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Transcript
Resource Management Mrs. Windi D. Turner Mortgage Quiz A mortgage that permits the lender to periodically adjust the interest rate on the basis of changes in a specified index. A report of a real estate property's estimated value based on an analysis that includes references to the sale of comparable properties. The professional who performs appraisals is called an appraiser. Lenders usually require an appraisal to ensure that the mortgage loan amount is not more than the property's value. The fee that a mortgage lender charges when you apply for a mortgage to cover processing costs. You may be charged an application fee when applying for an apartment rental. The value placed on property for the purpose of taxation. A mortgage requiring a large payment at the end of the loan term. These mortgages generally have very low interest rates for an initial time period (usually 5, 7 or 10 years) with low monthly payments. At the end of the period, the entire balance is due. Many borrowers pay the balance by refinancing the mortgage. Any borrower other than the first borrower whose name appears on the application and mortgage note, even when that person owns the property jointly with the first borrower and shares liability for the note. A loan for financing the cost of construction or improvements to a property. The lender disburses payments to the builder at periodic intervals during construction. A lender's binding offer to loan money at a future date subject to the borrower's compliance with stated conditions. A legal document that conveys title to real estate to a disinterested third party (a trustee) who holds the title until the borrower has repaid the debt. In some states, this document is used in place of a mortgage. An item of value, money or documents deposited with a third party to be delivered upon the fulfillment of a condition. Examples are funds you deposit with the lender to pay taxes and insurance premiums when they become due, or funds or documents you deposit with an attorney or escrow agent to be disbursed upon the closing of a real estate sale. Comes from the company's initials, Federal National Mortgage Association (FNMA). A public company that operates under a federal charter and is the nation's largest source of financing for home mortgages. Fannie Mae does not lend money directly to consumers, but purchases mortgage loans from institutions that lend directly to consumers. Shares in the company are bought and sold on the New York stock exchange. An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders. A loan that is insured by the Federal Housing Administration (FHA) of the U.S. Department of Housing and Urban Development (HUD). A fee charged by independent mapping firms to identify properties in areas designated as flood zones. A form required by the Real Estate Settlement and Procedures Act (RESPA) that discloses an estimate of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the mortgage transaction. It must be provided to a borrower within three days of a mortgage loan application. The lender's estimate is not a guarantee and actual charges can be more or less. A type of revolving loan account that enables a homeowner to obtain multiple advances of the loan proceeds at his own discretion, up to an amount that represents a specified percentage of his equity in the property. The percentage of a borrower's gross monthly income that is devoted to housing costs (principal, interest, taxes and insurance). A standard guideline is that your housing costs should not exceed 25-28 percent of gross monthly income. If your monthly gross income is $2,500, then your monthly housing cost should be $700 or less. Fee or charge by the lender for processing or evaluating the loan application. Often expressed as a percentage of the loan amount, usually 1% of the loan or one point. An agreement in which the lender agrees to guarantee the borrower's interest rate for a set time period before closing. The date on which a mortgage loan is scheduled to be paid in full, as stated in the note. Any change to the terms of a mortgage loan, including changes to the interest rate, loan balance or loan term. A loan to finance the purchase of real estate. The borrower pledges the real estate as security, or collateral, for the loan by giving the lender a lien on the property. Insurance that protects lenders against losses caused by a borrower's default on a conventional mortgage loan. It typically is required if the borrower's down payment is less than 20% of the purchase price. Also called Private Mortgage Insurance (PMI). The cost or the interest rate you pay to borrow the money to buy your house. A written promise, such as a mortgage note, to pay a specified amount under agreedupon conditions. The interest rate stated on a mortgage note or other loan agreement. The total amount of principal owed on a mortgage before any payments are made. An amount of money equal to 1% of the loan amount. For example, on an $80,000 loan, one point would be $800.00 ($80,000 X .01 = $800.00) Credit Quiz A bank's review of your checking account use history prior to opening a new account for you. Some banks may run a full credit report to determine their level of risk. Others use the services of companies such as TeleCheck or ChexSystems. If you have a history of bouncing checks or misusing your accounts, institutions may not open accounts for you. The cost of credit stated as a yearly rate. On a mortgage, the APR includes the interest rate, points, broker fees and certain other credit charges that the borrower is required to pay. On a credit card, you want to look for a low APR. If you expect to pay your bills in full each month, it will be more important to compare the annual fee and other charges, rather than APR rates. Anything of monetary value that is owned by a person or company. Examples are real property, personal property, stocks and mutual funds. The amount of money in your bank account or the amount you owe on a loan. A business that offers you a place to keep your money and uses it to make more money. Banks offer a variety of services, such as checking, savings and certificates of deposits (CDs). A legal process established by federal law that allows debtors with serious financial difficulties to eliminate or restructure debts. Accounts in which money is deposited for a set period of time (e.g. 6 months, 1, 2 or 5 years) called a term. Money in a CD usually earns a higher interest rate than in a regular savings account. The longer you promise to keep your money in a CD, the higher the interest rate. There usually is a penalty if you withdraw your money early. An account that lets you write checks to pay bills or buy goods. The financial institution takes the money from your account and pays it to the person named on the check. The financial institution sends you a monthly record of the deposits made into the account and the checks written. The process of completing a loan transaction at which time the mortgage documents are signed, funds are disbursed and the property is transferred to the buyer, if applicable. May be called settlement or escrow in some states. A document that lists all costs to close a real estate purchase or refinance transaction. HUD-1 Settlement Statement An offer made in return by the person who rejects the previous offer. A person's ability to borrow money or obtain goods with payments over time, because the lenders holds a favorable opinion of the person's financial situation and reliability. A record of an individual's debts and repayment. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner. A file that contains information on where you work and live, how you pay your bills and whether you've been sued or arrested, or have filed for bankruptcy. Credit reports are used by credit card companies, banks, employers, landlords, and insurance companies. If you've ever applied for a charge account, a personal loan, insurance or job, there's a file about you. A person to whom money is owed. A computer-generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations. This number is your credit rating. Credit scores are produced by Fair Isaac Corporation and are called FICO® scores from the company's initials. Most lenders approve loans and decide what interest rate to charge based on your credit score. You have three credit scores, one for each of the three national credit reporting companies: Experian, Equifax and Trans Union. Improving your credit score lowers the cost of borrowing by qualifying you for lower interest rates. A plastic card, sometimes called a check card. The debit card has a MasterCard or Visa logo and a magnetic strip on the back that allows payment for goods and services at businesses that accept MasterCard or Visa credit cards. When paying with a debit card, the money is immediately taken electronically from your bank account. An amount owed to another. The legal document that transfers title (ownership) of real property from one party to another. Failure to make a payment when it is due. The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which payment is 30 or more days past due. Money added to your checking or savings account. To add money, you must fill out a deposit slip that tells the bank how much money you are adding to your account. Depending on whether you deposit cash, a payroll check or a check drawn on an out-ofstate bank, you may not have immediate use of the funds. The bank first must make sure there are funds at the originating bank to cover your check. You may ask the bank when you can use the money you deposited. The amount of money you put down on the purchase of a house to hold it until financing arrangements are competed. A method by which an employer or government agency can send your paycheck or benefit check directly to your checking or savings account electronically. Some banks do not charge monthly account fees if direct deposit is used. A federal law that prohibits discrimination in any aspect of a credit transaction because of an applicant's race, color, religion, national origin, sex, marital status, age, receipt of income from a public assistance program or good faith exercise of any right under the Consumer Credit Protection Act. A financial institution's charge for services. For example, a monthly maintenance fee may be charged for keeping your account open. You also may be charged a penalty fee if you misuse your account, such as by bouncing a check. The grace period is the number of days you have to pay a balance before a creditor starts charging interest. Once you receive your monthly bill, you will have 2-3 weeks to pay your bill interest-free. If your credit card issuer does not provide a grace period, a finance charge may be imposed from the date you use your card or the date the transaction is posted to your account. An increase, over time, in the general level of prices. A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can lower your credit score. Retirement plans offered by some private companies and non-profit organizations that allow you to deduct part of your paycheck and place it into the investment program you design. The plans allow you to choose different types of investments, depending on how much risk you want to take. Money invested in a plan lowers your taxable income. Employers usually will match a portion of your contribution, sometimes up to 50%. The funds grow, tax-free, until the money is withdrawn during retirement. Similar to a check and used to pay bills or make purchases in cases where cash is not accepted. Many businesses sell money orders. The price varies from business to business. Any property that is not real property. Furniture, jewelry and television sets are examples of personal property. A line of credit that may be used repeatedly up to a specified amount. Payment may be made at the end of each billing period or over several billing periods. A finance charge is added to the unpaid balance.