 |
|||||||||
     |
|||||||||
|
 |
||||||||
| Loan Links | Glossary of Terms | ||||||||
| Related Services
|
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Adjustable Rate Mortgage or ARM - is a mortgage that has an initial rate which adjusts periodically. The initial rate adjusts based upon the movement of an underlying index. There are a number of different indexes (i.e.; LIBOR or London Interbank Offer Rate, 11th District cost of funds, T-Bill, etc.). On ARMs, a predetermined margin is added to the index to compute the interest rate. Amortization - gradual reduction of a mortgage debt through installment payments according to a schedule over a specified mortgage term. Appraisal - a report that sets forth an estimate or opinion of fair market value: also refers to the process by which a value estimate is obtained. Appreciation - an increase in the value of a property due to changes in market conditions or other causes. Arms-Length Transaction - is a transaction negotiated by unrelated parties, each acting in his/her own best interest. Assumable Mortgage - a mortgage that can be taken over ("assumed") by the buyer when a home is sold. Assumption - the transfer of the seller's existing mortgage to the buyer. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Back-end Ratio - total debt-to-income ratio. Total monthly obligations divided by gross monthly income. Monthly obligations include: mortgage payment, property taxes, insurance premiums, installment loans, and revolving debt. Balloon Mortgage - a mortgage that has level monthly payments over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified time (i.e.; 5 & 7 year balloon mortgages, where the payment is fixed for 5 or 7 years then becomes due and payable at the end of the term). Bankruptcy - a proceeding in a federal court in which a debtor (one who owes more than his/her assets) is relieved from the payment of debts. Buy Down - an arrangement where a party pays a lender an up-front fee, or premium, to "buy down" the interest rate on a loan for a temporary time period, usually one to three years: usually expressed as two numbers. For example, 2/1 where the two represents a 2% rate buy down the first year and the one represents 1% buy down the second year, the third year the rate would revert to the "straight" note rate. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Cap - a provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease. Cash-out Refinance - a transaction that provides cash proceeds to the borrower in excess of 1% of the mortgage amount or provides cash that is used to pay-off consumer debt. Cash Reserves - the amount of liquid assets the borrower has remaining after the mortgage loan transaction is completed. Closing Costs - money paid by borrowers and sellers to effect the closing of a loan: could include processing fees, discount fees, title insurance, survey fees, attorney's fees, appraisal fees, credit report fees, and prepaid items such as taxes and insurance. Combined Loan-to-Value (CLTV) - the ratio of the total mortgage liens against the subject property to the lesser of either the appraised value or the sales price. Compensating Factors - borrower strengths that mitigate or compensate for a borrower's weakness (i.e.; length of employment, considerable cash reserves, etc.). Condominium - a form of property ownership in which the homeowner holds title to an individual dwelling unit, an undivided interest in common areas of certain limited common areas. Conforming Loans - loans that conform to FHLMC/FNMA and do not exceed the maximum loan amount and LTV limitations established by FNMA or FHLMC: $275,000 $351,950 $425,400 $528,700 Co-borrower - is a person who is jointly and equally liable for repayment of the mortgage obligation. A co-borrower completes an application and submits all documentation and may not be on the security instrument. Construction Perm - construction-to-permanent financing involves the granting of a long term mortgage for the purpose of replacing interim construction financing that the borrower obtained to fund the construction of a new residence. The transaction may be considered as a purchase or a refinance. Contingency - a condition that must be met before a contract is legally binding. Conventional Mortgage - any mortgage that is not insured or guaranteed by the federal government. Convertible ARM - a type of ARM that includes an option for the mortgagor to change the mortgage to a fixed rate mortgage at specified intervals during a predetermined time. Cooperative - a type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. Cost of Funds Index or COFI - is an index that is used to determine interest rate changes for certain ARMs. It represents the weighted average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. Credit Bureau Repository - an organization that compiles credit history data directly from lenders and creditors to build in-file credit reports for individuals: the main repositories are TRW, TransUnion, & Equifax. Credit Report - a report of an individual's credit history prepared by a credit bureau or consumer reporting agency and used by a lender in determining a loan applicant's creditworthiness. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Debt-to-Income Ratio - is the ratio of the borrower's total monthly obligations, including housing expenses and recurring debts to monthly income. It is used to determine the borrower's capacity to repay the mortgage and all other debts. Deed of Trust - in certain states, a legal instrument that secures a note and perfects a security interest upon real property. Depreciation - a decline in the value of property; the opposite of "appreciation". Discount Points - are payable to the lender by the borrower or seller to decrease the interest rate. One point is equal to 1% of the loan amount. Drive-by Appraisal - is an estimate of value given that is based mainly on recent comparable sales. Down Payment - the part of the purchase price that the buyer pays in cash and does not finance with a mortgage. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Earnest Money - a deposit made by the potential home buyer to show that he or she is serious about buying the house. Equal Credit Opportunity Act - a federal law that prohibits lenders from discriminating on the basis of the borrower's race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. Equity - a homeowner's financial interest in a property. Equity is the difference between the fair market value of a property and the amount still owed on the mortgage. Escrow - the holding of documents and money by a neutral third party prior to closing; also, an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Federal Housing Administration (FHA) - is a government mortgage insurance agency under direction of the Department of Housing and Urban Development (HUD) that insures lenders against loss from default of borrowers on residential properties. Federal National Mortgage Association (FNMA) aka Fannie Mae - is a tax-paying corporation, created by Congress to support the secondary mortgage market. Federal Home Loan Mortgage Corporation (FHLMC) aka FreddieMac - is a tax-paying corporation, created by Congress that purchases conventional mortgages in the secondary mortgage market. First Mortgage - a mortgage that has first claim to the secured property in the event of default. Fixed Rate Mortgage - a mortgage with one set interest rate for the entire term of the mortgage. Flood Insurance - insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designed flood areas. Foreclosure - the legal process by which a borrower is in default under a mortgage or deed of trust, loses his/her interest in the mortgaged property: this process usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Gift Funds - funds donated on behalf of the borrower from certain eligible sources to assist the borrower in meeting closing costs. Generally eligible sources are: relatives, church, municipality, or a nonprofit organization. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Hazard Insurance - insurance coverage that compensates for physical damage by fire, wind or other natural disasters to the property. HOA or homeowners association - is a nonprofit association, whose directors and officers are elected by the unit owners of a condominium or PUD project; primary responsibilities are to manage the common areas, expenses and services of the project. Home Equity Line of Credit or HELOC - is a real estate loan, usually in a subordinate position, that allows a borrower to withdraw equity in real estate owned with specific limitations. Housing Debt-to-Income Ratio - the sum of all monthly housing mortgage expenses such as PITI, homeowners dues, private mortgage insurance and any special assessments as a percentage of gross qualifying income. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Impound Account - see "Escrow" Index - a published interest rate, such as the prime rate, LIBOR, T-Bill rate or the 11th District COF. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns. A predetermined margin is added to the index to compute the interest rate on the ARM. Installment Debt - borrowed money that is repaid in successive payments, usually at regular intervals; the monthly debt service is sometimes excluded for D/I purposes if 10 or fewer payments remain to be made. Interest - the fee charged for borrowing money. Interest Rate Cap - a provision of an ARM limiting how much interest rates may increase per adjustment period or over the life of a mortgage. Investment Property - a non-owner occupied residential property used for the generation of income. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Joint Tenancy - a form of co-ownership giving each tenant equal interact and equal rights in the property, including the right of survivorship. Junior Lien - any lien that is subordinate or subsequent to the claims of a prior lien. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z K A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Late Charge - the penalty a borrower must pay when a payment is made after the due date. Lien - a legal claim against a property that must be paid off when the property is sold. Lifetime Cap - a provision of an ARM that limits the total increase in interest rates over the life of the loan. Loan Servicing - the collection of mortgage payments from borrowers and the related responsibilities of a loan servicer. Loan-to-Value Percentage - The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. Lock-in - an agreement guaranteeing the home buyer a specified interest rate providing the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Margin - the amount that is added to the index to create the mortgage interest rates or an ARM. Mortgage - a note or other evidence of real property being pledged as the security for a debt; also referred to as a "Deed of Trust", "Trust Deed", or "Security Instrument". Mortgage Insurance or MI - is insurance that protects a mortgage lender against loss in the event of default by the borrower. This insurance allows lenders to make loans with lower down payments (LTVs above 80%, in most cases). Mortgagee - the lender in a mortgage agreement. Mortgagor - the borrower in a mortgage agreement. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Negative Amortization - a gradual increase in the mortgage debt caused by unpaid interest that is added to the mortgage principal because the payment is not sufficient to cover the full amount of interest due. Non-Conforming Loans - those loans that do not conform to traditional Fannie Mae or Freddie Mac conditions. Generally, loans above $240,000 (Jumbo). Notice of Default - a formal written notice to a borrower that a default has occured and that legal action may be taken. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Owner Financing - a property purchase transaction in which the property seller provides all or part of the financing. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Payment Cap - a provision of some ARMs limiting the amount by which a borrower's payments may increase regardless of any interest rate increase; may result in negative amortization. PITI - stands for Principal, Interest, Taxes, and Insurance. The components of a monthly mortgage payment. Points - a one-time charge by a lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage. Prepayment Penalty - a fee that may be charged to a borrower who pays off a loan before it is due. Pre-qualification - the process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for. Prepaid Items - items that generally must be paid for at the time of closing and are generally recurring charges. Prepaid items may include the following: Taxes First year premiums for hazard, flood and mortgage insurance. Prorated interest. Any special assessments which must be prepaid (i.e.; water/sewer connection, etc.). Escrow account for any of the above. Private Mortgage Insurance or PMI - insurance coverage that lenders require the borrower to obtain to protect the lender against loss in the event of a mortgage default for higher LTV mortgages. Processing Fee - a fee charged to the borrower to reduce the interest rate; this fee is usually stated as a percentage; see "Discount Points". PUD or Planned Unit Development - is a real estate project in which each unit owner has title to a residential lot and a non-exclusive easement on the common areas of the project. Purchase and Sale Agreement - a written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. Purchase Money Mortgage - a mortgage used to purchase real property where title is conveyed from one individual to another. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Qualifying Ratios - the percentage of payment to income (P/I) and debt-to-income (D/I) that is used to measure the borrower's capacity to repay the mortgage debt. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Rate & Term Refinance - a refinance of any mortgage in which the new mortgage amount is limited to the unpaid principal balance of the existing first mortgage plus any closing costs. Real Estate Settlement Procedures Act - a consumer protection law that requires lenders to give borrowers advance notice of closing costs. Refinancing - the process of paying off one loan with the proceeds from a new loan using the same property as security. Revolving Debt - a debt that does not have a fixed payment, although repayment is usually a percentage of the outstanding balance and made at regular intervals; most common are credit cards issued by banks and department stores. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Second Mortgage - a mortgage that is in a second position behind the first mortgage; see "Junior Lien". Secondary Mortgage Market - the buying and selling of existing mortgages. Self Employed Borrower - a borrower whose income is derived from a business source in which he/she has an ownership interest of 25% or more. Settlement Costs - see "Closing Costs". Settlement Statement - the computation of costs payable at closing that determines the seller's net proceeds and the buyer's net payment (referred to as a HUD-1). Single Family Residence or SFR - is a structure that is intended to house one family. Subordinate Financing - secondary financing secured by a lien that is junior to the first mortgage or senior claim. Supplemental Income - income derived from sources such as interest/dividends, capital gains, and rental properties; these incomes require tax returns to support the qualifying income. Sweat Equity - the exchange of labor or services in lieu of paying cash for the purpose of receiving credit towards the down payment: this generally is not an eligible source of down payment. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Tax Service Contract - the lender's verification of payment of property taxes. Temporary Buydown - a loan on which the interest rate has been "bought down" for a temporary period of time at the beginning of the loan by escrowing funds at the time of closing, which will be applied to the total monthly mortgage payment as each becomes due. See "Buy Down". Tenancy in Common - a type of joint ownership in a property without rights of survivorship. Title - a legal document evidencing a person's right to or ownership of a property. Title Insurance - a type of insurance that insures against defects in title that were not listed in title work or abstract. Townhouse - an architectural type of construction; a row house on a small lot that has exterior limits common to other similar units; title to the unit and its lot is vested in the individual owner with a fractional interest in common areas. Truth-in-Lending Act - a federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges. Two-step ARM - an ARM that has a fixed interest rate for the first five or seven years of the mortgage term, then adjusts at the current market rate plus a predetermined margin, then remaining fixed at that rate for the remainder of the term. Two-to-Four Family Properties - consists of a structure that provides dwelling units for two, three or four families, although ownership is evidenced by a single deed. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Underwriter - an analyst who reviews the supportive documentation to determine the risk associated with the loan request. The person who gives final loan approval. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Veterans Administration or VA - is a government agency designed to encourage mortgage lenders to offer long term, low down payment financing to eligible veterans by partially guaranteeing the lender against loss from default. A B C D E F G H I J K L M N O P Q R S T U V W X Y Z W A B C D E F G H I J K L M N O P Q R S T U V W X Y Z X A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Y A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Zoning - the creation of districts by local governments in which specific types of property uses are authorized (e.g., commercial, industrial, residential, high density, mixed use). Disclosures  |
||||||||
| Santa Barbara Bank & Trust,
First National Bank of Central California,
South Valley National Bank,
San Benito Bank,
and First Bank of San Luis Obispo
are divisions of Pacific Capital Bank, N.A., member FDIC.
© - Pacific Capital Bank, N.A. All rights reserved. | |||||||||
