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Loanfactz DefinitionsGlossary of Legal Terms, Loan Terms and Home Construction, Repair and Maintenance Definitions. Some words have more than one meaning. Only those meanings relating to this site will be used.
Cap A limit on the amount the interest rate or monthly payment can increase in an adjustable rate mortgage. Capitalizing Interest Adding accumulated interest to the loan principal rather than having the borrower make monthly interest payments. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan. Cash-out Refinance When a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value. Example - if a home has a current value of $100,000 and an outstanding mortgage of $60,000, the owner could refinance $80,000 and have additional $20,000 in cash. Closed End Loan Borrowing a lump sum of money and paying it back over a period of years with interest. Closing Also known as settlement. This is the time at which a home property is officially sold and transferred from the seller to the buyer. Also, it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives the title from the seller. Closing Costs Various fees and expenses (in addition to the price of the property) paid by the seller and buyer to complete the real estate transaction - the transfer of ownership of property from the seller to the buyer. Some closing costs include: loan origination fee, points, property taxes, title search and title insurance, credit report fee, appraisal fee, financing costs, brokerage commissions, items that must be prepaid or escrowed, interest from the closing date to the beginning of the 1st payment, hazard insurance premium, and mortgage insurance premium. Not all closing costs may apply to your transaction. Closing costs can vary, ranging between 2 and 10% of the sale price of the property. Ask the lender or the real estate agent for a complete list of closing cost items. Co-Applicant Another person who joins the applicant (you) in applying for a loan. Co-Buyer A Co-Buyer's income is combined with the Buyer's. This option is normally limited to a spouse or a person closely related residing at the same residence. Co-Signer Another person who signs your loan and assumes equal responsibility for repayment of it in the event you do not pay. A co-signer may be considered for a buyer who does not comply with all the credit requirements. The income of the buyer, however, must meet all the income and budget guidelines without reliance upon the income of the co-signer. Collateral Property which is used as security for a debt. In the case of a mortgage, the collateral would be the land, the house, and other buildings and improvements. Commercial Bank A financial institution that offers a variety of financial services including checking accounts, savings accounts, CD's, mutual funds, credit cards, IRA's, savings bonds, trust services, online banking services, mortgage loans, auto loans, boat loans, student loans, personal loans, construction loans, home improvement loans, business loans, second loans secured by home equity, home equity lines of credit and a wide range of other services. Commission An amount of money, usually a percentage of the sales price, that is collected by sales professionals, real estate agents, car sales representatives, loan officers, attorneys, insurance agents, brokers, escrow representatives, etc., as a fee for negotiating a transaction or performing a service. Commitment Letter A letter from your lender that states the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges. Community Reinvestment Act of 1977 Encourages financial institutions to help meet the credit needs of their communities, particularly low and moderate income neighborhoods. Conforming Loan Fannie Mae and Freddie Mac single family mortgage loans under this amount, $417,000 for 2007, are referred to as conforming loans. Consolidate To consolidate means to combine, an exmaple would be to combined several debts into one loan, usually for the purpose of reducing your monthly payments by extending them over a longer time period. Consumer An individual (you) who buys products and/or services. Consumer Credit Protection Act (CCPA) of 1968 Commonly known as the Truth in Lending Act of 1968, requires that creditors have to state the cost of borrowing in a common language, laws that bar unfair discrimination in credit transactions, require that consumers be told the reason when credit is denied, let borrowers find out about their credit records, set up a way for consumers to settle billing disputes, protects employees from discharge by their employers because their wages have been garnished for any one debt, and limits the amount of an employee's earnings that may be garnished in any one week. More about Consumer Credit Protection Act Consumer Leasing Act of 1976 Requires disclosure of certain information that helps consumers compare the cost and terms of various leases and the cost and terms of buying on credit versus cash. The Act does not apply to real estate leases or to leases of four months or less. More about the Consumer Leasing Act Consumer Reporting Agency (CRA) Also called Credit Bureau. An agency that gathers and sells the information in your credit report to creditors, employers, insurers, and other businesses. The three major credit bureaus are Equifax, Experian, and TransUnion LLC. Contingency A condition that must be met before a contract is legally binding. Example, the buyer specifies the house and property must pass inspection from a qualified home inspector. The contract is not binding until all contingencies are met, if not met, the party may withdraw from the contract. Contract A legally enforceable agreement between two or more competent people that creates an obligation to do or not to do a particular thing. Conventional Loan A conventional loan is a mortgage loan that is not guaranteed or insured by the U.S. government. There is a down payment required, usually 10 percent to 20 percent of the sales price. A conventional loan does not require mortgage insurance. Conversion Clause A provision in some adjustable rate mortgages (ARMs) that allows you to change the ARM to a fixed rate mortgage at some point during the term, usually after the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the current rates for fixed rate mortgages. The conversion feature may be available at extra cost. Convertible ARM A Convertible ARM begins as an adjustable rate mortgage (ARM), and after an initial payment period, allows the borrower to convert it to a fixed rate mortgage. Usually a fee is charged by the lender for this option. Convertible Mortgage A convertible mortgage is a loan with a combination of a fixed interest rate (an interest rate that can not change) and an adjustable interest rate (an interest rate that can change) during the life of the loan. Convey To transfer ownership of the title to property from one to another. Conveyance The act of conveying; the transfer of title of property from one person to another. Credible Capable of being believed, plausible, worthy of confidence, reliable Credit Credit is more than just a plastic card used to buy things. It's your financial trustworthiness. Good credit means that your history of payments, employment and salary make you a good candidate for a loan, and creditors (those who lend money or services) will be more willing to work with you. Having good credit usually translates into lower payments and more ease in borrowing money. Bad credit, however, can be a big problem. It usually results from making payments late or borrowing too much money, and it means that you might have trouble getting a car loan, a credit card, a place to live and, sometimes, a job. Repair Your Bad Credit Credit Bureau Credit Bureaus are companies that gather and sell the information in your credit report, are also called consumer reporting agencies (CRAs). The most common type of a consumer reporting agency (CRA) is the credit bureau. The information in your credit report that a consumer reporting agencies (CRA) sells to creditors, employers, insurers, and other businesses is called a consumer report. This information is used to evaluate your applications for credit, insurance, employment, or renting a home. Credit Card A plastic card (also called a charge card) issued to you by a bank or business which authorizes you, the holder, to buy goods or services on credit and pay for them later. Payment is usually made monthly. You can either pay in full or pay a minimum payment with interest charged on any unpaid balance. The Truth in Lending Act prohibits the unsolicited issuance of credit cards and limits cardholder liability for unauthorized use. More about Credit Cards Credit History The record of how you have borrowed and repaid debts. Credit Insurance Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. As with most contract terms, the cost of optional credit insurance must be disclosed in writing, and, if you want it, you must agree to it and sign for it. Credit Limit The maximum amount of money that may be borrowed on a loan account, or the maximum amount allowed you can charge and owe on a credit card account. Credit Practices Rule Prohibits lenders from using certain remedies, such as confessions of judgment, wage assignments, and nonpossessory, nonpurchase money, security interests in household goods. Requires creditors to provide a written notice to potential co-signers about their obligation and responsibility if the other person fails to pay, prohibits late charges in some situations, and prohibits creditors from using certain contract provisions that the government found to be unfair to consumers. Credit Rating A rating determined by a rating agency of the likelihood that a borrower will be able to repay its debt. Credit Report A document used by the credit industry to examine an individual's use of credit. It provides information on money that individuals have borrowed from credit institutions and a history of payments. Credit Score A computer generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations. Creditor A person, bank, business or other organization that you can borrow money from or you can owe money to. Creditworthy Your ability to qualify for credit and repay debts. Customer Service Customer service is something most people don't consider, or appreciate, until there's a problem. At the very least, look for a 24 hour toll free telephone number when evaluating customer service. |
SCAMS & FRAUD Federal Laws Organizations Fannie MaeFreddie Mac Ginnie Mae Nellie Mae Sallie Mae Consumer Info Consumer TipsCredit Bureau Credit Insurance Credit Report Directory of Federal Agencies Federal Trade Commission (FTC) Identity Theft Predatory Lending Repair Your Bad Credit Truth in Lending Act Borrowers Beware Miscellaneous Private Mortgage Insurance (PMI)Prepayment Penalty Copyright & |
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