fees for a loan

Regulation Z

Borrower has to be advised of what the APR will be in ads and writing

Amortization

The principal amount of the loan is paid down over the life of the loan according to the amortization schedule

Term Mortgage Loan

Loan repaid in regular installments for a set period of time

Fixed-rate mortgage

Interest rate stays the same for the length of the loan

Adjustable-rate mortgage

Interest rates change periodically which is risky and leads to you usually paying more

Fully Amortized Loan

Loans that include interest + principal and decreases debt over time

Partially Amortized Loans

Loans that include interest + principal and decreases overtime but end with paying entire remaining principal

Short-Term or Temporary Loans (Bridge Loan)

When a homeowner is selling one home and buying other, they need short term financing

Blanket Mortgages Loans

Used when buying more than one property- subdividing land

Home Equity Loans

Second mortgage or junior lien

HELOC

Home equity line of credit

Reverse Equity Mortgage Loans

Lender pays homeowner

Mortgage

A promise of real property given by a borrower as securing for a loan

Collateral

An asset pledged as security for a loan

Note/Bond

Aka a promissory note- personal promise to repay the loan

Foreclosure

A lender tried to recover balance of loan from a borrower who has stopped paying by forcing sale of the collateral

Judicial Foreclosure

Lender sells property and borrower can redeem property up until the moment of sale as long as the payment is in full

Strict Foreclosure

Lender regains title to the property

Mortgagor

Borrower who makes the pledge

Mortgagee

Lender

Title Theory

Lender holds title of property until loan is fully paid off

Lien Theory

Borrower owns and possesses property but lender has lien until loan is paid off

Alienation Clause

Due on sale clause

Assignment Clause

When owner wants to sell property quickly they can assign it

Insurance

Used to protect against possible issues including homeowner's insurance that covers losses and damages to the house and assets in the home

Property Taxes

School district taxes

Default

Failure to do PITI means you default

Deficiency Judgement

It's used when a foreclosure sale doesn't cover the loan amount and the lender is entitled to seek a deficiency where the judgement is made against the borrower of the unpaid balance

Banks

Most loans are obtained from financial institutions that hold savings

Credit Unions

Not profits that give traditional banking services

Insurance Companies

Invest in real estate loans and typically commercial/industrial properties

Mortgage Banking companies

Licensed by NY banking department

Government Agencies

Gov programs bringing affordable loans to working families that cannot afford upfront costs or down payments

Private Lenders

Seller can offer the buyer seller financing

Primary Mortgage Market

Lenders who provide funds to borrowers and all loans originate here

Secondary Mortgage Market

Lenders who sell mortgages to other investors

Unconventional Mortgage Loans

With gov protection

Conventional Mortgage Loans

Without gov protection

Wraparound Mortgages

Used for refinancing when mortgage gets assumed- second mortgage usually higher interest

Graduated-Payment Mortgage

Principal and interest gradually increase over time and eventually stays constant

Acceleration clause

Lender move up foreclosure

Deed in lieu of foreclosure

Lender gets deed from borrower

Prepayment penalty clause

Charged of some mortgage notes if the loan is paid before its full term

The federal real estate settlement procedures act

It limits the amount of tax and insurance reserves a lender requires

Tax reform act of 2018

Can deduct amount of interest paid on mortgage- 750K on 1st home, $100k on second (if married filing jointly)