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Glossary of Mortgage
Terms
Glossary of Mortgage Terms
Abstract Of Title
- A summary of recorded transactions concerning a property. (An attorney or
title insurance company examines an abstract of title for any title defects
which must be cleared before a buyer can purchase clear, marketable, and
insurable title.)
Acceleration Clause - Condition in a
mortgage that gives the lender the right to require immediate repayment of the
loan balance if regular mortgage payments are not made, or for breach of other
conditions of the mortgage.
Accrued Interest - Interest which has
been incurred but not paid.
Adjustable Rate Mortgage (ARM) - A
mortgage in which the interest rate is adjusted periodically based on a
pre-selected index. Subject to certain limitations, the rate and payments on an
ARM loan rise and fall with the market.
Adjustment Interval or Adjustment Period
- The length of time between rate adjustments on an Adjustable Rate Mortgage
(ARM).
Agreement Of Sale - Contract signed
by buyer and seller stating the terms and conditions under which a property will
be sold.
Alternative Documentation - A
substitute method of providing the documentation necessary to approve a loan.
For example, bank statements may be substituted if it is not possible to provide
written verification of the bank balance directly from the borrower’s bank.
Amortization - The process of paying
off a mortgage in regular increments.
Amortization Schedule - A monthly
repayment schedule outlining how a loan will be paid off in fixed payments
combining principal and interest.
Annual Percentage Rate (APR) - A
calculation that expresses the total cost of a mortgage loan as a yearly rate
(according to a federally mandated procedure). The APR calculation takes into
account monthly interest payments, mortgage insurance, points, and certain fees
paid at origination. It generally results in a rate slightly higher than the
stated interest rate on the loan.
Application - An initial statement of
personal and financial information required to approve a loan provided by the
borrower and necessary to intitiate the approval process for a loan.
Application Fee - Fees charged by
lender at loan closing to cover the initial costs of processing a loan
application.
Apply Online - Apply online, 24 hours
a day, 7 days a week, and get a loan approval in minutes! A leader in online
account capabilities, we offer unlimited, free access to track disbursements,
order draws, check account balance, and more. It’s fast and easy.
Appraisal - A written estimate of a
property’s current market value, based on recent sales information for similar
properties, the condition of the property, and the neighborhood’s impact on
future property value.
Appraisal Fee - A fee charged by a
licensed, certified appraiser to provide an appraisal.
APR - See Annual Percentage Rate.
ARM - See Adjustable Rate Mortgage.
Assessment - A local tax levied
against a property for a specific purpose, such as road or sidewalk construction
or sewer or street light installation.
Asset Documentation - We will require
recent verification of assets needed to close. This is required on all of our
loan programs except our NoDoc program.
Assignment - The transfer of property
rights by one person, the assignor, to another, the assignee.
Assumability - A loan feature that
allows the loan to be transferred from the seller to the purchaser of a home
with the same terms and conditions, subject to lender approval.
Balance Sheet - A document showing
the financial situation--assets, liabilities, and net worth--of a company at a
specific point in time.
Balloon Mortgage - A short-term,
fixed-rate loan with low payments for a set number of years and a large balloon
payment of the remainder of the principal due at the end of the term.
Bankruptcy - Proclamation by a court
of an individual’s (or organization’s) state of insolvency, or inability to
pay debts. Petition may be brought by an individual or creditors, with a goal of
orderly and equitable settlement of obligations.
Bearer - The legal owner of a piece
of property.
Best Loan For Your Borrower - With
our one-time close construction loan, our borrowers are guaranteed to have a
permanent loan once construction is complete. And best of all, the rate is
guaranteed.
Bequest - A gift of personal property
by will.
Bill Of Sale - A document by which
one transfers ownership of goods to another.
Bi-weekly Mortgage - A payment plan
under which the borrower pays one half of a monthly payment every two weeks.
Blanket Mortgage - A mortgage
covering at least two or more pieces of real estate, both of which together
serve as collateral for the loan.
Bona Fide - In good faith.
Bond - A document representing a
right to certain payments on underlying collateral.
Borrower (or Mortgagor) - An
individual who applies for and receives a loan in the form of a mortgage with
the intention of repaying the loan in full.
Bridge Loans
Our bridge financing is for homeowners who plan to construct a new
owner-occupied primary residence by accessing equity in their current
owner-occupied residence, which they intend to sell and use as the down payment
requirement on a Construction-To-Permanent Loan. Both the bridge financing and
Construction-to-Permanent Loan must be sourced by the borrower from IndyMac
Bank, and must close concurrently.
·
No monthly mortgage payments during construction phase
·
Competitive rates (see rate sheet)
·
Existing liens (including Bridge Loans) are not counted in
debt-to-income calculation
Broker - An
individual who assists in arranging funding or negotiating contracts for a
client but does not loan money himself.
Budget - The budget is comprised of
the total costs involved in the construction of the home, the amount of costs
that the borrower may have already paid, and the costs remaining to be paid to
complete the home. This will quickly identify the borrower’s equity already
paid, and the amount of borrower funding needed at closing, if any.
Buy-Down - A situation in which the
seller contributes money, allowing the lender to give the buyer a lower rate and
payment, usually in exchange for an increase in sales price.
Buyer’s Broker - An agent hired by
a buyer to locate a property for purchase and to represent the buyer in
negotiations with the seller’s broker.
Buyers’ Market - Market conditions
that favor buyers. With more sellers than buyers in the market, buyers have
ample choice of properties and can negotiate lower prices.
Call Option - A loan feature that
allows the lender to require repayment of the loan in full before the term of
the loan is up.
Caps - Limits on changes in ARM
interest rates or monthly payments, either in an adjustment period or over the
life of the loan.
Caps (Interest) - Consumer safeguards
which limit the amount the interest rate on an adjustable rate mortgage can
change in an adjustment interval and/or over the life of the loan.
Caps (Payment) - Consumer safeguards
which limit the amount monthly payments on an adjustable rate mortgage may
change. Since they do not limit the amount of interest the lender is earning,
payment caps may cause negative amortization.
Cash Out - A refinance for more than
the balance of the current mortgage. The excess money taken out reduces the
borrower’s equity.
Cashier’s Check (or Bank Check) - A
check whose payment is guaranteed because it was paid for in advance and is
drawn on the bank’s account instead of the customer’s.
CC&Rs - See Covenants, Conditions
and Restrictions.
Ceiling - The maximum allowable
interest rate of an adjustable rate mortgage.
Certificate Of Eligibility - Document
issued by the Veterans Administration to qualified veterans which entitles them
to VA-guaranteed loans. Obtainable through local VA offices by submitting form
DD-214 (Separation Paper) and VA form 1880 (request for Certificate of
Eligibility).
Certificate Of Occupancy - Document
issued by local government agency stating that a property meets the requirements
of health and building codes.
Certificate Of Reasonable Value (CRV)
- A property appraisal performed by a VA approved appraiser which establishes
the limit on the principal of the VA loan.
Certificate Of Title - Written
opinion of the status of title to a property, given by an attorney or title
company. This certificate does not offer the protection given by title
insurance.
Certificate Of Veteran Status -
Document given to veterans or reservists who have served 90 days of continuous
active duty (including training time) which enables them to obtain lower down
payments on certain FHA/VA-insured loans. This certificate is obtainable through
local VA offices by submitting form DD-214 (Separation Paper) with form 26-8261a
(request for certificate of veteran status).
Certified Check - A check drawn on
the issuer's account for funds that have been segregated by the bank, thus
guaranteeing sufficient funds for payment.
Chain of Title - The chronological
order of conveyance of a property from the original owner to the present owner.
Clear Title - A marketable title,
free of clouds and disputes.
Closing (or Settlement) - Meeting
between the buyer, seller, and lender or their agents, at which property and
funds legally change hands.
Closing Agent -
Neutral third party appointed to act as a custodian for documents and funds
during the transfer of property from seller to buyer. Depending on local law and
custom, this could be an attorney, escrow agent, or title company.
Closing Costs - Costs associated with
the closing of the loan (e.g. title costs, loan fees, discount fees, inspection
fees, appraisals, etc.).
Closing/Settlement Statement - A form
prepared by the closing agent that itemizes the closing costs associated with
purchasing or refinancing a home. Also see HUD-1.
Cloud on Title - An outstanding claim
or encumbrance that, if valid, would affect or impair the owner's title.
Combined Loan To
Value (CLTV) - The percentage of the property value borrowed through a
combination of more than one loan (for example, first mortgage and home equity
line of credit). Mathematically, the combined loan and line of credit amounts
divided by property value equals Combined Loan To Value Ratio.
COFI - See Cost of Funds Index.
Collateral - Assets that secure a
loan. (In the case of a mortgage, real property serves as collateral.)
Commission- Money paid to a real
estate agent or broker by the seller (usually 6-7% of the sale price of the
house).
Commitment - A
formal offer by a lender to a borrower to make a loan under certain terms or
conditions.
Condominium - A
form of property ownership in which the homeowner holds title to an individual
dwelling unit and an interest in common areas and facilities of a multi-unit
project.
Conforming Loan - A mortgage loan
eligible for purchase by the two federally sponsored housing agencies, Fannie
Mae and Freddie Mac.
Construction APR - A calculation that
expresses the cost of a mortgage loan as a yearly rate (according to a federally
mandated procedure) over the life of the loan, including the construction phase.
The APR calculation takes into account monthly interest payments, mortgage
insurance, points, and certain fees paid at origination.
It generally results in a rate higher than the stated interest rate on the Note,
as well as the estimated APR disclosed on the permanent financing phase of the
loan term. You may receive two APRs, one for the construction period of your
loan and the other for the permanent financing of your loan, or the APR can be
combined for both the construction and permanent periods of your loan.
Construction Costs - These are the
costs to complete the construction of a home: off-site, on-site, land value,
closing costs, contingency, and interest reserves.
Construction Loan - A short-term
interim loan to fund the construction of buildings or homes, which usually
advances the money in installments as work progresses.
Construction-To-Permanent (CTP) Loan
·
Loans to $3 million and above
·
No Ratio, No Doc, Reduced Doc options
·
Streamlined application process
·
Online account access. Track disbursements, order draws, check
account balance.
·
Fixed rate during 6, 9, or 12-month construction periods
·
At completion of construction, permanent financing guaranteed at
NO additional cost. Borrower may pay down the principal at roll-to-perm.
·
Always-competitive rates!
Construction
Technology - IndyMac Bank is a leader in online construction lending
technology. We were the first lender to offer online credit approval. Within
minutes, you can obtain credit decisions, pricing, project approval, and builder
acceptance. Fast. Convenient. 24/7 Step-By-Step Approval!
Contract Of Sale - The agreement
between the buyer and seller on the purchase price, terms, and conditions of a
sale.
Contingency - A
condition which must be satisfied before a contract is legally binding--before a
sale can close.
Conventional Loan Loan
- A mortgage not insured by the FHA or guaranteed by the VA.
Conversion Clause -
A provision in some ARMs that allows changing an ARM to a fixed-rate loan,
usually after the first adjustment period. The new fixed rate is based on a
formula tied to current rates, and there may be a charge for the conversion
feature.
Convertible ARMs -
ARMs with the option of conversion to a fixed loan during a given time period
(see "Conversion Clause").
Conveyance - The
transfer of a deed, lease, or mortgage.
Cost Of Funds Index
(COFI) -A common index used in adjustable rate loans based on the
weighted-average interest rate paid for deposits by savings institutions that
are members of the 11th Federal Home Loan Bank District.
Course Of construction - This policy
is in the form of an "all risk" policy with fire, extended coverage,
builder's risk, replacement cost, vandalism, and malicious mischief insurance
coverage. The owner is named insured with insurable value equal to the
replacement cost of the improvement or the loan amount, whichever is lower. Once
the improvements are completed and the permanent mortgage begins, the course of
construction policy is usually converted to a standard "all risk"
policy.
Covenants, Conditions, and Restrictions
(CC&Rs) - A document that defines the use, requirements and restrictions
of a condominium or Planned Unit Development (PUD).
Credit Report - A report detailing
the credit history of a prospective borrower, used by lenders to help determine
creditworthiness.
Debt-To-Income Ratio - A figure,
expressed as a ratio, that compares the amount of recurring debt payments a
borrower is obligated to make to the amount of their income.
Deed - Legal document by which title
to a property is transferred from one owner to another. The deed contains a
description of the property and is signed, witnessed, and delivered to the buyer
at closing.
Deed Of Trust - Document creating a
lien on a property as security for the payment of a debt. In some states, a
mortgage is used instead.
Default - Failure to meet legal
obligations in a contract, including failure to make payments on a loan. A
mortgage is generally considered to be in default when a payment is 30 days past
due.
Deferred Interest - Amount added to
the balance of a loan when monthly payments are insufficient to cover the
interest incurred. This results in negative amortization.
Delinquency - Failure to make
required payments on time.
Deposit - Cash
paid to the seller when a formal sales contract is signed.
Depreciation -
Decline in property value.
Dependable and
flexible disbursements - IndyMac Bank’s in-house disbursement
administrators handle all of your draw requests. No unnecessary delays or
unexpected slow-downs. A leader in online account capabilities, we offer
unlimited, free access to track disbursements, order draws, check account
balance, and more. It’s fast and easy.
Discount Points - See Points.
Documentary Stamps - A state tax, in
the forms of stamps, required on deeds and mortgages when real estate title
passes from one owner to another.
Document Review -
Fee charged by lender for review of documents necessary to fund a loan.
Down Payment -
In a home purchase, the difference between the purchase price and the mortgage
amount.
Draw Deposits - We can make deposits
on certain line items up to 50% of the cost. These deposits are made payable to
the vendor. When making a deposit request, please mark the check box.
Draw Requests - Prior to the close of
escrow, the borrower will execute a signature card and establish a bank account
at the Federal or State chartered financial institution. At IndyMac Bank, we
figured out a way to speed up your disbursements. When you fund your
Construction-to-Permanent Loan, we’ll set up an IndyMac Bank Value Checking
Account and wire your disbursement funds directly to it, free, quickly.
Draw Request Status - You may be
advised that your Draw Request is:
·
Pending - You have not
submitted your request to IndyMac Bank; you can view the requested item here.
You need to acknowledge and approve the request by executing the online draw
request and by pressing the submit button.
·
To Be Inspected - Your
draw request has been sent to the inspection company. They have not posted their
inspection results yet. Once they post the status, this will be e-mailed to you
and you can view their percentage completion on the project.
·
Inspected - Your
project has been inspected by an inspection firm. IndyMac Bank has received the
results of the inspection and is in the process of administering your requested
funds draw.
·
To Be Processed - Your
draw request is ready for advanced processing by loan administrator.
·
Approval Pending - We
have received all the necessary documentation for this draw. Within 24 hours the
funds will be wired to your bank account.
·
Disbursed - The
requested draw has been approved and wired. Please check your bank account for
funds availability before writing a check or disbursing funds to your
contractor.
·
Denied - At this time
we are not able to process your draw request. Please view the note pad attached
to give the reason behind our lack of ability to issue funds to your account at
this time. If you have any further questions after reading our reason for denial
of the draw, please contact your loan adminstrator via e-mail by utilizing the
"contact me" button on the request draw page or via telephone. The
phone number for your loan administrator is available on the Terms and
Commitment page.
IndyMac Bank Value
Checking Account
·
No monthly fee
·
Unlimited check writing
·
Available overdraft protection
·
Visa® check card available upon approval
·
Free IndyMac Bank ATM access, plus a $5 reimbursement per month on
other banks’ ATMs
·
$500 Minimum balance required
Earnest Money -
Deposit made by a buyer toward the down payment as evidence of good faith when
the purchase agreement is signed.
ECOA - See Equal Credit Opportunity
Act.
Effective Interest Rate - The cost of
a mortgage expressed as a yearly rate, usually higher than the interest rate on
the mortgage since this figure factors into the up-front costs of acquiring the
loan.
e-MITS® -
IndyMac was among the first in the industry to field a fully integrated and
automated Web-based underwriting / pricing system called e-MITS. With e-MITS,
we provide our customers risk-based, competitive pricing and quick
decisions...in as little as three minutes... 24 hours a day, 7 days a week. It's
fast, easy and best of all, it's free to IndyMac B2B customers.
Encumbrance - A
legal right or interest in a property that affects title and may lessen the
property value.
Equal Credit Opportunity Act (ECOA) -
Federal law requiring creditors to make credit equally available without
discrimination based on race, color, religion, national origin, age, sex,
marital status, or receipt of income from public assistance programs.
Equity - The difference between the
current market value of a property and the outstanding mortgage balance.
Equity Loan - A loan based on the
borrower's equity in his or her home.
Escrow - 1.
Neutral third party appointed to act as a custodian for documents and funds
during the transfer of property from seller to buyer or in the course of
refinancing property. 2. Account held by lender containing funds collected in
conjunction with monthly mortgage payments. The funds in the escrow account are
used by the lender to pay annual expenses such as taxes and insurance on behalf
of the borrower.
Escrow Account -
Account held by lender containing funds collected in conjunction with monthly
mortgage payments. Also known as impounds, the funds in this account are held in
trust by the lender on behalf of the borrower, and are used to pay expenses such
as property taxes and homeowner’s insurance.
Escrow Officer - See Closing Agent
Estimated Settlement (or Closing)
Statement - A document provided by the closing agent a few days before
closing, detailing all costs and indicating the final sum the buyer will be
required to bring to the closing.
Expense-To-Income Ratio - Also known
as Back-End Ratio and Debt-to-Income Ratio. The figure derived by dividing a
borrower’s monthly financial obligations by his/her gross monthly income.
Fannie Mae (FNMA) - Corporation
created by Congress that buys and sells residential mortgages. Fannie Mae
provides funds for one in seven mortgages.
Farmer's Home Administration (FmHA) -
An agency of the U.S. Department of Agriculture that provides financing for
purchasers of homes and farms in small towns and rural areas.
FDIC - See
Federal Deposit Insurance Corporation.
Federal Deposit
Insurance Corporation (FDIC) - Independent deposit insurance agency created
by Congress to maintain stability and public confidence in the nation's banking
system.
Federal Home Loan
Bank Board (FHLBB) - Former name for the regulatory and supervisory agency
of federally chartered savings institutions, now called the Office of Thrift
Supervision.
Federal Housing
Administration (FHA) - Government agency, division of the Department of
Housing and Urban Development, which insures residential mortgage loans made by
private lenders and sets standards for underwriting mortgage loans.
Federal Reserve -
Central bank of the United States and major regulatory agency for many
commercial banks.
Fee Simple -
Absolute ownership of real property. FHA - See Federal Housing Administration.
FHA - See
Federal Housing Administration.
FHA Loan - Loan
insured by the FHA for low to middle income homes, open to all qualified home
purchasers.
FHLBB - See
Federal Home Loan Bank Board.
FHLMC - See
Federal Home Loan Mortgage Corporation.
First Mortgage -
The primary lien against a property.
Fixed Rate - An interest rate that is
fixed for the term of the loan.
Fixed-Rate Mortgage
- A mortgage whose interest rate does not change for the life of the loan.
Payments are also fixed.
Federal Home Loan Mortgage Corporation (FHLMC)
- See Freddie Mac.
Flexible Documentation
Our Construction-To-Permanent Loan offers our borrowers flexible and sensible
documentation options:
·
Full Doc: Income documentation is required, such as pay stubs, W2s
and 1040s
·
No Ratio: Income is neither stated nor verified
·
No Doc: Employment, income and assets are neither stated nor
verified
·
Reduced Doc: Income stated but not verified
Flood Insurance
- A form of hazard insurance required by the federal government to cover
property damage or loss in flood zones.
Floor - The minimum interest rate
payable on an Adjustable Rate Mortgage.
Federal National Mortgage Association
(FNMA) - See Fannie Mae.
FICO Score - A credit evaluation
score developed by Fair, Isaac, and Co., used by lenders as one factor in making
a loan decision. Some methods of improving a score are to establish and maintain
a payment history on credit accounts, keep public records (bankruptcies,
judgments, etc.) and collection accounts to a minimum, pay down loans, keep
credit cards well below their limits, avoid late payments, and limit applying
for new credit.
Fixed Price Contract - A construction
contract between the borrower and contractor defining the cost of building and
improving a residence. The contract should have a start date and a finish date.
Forbearance - Grace period given when
a lender postpones foreclosure to give the borrower time to catch up on overdue
payments.
Foreclosure (or
Repossession) - Legal process by which the lender forces the sale of a
property when the borrower has not met the mortgage terms.
Freddie Mac (FHLMC)
- Quasi-governmental agency that purchases conventional mortgages from insured
depository institutions and HUD-approved mortgage bankers.
General Liability - Insurance in the
form of a comprehensive general policy or included as a broad form liability
endorsement. This can be provided by the borrower or the general contractor. If
the insurance is provided by the borrower, a minimum amount of $300,000 for each
occurrence is required, extended to both property and personal injury. If the
contractor is providing the insurance, a comprehensive general policy of at
least $1,000,000 or a policy including broad form liability endorsement is
required.
Ginnie Mae - See Government National
Mortgage Association.
GNMA - See
Government National Mortgage Association.
Government National
Mortgage Association (GNMA, or Ginnie Mae) - Government agency that provides
funds for VA and FHA loans.
Good Faith Estimate
- Written estimate of costs the borrower will pay at closing, provided by a
lender within three days of loan application.
Graduated Payment
Mortgage (GPM) - Mortgage in which initial low payments (with potential
negative amortization) increase regularly for several years and then level off.
Grace Period -
Period of time during which a loan payment may be made after its due date
without incurring a late penalty.
Gross Income -
Total income before taxes or expenses are deducted.
Growing Equity
Mortgage - A fixed-rate loan in which payments increase by a predetermined
amount each year, reducing the outstanding balance of the loan. This accelerated
payment plan allows repayment of a 30-year loan in 15 to 20 years.
Guarantee or
Guaranty - A promise by one party to pay a debt or perform an obligation
contracted by another in the event of that person's default.
Gross Monthly Income
- Total monthly income before taxes or expenses are deducted. Used in the loan
origination process to calculate borrower’s ability to make payments on a
loan.
Hazard Insurance - A policy that
protects the insured against loss due to fire or certain natural disasters in
exchange for a premium paid to the insurer. Also known as Home Owner’s
Insurance or fire insurance.
Higher Compensation/High Profit Margin
Business - Our Construction-to-Permanent Loan is a very high profit margin
business. And since it’s single close, you get paid upfront for both
loans--construction and permanent. And, you don’t run the risk of potentially
losing the end loan to a competitor. Additionally, Construction-To-Permanent
loans, on average, are higher dollar loans.
Home Equity Loan - An additional
mortgage secured by the equity in the home. All funds for this loan are
disbursed at closing. (In contrast, see Home Equity Line Of Credit).
Home Equity Line Of Credit - A
revolving line of credit secured by the equity in the home. Unlike a Home Equity
Loan, these funds may be drawn and repaid like a credit card.
Homeowner's Warranty - A type of
insurance that covers repairs to specified parts of a house for a specific
period of time.
Housing and Urban
Development (HUD) - A U.S. government agency established to implement
federal housing and community development programs; oversees the Federal Housing
Administration.
Housing Code -
Local government ordinance that sets minimum standards of safety and sanitation
for existing residential buildings.
Housing
Expense-To-Income Ratio - The ratio, expressed as a percentage, that is
result of dividing a borrower's housing expenses by his/her gross monthly
income. HUD - See Housing and Urban Development.
HUD - See
Housing and Urban Development.
HUD-1 Settlement
Statement - A form mandated by the federal government that itemizes the
closing costs associated with purchasing a home. Also see Estimated Settlement
Statement.
Impound (or Reserves) - Portion of a
borrower's monthly payments held by the lender to pay for taxes, insurance, and
other items as they become due.
Impound Account
- See Escrow Account.
Index - A published rate used by
lenders to calculate interest adjustments on adjustable rate mortgages (Index +
Margin = Interest Rate). Common indexes include 1-Year Treasury securities, COFI
(Cost Of Funds Index), and Six-Month LIBOR (London Interbank Offered Rate).
Initial Rate - The rate charged
during the first interval of an adjustable rate mortgage.
Insolvency - Condition of a person
unable to pay debts as they fall due.
Interest -
Charge paid for borrowing money.
Interest Rate - The rate, expressed
as a percentage, of the outstanding balance used to calculate interest charges.
Interest Rate Cap - A safeguard built
into ARMs to prevent drastic changes in interest rates.
Interest Reserve
- During the construction period, an account is established to pay the estimated
interest costs during the construction of the home. Since the borrower is only
charged interest on the amount of funds disbursed, an estimate of the average
disbursed amount is made. IndyMac Bank estimates that, on average, 60% of the
loan amount will be disbursed during the term of the construction period.
Investor Rehab Financing - This
program is designed to provide a loan for investors to acquire and rehabilitate
a property for future rental use.
Joint Liability - Liability shared
among two or more people, each of whom is liable for the full debt.
Joint Tenancy -
The ownership of property by two or more persons with the survivor taking the
share of the deceased.
Jumbo Loan - A
mortgage with a principal balance that exceeds the amount eligible for purchase
by Fannie Mae and Freddie Mac. Jumbo loans generally carry a higher interest
rate.
Junior Mortgage - A mortgage
subordinate or secondary to another mortgage. In the case of a foreclosure, a
senior mortgage will be paid first.
Large, Experienced
Construction Lender - IndyMac Bank Home Construction Lending is a division
within IndyMac Bank, doing business nationally and traded on the New York Stock
Exchange with assets in excess of $5 billion and more than $800 million in
capital. This financial strength allows us to approve loans quickly, close the
transaction, and expedite cash disbursements during the construction of a new
home.
Late Charge - Penalty paid by a
borrower when a payment is made after the due date.
Lease-Purchase
Mortgage Loan - An alternative financing option that allows low- and
moderate-income homebuyers to lease a home from a nonprofit organization with an
option to buy. Monthly rental payments cover mortgage payments and include an
additional amount that is saved toward a down payment.
Lender - The
bank, mortgage company, or mortgage broker offering the loan.
Leading
Construction-To-Permanent Home Lender - IndyMac Bank Home Construction
Lending is a division within IndyMac Bank, doing business nationally and traded
on the New York Stock Exchange with assets in excess of $5 billion and more than
$800 million in capital. This financial strength allows us to approve loans
quickly, close the transaction, and expedite cash disbursements during the
construction of a new home.
Lender’s Contingency - This is a
reserve to cover unforeseen circumstances in the construction of the home. At a
minimum, 5% of the "on-site costs" will be established in the
contingency account (separate from the contractor’s).
Less Red Tape - We’re not like
those big bureaucratic types who know a lot about paperwork, but not much about
construction. We’re home construction lending experts. We can answer your
questions, and your contractor's and borrower's questions, so your loan keeps
moving. Our construction loan is a one-time close loan. This means with one
application, your borrower gets all the financing they need, construction loan
and permanent loan combined in one. Best of all, you can apply online for easy,
fast approval.
LIBOR (London Interbank Offered Rate)
- The interest rate charged among banks for short-term Eurodollar loans, and a
common index for adjustable rate mortgages.
Lien - A legal claim against a
property that must be paid when the property is sold.
Lifetime Interest Rate Cap - The
highest interest rate that can be charged for an adjustable rate mortgage during
the life of the loan.
Loan Administration (or Loan Servicing) -
The collection of mortgage payments from borrowers and related responsibilities
(such as handling escrows for property tax and insurance, foreclosing on
defaulted loans and remitting payments to investors).
Loan Application -
Document required by lenders prior to loan approval containing detailed
information about the borrower and property.
Loan Application Fee
- Fee paid by prospective buyer to lender when applying for a mortgage.
Line Item Cost
Breakdown - This is the form that a contractor furnishes to a consumer
detailing the costs of building the home. This form serves as the basis of a
percentage of completion disbursement schedule. Most contractors will have
budget forms that they are already using, but we recommend that the builder
fills out the online version available at IndyMac Bank.
Loan Approval
·
Credit
·
Project: Line item, property profile and budget
·
Builder: Easy online acceptance
Loan Origination Fee
(or Processing Fee) - Fee charged by a lender that compensates for the work
in evaluating and processing the loan.
Loan Servicing (or Loan Administration) -
The collection of mortgage payments from borrowers and related responsibilities
(such as handling escrows for property tax and insurance, foreclosing on
defaulted loans and remitting payments to investors).
Lock (or Lock In) -
A lender's guarantee of an interest rate and related points for a set period of
time, usually between loan application and loan closing. Protects borrower
against rate increases during that time.
Loan To Value (LTV)
Ratio - The percentage of the property value borrowed (loan amount/property
value = loan to value ratio).
Lot Value/Cost - If the borrower
already owns the land, include a copy of the HUD-1 closing statement, regardless
of when the lot was purchased. If the lot has been owned for more than 12
months, enter the appraised value of the lot in the first column. If the
borrower has owned the lot for less than 12 months, indicate the purchase price
from the HUD-1 in the first column. If the borrower has an existing lien against
the lot, indicate the borrower’s equity in the second column (cost or
appraised value minus the lien amount).
Lot Acquisition
·
For borrowers eligible for our Construction-to-Permanent Loan
·
A convenient balloon maturity option allows up to 2 years to
design a home, choose a contractor, and obtain construction financing
·
Short-term financing for construction of a primary or second
single-family home
·
Fixed rate, amortized over 30 years (30 due in 2 products)
·
Reduced doc available (on an exception basis)
LTV - See Loan
To Value Ratio.
Margin - The percentage amount added
to an index to calculate the interest rate of an adjustable rate mortgage at
each adjustment.
Marketable Title - A title that is
free and clear of liens, clouds, or other defects which would prevent the sale
of the property.
Market Value -
The value that a willing seller would accept and a willing buyer would offer
given a reasonable time for the seller to market a property.
MIP (Mortgage
Insurance Premium) - Insurance purchased by borrower to insure against
default on government (FHA or VA) loans.
Monthly Housing
Expense - Total monthly expense of principal, interest, taxes, and
insurance.
Mortgagee - The lender in a mortgage
loan transaction.
Mortgage - Document creating a lien
on a property as security for the payment of a debt. In some states, a Deed of
Trust is used instead.
Mortgage Banker - A lender that
originates and funds, then sells and services mortgage loans.
Mortgage Broker - A person or entity
that arranges financing for borrowers, but places loans with lenders rather than
funding them with the broker’s own money.
Mortgage Insurance - Insurance
purchased by a buyer to cover the lender’s risk of loss. Mortgage Insurance is
generally required by lenders when the down payment is less than 20% of the
purchase price.
Mortgage Loan - A loan for which real
estate serves as collateral to provide for repayment in case of default.
Mortgage Note - Legal document
obligating a borrower to repay a loan at a stated interest rate during a
specified period of time. The agreement is secured by a mortgage.
Mortgagor - The
borrower in a mortgage loan transaction.
Negative Amortization - Increase in
principal balance that occurs when monthly payments are not large enough to pay
all interest incurred on a loan, usually caused when payment caps prevent
sufficient payment increases. Deferred interest is added to the loan balance,
resulting in the borrower owing more than the original amount of the loan.
Net - After taxes.
Net Effective Income
- Gross income minus federal income tax.
Non-Assumption
Clause - A statement in a mortgage contract forbidding the assumption of the
mortgage by another borrower without the prior approval of the lender.
Nondischargeable
Debt - Debt, such as taxes, that cannot be forgiven in a bankruptcy
liquidation.
Notice Of Default -
Written notice to a borrower that a default has occurred and that legal action
may be taken.
No Doc Loan - A loan for which
neither income, employment, or assets are stated on application. Borrowers must
have a perfect credit history.
No Monthly Mortgage Payments - This
feature of our Bridge Loan means the borrower has no monthly mortgage payments
during the construction phase.
No Ratio Loan - This loan program is
offered for borrowers who have a strong asset base and perfect credit history;
the loan application must be fully completed except for any reference to income.
Note - Legal document stating the
terms of a debt and a promise to repay it.
Office Of Comptroller Of The Currency
- The oldest federal financial regulatory body which oversees the nation's
federally chartered banks.
Office Of Thrift
Supervision - Regulatory and supervisory agency for federally chartered
savings institutions.
Off-Site Costs -
These are indirect site costs. Permit fees, engineering fees, architectural
fees, and other costs associated with building the home but not directly a part
of the actual construction costs. Many times the borrower has already paid some
of these costs. To consider these paid items as “equity,” the borrower must
document the cost with a bill and a cancelled check or a paid receipt.
One Time Close - Often, getting
approved for a construction loan can be tricky. In many cases, two loans are
required: one for construction and one for permanent financing. Usually you will
have to pay closing costs on both loans, not to mention the extra paperwork,
time, and hassle involved. At IndyMac Bank, we offer our
Construction-To-Permanent Loan that combines both construction and permanent
financing into one loan.
Online Builder Acceptance Process -
By filling out a simple questionnaire, we are able to qualify the builder and
issue a builder acceptance online and in minutes.
Online Project Approval - By filling
out the line item, budget, and property profile, we can analyze the project and
issue project approval.
On-Site Costs - These are direct site
costs. The actual cost of construction covering all materials and labor
associated with the building of the home. Typically the borrower will enter into
a contract with a contractor to build the property. Like a purchase contract for
an existing home, this contract will set forth the work to be done and the costs
associated with that work. All contracts must be for a fixed price; “Cost
Plus” contracts are not acceptable. To support this cost, we require a signed
and dated copy of the contract along with a budget (Cost Breakdown) form
prepared by the contractor. All contracts and budgets must be reviewed by and
contain terms acceptable to Home Construction Lending.
Origination Fee - See Loan
Origination Fee.
Owner Financing - A purchase in which
the seller provides all or part of the financing.
Payment Cap -
Limit on the amount by which a borrower’s adjustable rate mortgage payments
may increase, regardless of rise in interest rates. May result in negative
amortization.
Per Diem Interest - Interest
calculated per day. Depending on the day of the month on which closing takes
place, borrower pays interest from the date of closing to the end of the month.
The first mortgage payment of a loan is generally due on the first of the
following month.
Periodic Interest
Rate Cap - A limit on the amount that interest rates can change at each
adjustment period.
Permanent Financing Guaranteed - Our
one-time close loan program to finance the construction, rehabilitation, or
remodel of primary and secondary homes or investment property, provides both the
construction funds and permanent loan all in one close. This mean the borrower
signs only one set of loan documents and does not have to worry about
re-qualifying, re-appraisals, additional costs, or signing additional loan
documents. With this program, the construction and permanent loans are combined
in one set of documents. You can lock in the permanent loan rate at closing, and
have up to 12 months to complete construction. During the construction period,
interest is charged only on the funds that have been disbursed. When the home is
complete, the permanent loan period begins.
Permanent Loan - A long term mortgage
of 10 years or more.
Pledged Account
Mortgage (PAM) - Money is placed in a pledged savings account. This fund,
plus earned interest, is used to gradually reduce mortgage payments.
PITI -
Abbreviation for Principal, Interest, Taxes, and Insurance, the components of a
monthly mortgage payment; also called Monthly Housing Expenses.
Plans/Specifications - These
documents consist of a legible set of architectural drawings (building plans)
usually prepared by an architect and approved through city or county plan check.
They typically include a floor plan showing all dimensions, a foundation plan
showing all dimensions, outside elevations of the building, electrical and
plumbing details, as well as other details of the actual construction of the
improvements. You will need to obtain two sets of plans signed by both the
borrower and the contractor; one will be provided to the appraiser and one to
HCL in your loan submission package. It is necessary to have them signed so that
all parties acknowledge that these are the plans that will be used to construct
the home.
PMI (or Private Mortgage Insurance) -
We require PMI for loans with LTVs greater than 80%. We will hold 2-month PMI
payments in reserve on the borrowers behalf. These reserves will be paid out to
insurer at time loan s to permanent mortgage.
Points (or Discount Points) - Money
paid to a lender at closing in exchange for a lower interest rate. Each point is
equal to 1% of the loan amount.
Power Tools - For IndyMac Bank
accepted builders only. Series of marketing materials for easy distribution to
construction loan borrowers. Materials are provided to our builders at no
charge.
Power Of Attorney - Legal document
authorizing one person to act on behalf of another.
Prepaid Expenses
- Taxes, insurance, and assessments paid in advance of due dates.
Prepaid Interest - Interest charged
to a borrower at closing to cover interest on the loan between closing and the
end of the month in which the loan closes.
Prepayment - Full or partial payment
of the principal before the due date. This might occur if the borrower makes
extra payments, sells the property, or refinances the existing loan.
Prepayment Penalty - Fee that may be
charged by a lender for early payment of debt.
Prequalification - The process of
estimating how much money a prospective homebuyer will be eligible to borrow
prior to application for a loan.
Primary Mortgage Market - Includes
banks, savings and loans, credit unions, and mortgage banks that make mortgage
loans directly to borrowers. These lenders sometimes sell their mortgages to
lenders such as FNMA in the secondary mortgage market.
Prime Rate -
Lowest commercial interest rate charged by a bank on short-term loans to its
most credit-worthy customers. Often used as an index for home equity lines of
credit.
Principal - The amount of debt, not
counting interest, left on a loan.
Private Mortgage Insurance (PMI) - We
require PMI for loans with LTVs greater than 80%. We will hold 2-month PMI
payments in reserve on the borrowers behalf. These reserves will be paid out to
insurer at time loan s to permanent mortgage.
Profit and Loss Statement - Financial
statement showing sales, expenses, and profits over a period of time. Often a
requirement for self-employed borrowers.
Property Tax - A government tax based
on the market value of a property.
PUD (Planned Unit Development) - A
project or subdivision that includes common property that is owned and
maintained by a homeowners’ association for the benefit and use of the
individual PUD unit owner.
Purchase Agreement - Contract signed
by buyer and seller stating the terms and conditions under which a property will
be purchased.
Rate Lock (or Lock In) - A lender’s
guarantee of an interest rate and related points for a set period of time,
usually between loan application and loan closing. Protects borrower against
rate increases during that time.
Real Estate Broker - An agent who
represents a buyer or seller in a real estate transaction.
Real Estate
Settlement Procedures Act - Law requiring lenders to give borrowers advance
notice of closing costs.
Real Property -
Land and everything that is permanently affixed to it.
Realtor - Real
estate professional who is a member of the National Association of Realtors.
Re-Amortize -
The function to provide a new graduated payment amount as it relates to a new
loan amount or a new interest rate.
Recision - The cancellation of a
mortgage loan, permitted by law within three days of signing when the loan is
not used to purchase a home.
Reclamation -
The right of the person with title to a property to recover it from the debtor
in the event of a bankruptcy.
Reconveyance -
The transfer of property back to the owner when a mortgage is fully repaid.
Recording - The
act of entering documents concerning title to a property into the public
records.
Recording Fee - Money paid to an
agent for entering the sale of a property into the public records.
Reduced Doc Loan - This program
eliminates the need to verify income. Income stated on the 1003 is used for
qualification. Borrowers who receive W2 income are not qualified for this type
of loan. Two years of continuous self-employment income or an established or
consistent 2 years' source of income is required.
Refinancing - The process of paying
off one loan with the proceeds from a new loan secured by the same property.
Rent With Option To Buy - See
Lease-Purchase Mortgage Loan.
Repossession (or
Foreclosure) - Legal process by which the lender forces the sale of a
property because the borrower has not met the mortgage terms.
Re-Pricing - The
function of taking the current loan and re-qualifying it at the current market
mortgage interest rate.
Rescission - Federal law that
guarantees the consumer the right to cancel a mortgage for a period of three
business days following the signing of the documents if the subject loan is a
refinance of the borrower’s primary residence.
RESPA - See Real Estate Settlement
Procedures Act.
Reverse Annuity
Mortgage (RAM) - Type of mortgage applicable to senior citizens in which the
lender makes periodic payments to the borrower from the borrower's equity in
their home, thus providing the borrower with a cash annuity.
Roll To Permanent
Financing Flexibility - We offer our customers a variety of mortgage options
when their construction loan rolls to the permanent phase. We keep their
financing needs in mind by offering a lower rate if lower rates are available
through IndyMac Bank and if they qualify.
Sale Agreement - Contract signed by
buyer and seller stating the terms and conditions under which a property will be
sold.
Satisfaction -
The payment of a debt which satisfies an obligation.
Second Mortgage
- A subordinate mortgage made in addition to a first mortgage.
Secondary Mortgage Market - The
market into which primary mortgage lenders sell the mortgages to obtain funds to
originate more new loans. Includes investors like Fannie Mae and Freddie Mac.
Servicing (or Loan
Administration) - The collection of mortgage payments from borrowers and
related responsibilities (such as handling escrows for property tax and
insurance, foreclosing on defaulted loans, and remitting payments to investors).
Settlement (or
Closing) - Meeting between the buyer, seller, and closing agent at which
property and funds legally change hands.
Settlement Costs - See Closing Costs
Settlement Sheet - The computation of
costs payable at closing which determines the seller's net proceeds and the
buyer's net payment.
Shared Appreciation
Mortgage (SAM) - Loan in which the borrower is given a below-market interest
rate and the lender receives a portion of the future appreciation of the
property value.
Simple Interest -
Interest computed only on the principal balance.
Subsidized Second
Mortgage - Alternative financing option for low- and moderate-income
households that also includes a down payment and a first mortgage, with funds
for the second mortgage provided by city, county, or state housing agencies,
foundations, or nonprofit corporations. Payment on the second mortgage is often
deferred and carries a low interest rate (if any). Part of the debt may be
forgiven for each year the family remains in the home.
Sweat Equity -
Value added to a property by improvements made by the owner.
Settlement Cost (HUD
guide) - Booklet published by the department of Housing and Urban
Development (HUD) that provides an overview of the lending process, given to
consumers after completing their loan applications.
Streamlined Application Process -
We're not like those big bureaucratic types who know a lot about paperwork, but
not much about construction. We're home construction lending experts. We can
answer your questions, and your contractor's questions, so your project keeps
moving. Our construction loan is a one-time close loan. This means with one
application, you can get all the financing you need--construction loan and
permanent loan combined in one. Best of all, there’s one set of closing costs.
And you can apply online for easy, fast approval.
Survey - A measurement of land,
prepared by a licensed surveyor, showing a property’s boundaries, elevations,
improvements, and relationship to surrounding tracts.
Tax Impound - See Escrow Account.
Tax Lien - Claim
against a property for unpaid taxes.
Tax Sale -
Public sale of property by a government authority as a result of non-payment of
taxes.
Term - The
number of years it will take to pay off a loan.
Terms and Conditions
·
Interest-only loan with a fixed interest rate during the
construction phase, all due upon the earlier of the sale of the subject
residence or within 6, 9, or 12 months depending upon the
Construction-To-Permanent loan's term.
·
Bridge Loans will not be available in states where restrictive
homestead or other laws prohibit or effectively limit lenders from obtaining a
valid lien to secure such financing. Your Relationship Manager or the IndyMac
Construction Lending Division staff can advise you on this if you're unsure.
·
All cash proceeds from the bridge loan will be held by IndyMac
Bank, which will use it for additional down payment in connection with the
IndyMac Bank Construction-To-Permanent loan.
·
The Bridge Loan must be paid in full prior to conversion of the
combined construction to permanent loan to the permanent loan phase.
Title - Document
which gives evidence of ownership of a property and the rights of ownership and
possession of that property.
Title Company - A company that
insures title to property.
Title Insurance - Insurance which
protects the lender (lender’s policy) or the buyer (owner’s policy) against
loss due to disputes over ownership of a property.
Title Search - Examination of
municipal records to ensure that the seller is the legal owner of a property and
that no liens or other claims exist against the property.
Transfer Tax - Tax paid when title
passes from one owner to another. Not applicable in all jurisdictions.
Trust Account - Account maintained by
a broker or escrow company to handle all money collected for clients.
Trustee -
Someone given legal responsibility to hold property in the best interest of
another.
Truth-In-Lending Act
- Federal law requiring written disclosure of the terms of a mortgage by a
lender to a prospective borrower within three business days of application.
Two-Step Mortgage - Mortgage with a
low fixed interest rate for 5, 7, or 10 years, which is then adjusted to a new
rate for the rest of the loan.
Underwriting -
The process of verifying data and evaluating a loan for approval.
Usury - Interest charged in excess of
the legal rate established by law.
VA Loan - Home
loan available to veterans with little or no down payment and guaranteed by the
U.S. Veteran's Administration.
Variable Rate
Mortgage - See Adjustable Rate Mortgage.
Variable Rate -
Interest rate that changes periodically in relation to an index.
Verification Of
Deposit (VOD) - Document signed by the borrower's bank or other financial
institution verifying the borrower's account balance and history.
Verification Of
Employment (VOE) - Document signed by the borrower's employer verifying the
borrower's position and salary.
Waiver -
Voluntary relinquishment or surrender of some right or privilege.
Walk-Through - A
final inspection of a home to check for problems that may need to be corrected
before closing.
Wire Money To -
Please choose one of the options for sending money:
·
B: Wire the money to
borrower
·
V: Wire the money to
builder/vendor
Worker’s
Compensation - This is a policy or endorsement covering the contractor,
subcontractor and others who will be working on the subject property. This
policy is typically provided by the contractor, thus the contractor should be
named as the insured. It states that in cases in which worker’s comp insurance
is not required or the borrower is acting as his or her own general contractor,
a waiver is required to be executed.
Wrap-Around Mortgage - Loan
arrangement in which an existing loan is combined with a new loan, resulting in
an interest rate somewhere between the old rate and the current market rate.
Zoning Ordinances
(or Zoning Regulations) - Local law establishing building codes and usage
regulations for properties in a specified area.
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