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  - Mortgage Related Questions
     
  How much of a property can I afford?
  What is an "Acceleration"?
 
  What is an "Adjustable Rate Mortgage (ARM)"?
  What is an "Amenity"?
  What is an "Amortization"?
  What is an "Amortization Schedule"?
  What is an "AMP"?
  What is an "Annual Cap"?
  What is an "Annual Percentage Rate (APR)"?
  What is an "Appraisal"?
  What is an "Appreciation"?
  What is an "APR Loan"?
  What is an "Assessed Valuation"?
  What is a "Balloon Mortgage"?
  What is a "Bridge Loan"?
  What is a "Buydown Mortgage"?
  What is a "Cap (Rate Cap)"?
  What is a "Closing"?
  What is "Closing Costs"?
  What is a "Conventional Mortgage"?
  What is a "Convertible ARM"?
  What is a "Conversion Option?
  What is a "Deed"?
  What is a "Disclosure"?
  What is a "Discount Point"?
  What is a "Down Payment"?
  What is "Earnest Money"?
  What is an "Easement"?
  What is an "Escrow Account"?
  What is a "FHA Loan"?
  What is a "Fixed Rate Mortgage"?
  What is a "Foreclosure"?
  What is a "Funding Fee"?
  What is a "Good Faith Estimate"?
  What is a "Graduated Payment Mortgage (GPM)"?
  What is an "Insured Loan"?
  What is a "Lease Purchase Mortgage"?
  What is a "Lifetime Cap"?
  What is a "Negative Amortization"?
  What is a "Lock In"?
  What is a "Mortgage"?
  What is a "Mortgagee"?
  What is a "Mortgagor"?
  What is a "Mortgage Banker"?
  What is a "Mortgage Broker"?
  What is a "Mortgage Insurance Premium (MIP)"?
  What is an "Origination Fee"?
  What is a "Payment Buydown"?
  What is a "PITI"?
  What is a "Point"?
  What is a "Pre-qualification"?
  What is a "Prepaid Interest"?
  What is a "Principal"?
  What is a "Private Mortgage Insurance (PMI)"?
  What is a "Second Mortgage"?
  What is a "Subprime Mortgage"?
  What is a "Title"?
  What is a "Title Insurance Policy"?
  What is a "VA Loan"?
  What is a "Wrap-Around Mortgage"?
     
   

Answers

            How much of a property can I afford?
            Let's say you make $40,000 a year. The maximum amount available for a monthly mortgage payment at
28 percent of gross income would be $933. However, according to the lenders the total debt payments
each
month should not exceed 36 percent, which comes to $1200.

Also you may want to visit our mortgage center:

http://www.immoads.com/mortgagecenter.asp

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            What is an "Acceleration"?
            The exercise of a clause which gives the mortgagee the right to declare the entire loan due prior to
maturity under certain specified conditions, usually default.


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            What is an "Adjustable Rate Mortgage (ARM)"?
            A type of mortgage in which the interest rate is keyed to a certain economic index and is adjusted as
the index rises and falls. If you have this type of mortgage your interest rate could go up or down,
depending on the prevailing rates.

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            What is an "Amenity"?
            A feature that enhances property value.

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            What is an "Amortization"?
            The process of paying off a loan balance. As you make payments, a certain amount is applied to the
principal and a certain amount to the interest.


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            What is an "Amortization Schedule"?
            A timetable for payment of a mortgage showing the amount of each payment applied to interest and
principal and the remaining balance.


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            What is an "AMP"?
            Automatic mortgage payment - to have your monthly mortgage payment automatically deducted from
your checking or savings bank account
.

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            What is an "Annual Cap"?
            The highest or lowest amount the interest rate of an ARM loan can increase or decrease in any
one year.


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            What is an "Annual Percentage Rate (APR)"?
            The total yearly cost of a mortgage stated as a percentage of the loan amount; includes the base
interest rate, primary mortgage insurance, and loan origination fee (points).


In other words,
Annual Percentage Rate (APR) is an expression of the effective interest rate that will
be paid on a loan. It is different from the "note rate" (the advertised interest rate) because it includes
one-time fees in an attempt to calculate a "total cost" of borrowing money.


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            What is an "Appraisal"?
            A professional opinion of the market value of a property.

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            What is an "Appreciation"?
            An increase in the value of a house due to changes in market conditions or other causes.

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            What is an "Assessed Valuation"?
            The value that a taxing authority places upon property for the purposes of taxation.

In other words, Assessed Valuation is the value assigned to property by a municipality for the purpose
of tax assessment. Such an assessed valuation is important to investors in municipal bonds that are
backed by property taxes.

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            What is a "Balloon Mortgage"?
            A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The
balance of the mortgage is due in a lump sum at a specified date, usually at the end of the term.


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            What is a "Bridge Loan"?
            An interim loan given to finance the difference between the construction loan and the maximum
permanent loan as committed or when unable to sell current home before purchasing a new home.


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            What is a "Buydown Mortgage"?
            A mortgage with a below-market interest rate made by a lender in return for an interest rate subsidy in
the form of additional discount points paid by the builder, seller or buyer.

In other words, a Buydown Mortgage is a mortgage loan with a below-market interest rate for a period
of time. A home loan in which the lender receives a premium as an inducement to reduce the interest
rate during the early years of the mortgage.

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            What is a "Cap (Rate Cap)"?
            The maximum allowable interest rate or payment increase on adjustable-rate mortgages.

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            What is a "Closing"?
            In real estate (immovable property), the delivery of a deed, financial adjustment, the signing of notes,
and the disbursement of funds necessary to consummate a sale or loan transaction.

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            What is "Closing Costs"?
            Fees paid to effect the closing of a mortgage, such as an origination fee, discount points, title insurance
fees, survey fees, and attorney's fees.


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            What is a "Conventional Mortgage (Loan)"?
            A conventional mortgage is a mortgage made by banks and other lending institutions that is not insured
by the Federal Housing Administration, VA or the Farmers Home Administration.

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            What is a "Convertible ARM"?
            An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

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            What is a "Conversion Option"?
            The option to switch the ARM mortgage to a fixed-rate mortgage.

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            What is a "Deed"?
            A written document signed, delivered, and usually recorded, which conveys title of the property from
the seller to the borrower.

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            What is a "Disclosure"?
            Information required by law relevant to specific transactions given to borrowers, sellers, and agents.

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            What is a "Discount Point"?
            Amount payable to the lending institution by the borrower or seller to increase the lender's effective
yield. One point is equal to one percent of the loan.

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            What is a "Down Payment"?
            The difference between sales price and loan amount. The down payment is the initial upfront portion
of the payment, usually given in cash. The amount of money the purchaser pays to the seller upon the
signing of the agreement of sale. The amount of money provided by the Purchaser toward the total
price of the property (not including legal fees or other acquisition costs). In general, down payment
plus mortgage equals purchase price. The amount of payment required to secure the purchase of a
property. Lenders typically require a 20% down payment, although with mortgage insurance down
payments of 5, 10, and 15% are common. The amount of your home's purchase price you need to
supply up front in cash to get your loan.

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            What is "Earnest Money"?
            A sum of money given to bind a sale of real estate, or assure payment or an advance of funds in the
processing of a loan; a deposit.

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            What is an "Easement"?
            A right to the limited use or enjoyment of land held by another. Also, an interest in land to enable sewer
or other utility lines to be laid, or to allow access to a property.


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            What is an "Escrow Account"?
            An account to which a borrower makes monthly installment payments for property taxes, insurance,
and special assessments, and from which the lender disburses the sum as payments become due.

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            What is a "FHA Loan"?
            A loan insured by the Federal Housing Administration (FHA), open to all qualified home purchasers.
While there are limits to the size of FHA loans, they are generous enough to handle moderately priced
homes almost anywhere in the country. You can put down a smaller down payment on a FHA loan, but
you will also be required to pay mortgage insurance. The Federal Housing Administration (FHA)
operates several low down-payment mortgage insurance programs that homebuyers can use to
purchase a home with a down payment of 3 percent or less of the cost of the home. The most
commonly used FHA program is the 203(b) program which provides for down payment assistance
on one- to four-family homes.

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            What is a "Fixed Rate Mortgage"?
            A mortgage in which the buyer contracts for a specified interest rate over a specified period of time. The
principal and interest payment does not vary. A fixed-rate mortgage is a type of mortgage in which the
interest rate is fixed for the life of the loan.


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            What is a "Foreclosure"?
            A foreclosure is the legal process by which a mortgage property is seized due to default and then sold.
A legal term applied to any of the various methods of enforcing payment of the debt secured by a
mortgage, or deed of trust, by taking and selling the mortgaged property and depriving the mortgagor
(borrower) of possession. Court action taken by a mortgagee when a borrower has defaulted. The legal
process by which a borrower in default under a mortgage is deprived of his or her interest in the
mortgaged property. This usually involves a forced sale of the property at public auction with the
proceeds of the sale being applied to the mortgage debt. A proceeding in or out of court, to extinguish
all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien
against it. An enforcement process in which the lender under a defaulted mortgage takes title to the
property for the purposes of selling it to recoup moneys owed under the mortgage. The legal process
reserved by a lender to terminate the borrower's interest in a property after a loan has been defaulted.
When the process is completed, the lender may sell the property and keep the proceeds to satisfy its
mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned
to the borrower. Legal procedure used by creditors to take a mortgaged property from a debtor who has
defaulted on the loan. A legal process instituted by a mortgagee or lien creditor after the debtor's default.

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            What is a "Funding Fee"?
            The insurance premium that is collected up front on a VA loan to insure the lender against loss. This
premium may be paid in cash or financed over the life of the loan. The amount of the premium is based
on the loan-to-value ratio. There is no refund on any portion of this premium.

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            What is a "Good Faith Estimate"?
            A requirement that lenders provide borrowers with an estimate of settlement service charges the
borrower is likely to incur. A Good-Faith Estimate must be provided by the lender within three
business days of receiving a signed loan application.

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            What is a "Graduated Payment Mortgage (GPM)"?
            A mortgage with a structured repayment schedule to enable borrowers to meet monthly payments.
The monthly payments rise at a set rate over a set period of time and then become constant for the
remaining term of the loan. Negative amortization occurs during the first few years since the initial
payments do not cover the interest due on the loan.

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            What is an "Insured Loan"?
            A loan insured by FHA or a private mortgage insurance (PMI) company.

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            What is a "Lease Purchase Mortgage"?
            A lease purchase mortgage is a financing option that allows potential homebuyers to lease a property
with the option to buy. Often constructed so the monthly rent payment covers the owners first mortgage
payment, plus an additional amount as a savings deposit to accumulate cash for a down payment.
Sellers may agree to a lease purchase option if the housing market is saturated and they are having
difficulty selling the property.

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            What is a "Lifetime Cap"?
            A provision of an ARM that limits the total increase in interest rates over the life of the loan.

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            What is a "Lock In"?
            Interest rates and discount points are guaranteed for a period of time; loan must be closed prior to
expiration of lock-in period.

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            What is a "Mortgage"?
            A mortgage is a method of using property as security for the payment of a debt. Technically the term
mortgage (from Law French, lit. "dead pledge") refers to the legal device used in securing the property,
but it is also commonly used to refer to the debt secured by the mortgage.

In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than
other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage
is seen as the standard method by which individuals or businesses can purchase residential or
commercial real estate without the need to pay the full value immediately.

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            What is a "Mortgagee"?
            A morgagee is the lender. The lender in a mortgage agreement. The lender in a mortgage transaction.
Also known as "chargee". A bank or other financial institution that lends money to the borrower. The
lender of mortgage funds.

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            What is a "Mortgagor"?
            A mortgagor is the borrower in a mortgage agreement. The borrower, purchaser or homeowner in a
mortgage transaction. Also known as "chargor". The borrower of mortgage funds.

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            What is a "Mortgage Banker"?
            A mortgage banker is a company that originates mortgages and sells them to a secondary market.

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            What is a "Mortgage Broker"?
            A mortgage broker is an intermediary who ensures a loan between a borrower and lender. The broker
takes the loan and then packages for the lender.

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            What is a "Mortgage Insurance Premium (MIP)"?
            A mortgage insurance premium is a policy that insures the lender against loss if the homeowner defaults
on a mortgage.

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            What is a "Negative Amortization"?
            In finance, negative amortization, also known as NegAmMort, is an amortization method in which the
borrower pays back less than the full amount of interest owed to the lender each month. The shorted
amount is then added to the total amount owed to the lender. Such a practice would have to be agreed
upon before shorting the payment so as to avoid default on payment. Also known as deferred interest or
Graduated Payment Mortgage (GPM).

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            What is an "Origination Fee"?
            The fee mortgage lenders charge to borrowers for preparing loan documents, making credit checks, etc.;
usually computed as a percentage of the face value of the loan. This fee is usually paid by the buyer
unless other arrangements are made.

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            What is a "Payment Buydown"?
            Payment buydowns occur when a third party, typically a builder, pays part of the initial P&I payments
for a year or two, so that the borrower has smaller payments and can qualify for the loan.

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            What is a "PITI"?
            PITI is the total monthly payment you make on a house: Principal, Interest, Taxes, and Insurance (components of a mortgage payment).

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            What is a "Point"?
            An amount equal to one percent of the principal amount of a mortgage.

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            What is a "Pre-qualification"?
            Loan application package processed and submitted for credit approval when no subject property has
been chosen by the borrower.

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            What is a "Prepaid Interest"?
            Mortgage interest that is paid in advance of when it is due, to obtain tax advantages.

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            What is a "Principal"?
            Amount of loan excluding interest or other charges.

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            What is a "Private Mortgage Insurance (PMI)"?
            Private mortgage insurance is insurance that protects mortgage lenders against default on loans by
providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if
the down payment is less than 20 percent of the sale price. Homebuyers pay for the coverage in
monthly installments. PMI is usually terminated when the homebuyer has built up 20 percent equity
in the property.

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            What is a "Second Mortgage"?
            A second mortgage is a secured loan (or mortgage) that is subordinate to another loan against the same
property. More specifically, the second loan in sequence. In real estate, a property can have multiple
loans against it. The loan which is registered with county or city registry first is called the first mortgage.
The loan registered second is called the second mortgage. A property can have a third or even fourth
mortgage, but those are rarer. Second mortgages are called subordinate because, if the loan goes into
default, the first mortgage gets paid off first before the second mortgage gets any money. Thus, second
mortgages are riskier for the lender, who generally charges a higher interest rate.

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            What is a "Subprime Mortgage"?
            A subprime mortgage is a mortgage granted to a borrower who is considered subprime, that is, a
person with a less than perfect credit report. Subprime borrowers have missed payments on a debt or
have been late with payments. Lenders charge a higher interest rate to compensate for potential losses
from customers who may run into trouble or default.

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            What is a "Title"?
            A legal document establishing the right of ownership.

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            What is a "Title Insurance Policy"?
            A contract by which the insurer agrees to pay the insured a specific amount for any loss caused by
defects of title to real estate, wherein the insured has an interest as purchaser, mortgage, or otherwise.

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            What is a "VA Loan"?
            A mortgage offered to eligible veterans and guaranteed by the Veterans Administration.

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            What is a "Wrap-Around Mortgage"?
            A wraparound mortgage is a new mortgage that includes the remaining balance on an old mortgage,
plus a new amount. Seller keeps original mortgage. Buyer makes payments to seller, who forwards a
portion to the lender holding the original mortgage. A secondary financing option in which new money
borrowed is blended with money already owed and registered on title to the property. A second
mortgage is registered as security for the new money but the old mortgage remains in existence and
the rate of interest is a blend of the rate chargeable on the old mortgage and the rate chargeable on
the newly borrowed money. A loan to a buyer for the remaining balance on a seller's first mortgage and
an additional amount requested by the seller. Payments on both loans are made to the lender who
holds the wrap-around loan.

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