One to four unit properties.
Federal Housing Administration transactions, provides "whoever, for the purpose of - influencing in any way the action of such administration - makes, passes, utters, or publishes any statement, knowing the same to be false - shall be fined not more than $5,000 or imprisoned not more than two years, or both.
A premium paid by a borrower for an insurance policy that insures continuance of mortgage payments in the event of a mortgagor's disability or illness. These premiums may be collected as a part of a monthly mortgage payment and, if they are, they should be included as a cost on the Federal-in-Lending Disclosure Statement. On HUD-FHA and VA mortgages. however, failure to pay the premium cannot serve as a condition of default, so premiums should not be included as part of the mortgage payment or as obligations on the application for insurance or guaranty.
In a HUD-FHA transaction, the sum of the price paid for the property + any costs of closing, repairs or financing (except discounts, if the transaction is not a refinance) properly paid by the borrower. Seller inducements, such as the seller paying closing costs, will be deducted from the acquisition cost. When the transaction is a refinance, all charges connected with the transaction can be included as long as the maximum mortgage amount of the property is not exceeded. In all transcations, the maximum mortgage amount may be increased by the amount of the MIP financed.
An addition to a written doument. In many, but not all, jurisdictions, notes and mortgages may be notified by addenda. This makes it possible to avoid striking out and adding language in the basic document to accomodate special program requirements.
HUD Form 92800-5a. A three page form, one of which is retained by HUD, used to identify the general and specific conditions imposed in connection with the issuance of a Conditional Commitment. These conditions relate to the property and must be met before the mortgage can be insured.
A sworn statement in writing before a proper official, usually a Notary Public.
American Land Title Association. A national association of title insurance companies, abstractors and attorneys, specializing in real property law. The association speaks for the title insurance and abstracting industry and established standard procedures and title policy forms.
Gradual debt reduction. Normally, the reduction is made according to a predetermined schedule for installment payments. HUD-FHA and VA regulations require that the insured or guaranteed mortgages provide for amortization in equal monthly payments over the term of the loan, except that the payments of the early years of a Graduated Payment Mortgage may change from year to year, and those of an Adjustable Rate Mortgage may change from time to time, subject to certain restrictions.
A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the mortgage loan is paid after each payment is made. Since interest is due on the actual unpaid mortgage balance rather than on the schedule mortgage balance, an amortization schedule can be misleading if the mortgage loan is either paid in advance or or delinquent. In practice, however, many mortgage lenders adhere to the amortization schedule even though it may not be technically accurate.
A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the mortgage loan. Important in preparing the Federal Truth-in-Lending Disclosure Statement (Reg Z).
A FNMA from used by all the mortgage lenders in obtaining data needed to process an FHA/VA home loan.
The form is used as the borrower's application for assistance under Section 235, a program in which HUD-FHA makes a part of the borrower's monthly mortgage payment, as long as his/her income stays below a certain level. When completed by HUD and returned to the mortgage lender, it serves as a contract on the part of HUD to make the payments. Acts as a second Deed of Trust on the mortgage loan, which is paid off when the mortgage loan is paid off.
The form used by nonsupervised lenders to apply for approval to particiapte in VA's “Automatic“ loan guaranty program.
The application form used to request approval of the borrower. It includes the information needed to evaluate the borrower's credit worthiness and is accompanied by verifications.
The basic application for property appraisal and commitment when the application involves five or more properties on which one or more basic houses are to be constructed. The lots, houses and alternates are valued separately, then combined to produce individual values when applications for Firm Commitment are submitted.
The basic appplication to HUD-FHA of VA, requesting appraisal of the property and determination of its eligibility for insurance or guaranty.
A prorated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents, and other income and expenses between the buyer and seller. Apportionment usually occurs when a property is sold, and is the manner of determining the amounts due to and from each party. See also “Settlement Statement.“
A report made by a qualified person setting forth an opinion or estimate of value. The term also refers to the process by which this estimate is obtained. In conventional mortgages and in the HUD-FHA Direct Endorsement program, the lender recieves a copy of the appraisal showing the basis for the appraiser's estimate. In VA cases and in HUD mortgage applications processed by HUD, the lender receives only a statement of the estimate of value, without any detailed supporting data.
An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.
One qualified by education, training and experience to estimate the value or real estate and personal property. The estimate is based on a process in which the appraiser judges the facts discovered in an investigation of the property.
A transaction between a willing buyer and a willing seller with no undue influence imposed on either party and where there is no relationship between the parties except that of the specific transaction.
The person or corporation to whom an agreement or contract is assigned. One to whom real property, or interest in real property, is transferred or set over.
The transfer of a right or contract from one person to another. Mortgages and other security instruments regularly assigned from one investor to another and commitments by HUD-FHA to insure mortgages may be assigned by one originating mortgage lender to another before insurance.
One who transfers, assigns or sets over real proprty or an interest therein to another.
A person who has qualified as a real estate broker but works for a principal broker licensed in the state.
A written agreement by one party to pay an obligation originally incurred by another.
The fee paid to a lender (usually by the purchaser of real property) as compensation for the work involved in processing the assumption of a mortgage or as consideration for permitting an assumption.
Assumption by a purchaser of the primary liability for payment of an existing mortgage or deed of trust. The seller remains secondarily liable unless specifically released by the lender. See also “Due on Sale“.
A statement of financial condition of a business organization showing assets, liabilities, capital, and including net worth as of a given date.
A person, firm or corporation who, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court appointed trustee, or referee, for the protection of creditors. In lieu of total relief from payment, the bankrupt may be required to make partial payments on a regular schedule.
The state of being bankrupt.
One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages.
A mortgager who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.
The local regulations that control design, construction, and materials used in construction. Building codes are usually based on safety and health standards.
An unnumbered form, reproduced locally by lenders, used to formalize the terms of an escrow established to finance the reduced initial mortgage payments made available to the buyer by a buydown agreement. Before insurance of such a mortgage by HUD, such an agreement must have been executed by the seller, the buyer, the mortgage lender and the escrow agent.
Basic allowance for quarters - a non-taxable military income.
Basic allowance for substance - a non-taxable military income.
A system of using additional fees up front to get a lower temporary or permanent monthly payment. The typical buydown is called a “subsidized“ buydown and requires 6 points to achieve a 3-2-1 standard system. This has the effect of reducing the payment by 3% of note rate the first year, 2% the second year, and 1% the third year. After the third year the buyer pays the total monthly payment. This is really a form of subsidy. A true or permanent buydown, which is still available, will buy down the rate for the life of the mortgage loan at about 1 point per 1/8%.
A system which realtors use, normally following their weekly meeting. They all pile into a bus and tramp through several of their most recent listings. This has been known to cause heart attacks among some hapless sellers.
A mortgage refinance in which the owner is getting money back (normally a higher-risk refi). To a realtor, it is jargon for a listing that will not carry financing behind an existing first or second, meaning the owner wants all the equity out.
The VA Certifiacte of Eligibility, establishing the vet's eligibility for a VA loan and for the loan amount.
California Housing Finance Agency (a California lending program). Some lenders will buy communities for this program, which usually has lower rates. It offers low commissions to loan reps. It is very restrictive on buyer guidelines: the programs are usually for first time buyers only, mostly new housing, and is considered by processors to be a monumental pain.
Refers to building code violations on room additions and conversions noticed by appraisers. These often become closing conditions.
Listings on an appraisal of similar homes recently sold to establish the basis of the value set by the appraiser of the subject home.
The process of ascertaining the magnitude, worth or value of a capital good through the use of a rate that is believed to represent the proper relationship between that capital good or property and the net income it produces. In real estate appraisal, the process of converting anticipated future rents from the property into a present value.
An accounting method, employed principally by thrift institutions, in which all monthly mortgage payments are applied to reduce principal, and all disbursements or charges(such as interest and charges for taxes, insurance premiums, etc.) are added to principal, with interest computed periodically on the actual unpaid mortgage principal balance. HUD-FHA does not permit unpaid interest or late charges on delinquent accounts to be included in the amount used as a basis for computing interest.
The spendable cash (income) from an income-producing property after deducting from gross income all operating expenses in debt service.
VA Form 26-1866a. The form by which VA notifies the lender that an application has been found acceptable and will be guaranteed if any conditions imposed by VA have been met and the mortgage loan is closed within six months. Performs the same function as the HUD-FHA Firm Commitment.
A written document issued by a bank or other financial institution that is evidence of a deposit with the issuer's promisse to return the deposit plus earnings at a specified rate of interest. Some Certificates of Deposit include restrictions on redemption before maturity which make them unacceptable as a source of funds for closing mortgage loans.
VA Form 26-8320. Evidence that the veteran is eligible for VA mortgage loan guaranty benefits. The face of the form identifies the veteran. The reverse provides details on the status and extent of his/her eligibility.
VA Form 26-1876. A detailed listing of the charges paid by the veteran and the disposition made of the proceeds of the mortgage, prepared as a part of the closing and certified by the lender and by the veteran. Submitted with other closing documents when loan guaranty is requested.
Written authorization given by a local municipality that allows a newly completed or substantially completed structure to be occupied.
VA Form 26-1843, HUD Form 92800-5. A document issued by the VA establishing a maximum value and loan amount for a mortgage to be guaranteed by VA. The CRV will also be accepted by HUD-FHA to establish the appraised value of the property for a mortgage to be insured by HUD-FHA.
A change in the original plan of construction by a building owner or the general contractor. May or may not affect the appraised value of the completed property, but its impact must be evaluated.
Title not encumbered or burdened with defects. Marketable title.
The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan transaction.
Money paid by any party to the transaction to effect the closing of a mortgage loan. Does not include prepaid expenses, apportionments, and the like, but does not normally include an origination fee (almost always paid by the borrower), title insurance, survey, attorney fees, etc. In HUD-FHA transactions, all closing costs are added to the transactions, all closing costs are added to the appraised value of the property to establish the “FHA Value“ on which the maximum insurable mortgage is based. Closing costs paid by the borrower are added to the sales price to establish “Acquisition Cost“.
A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance premiums for the escrow account. See also "HUD-1"; and "Settlement Statement".
Any conditions revealed by a title search that adversely affect the title to property. Usually they cannot be removed except by a quitclaim deed, release, or court action. HUD-FHA and VA will accept title to properties with existing clouds of a routine nature, specified in the regulations governing their various programs.
The highest professioanl designation awarded to employees of member firms or individual members of the Mortgage Bankers Association of America.
(1) A sharing of insurance risk between insurer and insured depending on the relation of the amount of the policy and a specified percentage of the actual value of the property insured at the time of loss. (2) In mortgage insurance and guaranty programs, the sharing of risk between the lender and the insurer or guarantor following foreclosure of the mortgage, expressed in the form of either a dollar limit on the amount of guaranty settlement (VA), a limit on the settlement based on the percentage of the outstanding loan balance (private mortgage insurers), or a limit on settlement based on a percentage of loss after disposition of the property (HUD-FHA).
An agreement, often in writing, by one party to a transaction to perform a specific act at some future date, suject to compliance with certain conditions. The commitment may be by a lender to an individual borrower to make a loan, by a lender to a builder to provide long-term mortgage financing to future purchasers, by an insurer or guarantor to insure or guarantee a loan made by a lender, by an investor to purchase mortgage loans originated by a mortgage lender, etc.
Any fee paid by a potential borrower to a potential lender for the lender's promise to lend money at a specified date in the future. The mortgage lender may or not expect to fund the commitment.
A second borrower, not the spouse of the principal borrower, who assumes equal responsibility for the debt and share in ownership of the property. Income and obligations of a co-mortgager are considered in the underwriting process as though s/he were the principal mortgager. Contrast with the “Co-Signer“.
An abbreviation for “comparable properties“ used for comparative purposes in the appraisal process. Facilities of reasonably the same size and location with similar amenities. Properties that have been sold recently and have characteristics similar to the propery under consideration, thereby indicating the fair market value of the subject property.
HUD Form 92051. A report given to a lender by a designated compliance inspector indicating whether or not construction repairs comply with conditions established as a result with an earlier inspection or appraisal. CIR's in other forms are typically used for the same purpose whenever a lender or some other agency has required repairs or improvements to an existing property or when a newly-constructed dwelling must be completed before the loan is closed.
Any commitment that includes conditions. Specifically with respect to HUD-FHA transactions, HUD Form 92800-5 (VA Form 1843), a contractual agreement on the part of HUD-FHA to insure a mortgage on a specific property, with a specific amount, interest rate, and term, provided certain conditions stated in the commitment are met and an acceptable borrower is presented.
A form reproduced locally by HUD-FHA offices and varying in content depending on local conditions. It lists the most common conditions imposed on Conditional Commitments, giving each a number (“VC-10,“ “VC-4“). Only the number of the condition is entered on the commitment itself, and the list is attached.
A contract for the sale and delivery of property to a buyer, with the seller retaining title until the conditions of the contract, usually related to payment, have been met. Also known as “Sales Contract“.
A form of ownership of real property. The purchaser receives title to a particular unit and an undivided, or proportionate, interest in certain common areas. A condominium generally defines each unit as a separately owned space to the interior surfaces of the perimeter walls, floors and ceilings. Title to the common to the common areas is in terms of percentages and refers to the entire project less the separately-owned units.
The basic condominium that must be registered by the originating property owner before conveyance of the first unit sold. This declaration thoroughly describes the entire condominium entity, including each unit and all common areas, and specifies essential elements of ownership that permanently govern its operation. Also known as the “Master Deed“.
The required element in all contracts by which a legal right or promise is exchanged for the act or promise of another promise.
One who agrees to assume the debt obligation if the principal borrower should default on mortgage payments. A co-signer assumes only personal liability and has no ownership interest in the property. His/her income and obligations are used in the underwriting process to reinforce the credit of the principal borrower, but they are not given equal weight with those of the principal borrower. They serve as compensating factors only. Contrast with “co-Mortgager“.
A contract between a purchaser and seller of real property to convey a title after certain conditions have been met and payments have been made. See also “Sales Contract“.
A mortgage neither insured by HUD-FHA nor guaranteed by VA. See also “Guaranteed Loan“ and “Insured Loan“.
The act of transferring title to real property from one party to another.
The document, such as a deed, lease or mortgage, used to effect a transfer.
A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property and grants the occupancy rights to particular apartments or units to shareholders by means of propriety leases or similar arrangements.
A body of persons granted a charter legally recognizing them as separate entity (legal person) having its own rights, priveleges, and liabilities distinct from those of its members.
The final step in the appraisal process, iin which the appraiser considers the three estimates of of value derived from the cost, income, and market data approaches. The correlation process weighs the influence of each in relation to th etype of property and the final estimate of value.
A mortgage banker who services mortgage loans as a representative or agent or agent for the owner or the mortgage or investor. Also applies to the mortgage banker's role as originator or mortgage loans for an investor. In the latter sense, HUD-FHA restricts correspondents from acting on behalf of other than mortgagees approved by HUD-FHA as supervised mortgage lenders and from acting as correspondent for more than one institution at time.
A method in which the value of the property is derived by estimating the replacement cost of the improvement, deducting there from the estimated depreciation, then adding the value of the land as estimated by use of the market data approach. Also called “physical indication of value“.
The annual interest rate on a debt instrument. More generally, the annual interest rate on any indebtedness. In mortgage banking, the term is used to describe the contract interest rate on the face of the note or bond.
A rating given to a person or company to establish credit wothiness based on present financial condition, experience, and past credit history.
A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness.
The highest professional designation awarded to appraiser members of the National Association of Review Appraisers and Mortgage Underwriters.
Bank accounts used for the deposit of funds belonging to others. See also “Escrow Account“.
Discharge papers issued by an armed service branch when a veteran leaves active duty.
The periodic payment of principal and interest on mortgage loans.
A document by which the ownership of land is transferred from one party to another.
In some states, the document used in place of a mortgage. A type of security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of a note. A conveyance of the title to land to a trustee as collateral security for the payment of a debt with the condition that the trustee will reconvey the title on payment of the debt, and with power of the trustee to sell the property and pay the debt in the event of a default on the part of the debtor.
A department of the federal government under whose auspices the FHA is operated. HUD was established to provide cohesive control over those governmental programs designed primarily to provide housing and the services and facilities essential to the improvement of housing standards and conditions. As of the signing of the 1983 Housing Bill, HUD no longer sets the interest rate on FHA loans, with the exception of Section 235. The Secretary of HUD still sets a maximum interest rate for all VA loans. This department also includes community planning and development, low-rent public housing, equal opportunity in housing, and research and technology.
(1) A sum of money given to bind a sale of real estate. (2) A sum of money given to assure payment or an advance of funds in the procesing of a loan. Also known as “Earnest Money“.
A form used to accept the earnest money that binds an offer to purchase real property. In many transactions, the deposit receipt is included in the sales contract.
HUD Form 92005. A form used to indicate construction specifications and list materials to be used in constructing properties which are to be the security for HUD-FHA insured mortgages.
A method by which the lender appraises, approves and closes a loan without submitting any documentation to FHA until the time of request for insurance. A lender must be approved by the FHA as a Direct Endorsement Lender before being allowed to operate in this manner.
In loan originations, a discount refers to an amount withheld from loan proceeds by a lender. In secondary market sales, a discount is the amount by which the sale price of a note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate or terms of the note. Borrowers are prohibited from paying discounts associated with VA mortgages, unless the transaction is a refinance. The discount points may be paid by any other party on a VA transaction. Interest rates and discounts are now freely negotiable with respect to HUD-FHA transactions. See also "Point".
A form of tax imposed in some states on the transfer of real property.
Disbursement of a portion of the loan proceeds, usually at a predetermined point in the construction or rehabilitation schedule, to pay for work already completed. The balance of the proceeds is retained until th next schedule draw, or until completion of the construction or rehabilitation work, to protect the lender against the contractor's failure to complete the work as scheduled.
Clause included in a deed of trust which causes the note to become due and payable if title in the property is transferred. This clause prevents assumptions and is present in most conventional deeds of trusts. FHA loans never contain a due-on-sale clause. VA loans are assumable by another person with VA entitlement unless the original borrower's entitlement remains tied up in the loan.
The living quarters occupied, or intended for occupancy, by a household.
Equal Credit Opportunity Act. ECOA is a federal law which requires lenders and other 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.
Normal annual income including overtime, before deductions, that is regular or guaranteed. It may be from more than one source. Salary is generally the principal source, but other income may be significant and stable, and thus qualify. Effective Gross Income is used as the basis for borrower qualification by most conventional lenders and private mortgage insurers. Contrast with “Net Effective Income“.
The actual rate of return to the investor. It may vary from the contract rate for a variety of reasons. See also “Yield“.
A writing on a negotiable by which title to property mentioned therein is assigned and transferred. A notation added to an instrument after execution to change or clarify its contents. In insurance, coverage may be restricted or enlarged by endorsing a policy. In HUD-FHA loans, a notation formerly placed on the note and mortgage by HUD-FHA evidencing that the mortgage is insured under the National Housing Act. Although notes and mortgages are no longer actually endorsed, the separate Mortgage Insurance Certificate, when completed by HUD-FHA, serves the same purpose. See “Mortgage Insurance Certificate“.
(1) A transaction in which a third party, acting as the agent for the buyer and seller, carries out instructions for both and assumes the responsibilities of handling all the paperwork and disbursement of funds in a transfer of title and mortgage loan transaction. Escrows may also be established for any purpose, at any time, as, for example, in the administration of funds set aside to effect a “buydown“ agreement among seller, buyer and lender. (2) Funds included in the monthly mortgage payment to accumulate amounts necessary to pay property taxes, insurance premiums, etc., in the future are held in escrow, but the lender often acts as the escrow agent, especially if the lender is a depositary institution.
The segregated trust account in which escrow funds are held. The term is also used to describe the accounting for such funds.
The person or organization having a fiduciary responsibilty to both the buyer and the seller, or other parties, to see that the terms of the purchase, sale, loan, or other agreement are carried out.
VA Form 26-1849. A three-party agreement, involving the seller, the lender and the purchaser, used to guarantee the completion of certain on-site improvements, such as landscaping, which for any reason could not be completed before loan closing and which VA has determined can be delayed.
A corporation established to act as an escrow agent.
An agreement among the parties (lender, buyer and seller; buyer and seller) and the escrow agent specifying the rights and duties of each.
In a loan closing involving an escrow account, all the costs of the buyer and seller individually that rae associated with the purchase, sale or financing of real property. They include, but not limited to, prorating of agreed items such as taxes and rents, the cost of title insurance policies, the cost of credit reporting, recording fees, and escrow fees. See also “Closing Costs“ and “Settlement Costs“.
Fees charged by the escrow agent for services. Can never be paid by the vet.
That portion of a mortgagor's monthly payment held by the lender to pay taxes, insurance premiums, lease payments, and other items as they come due. Also known as “impounds“.
A certificate which is evidence of the policy in effect for the full term. A requirement of the warehouse bank and the investor.
In legal descriptions, that portion of land to be deleted or excluded. The term is often used in a different sense to mean an objection to title or encumbrance on title.
To complete, finish, or, in real estate deeds, to sign, seal and deliver.
In HUD-FHA transactions, a house that was not approved by HUD-FHA or VA before the beginning of construction, but which has been completed more than one year.
In HUD-FHA transactions, a house that was not approved by HUD-FHA or VA before the beginning of construction and is less than one year old. Reduced mortgage amounts are applied to these properties.
Federal National Mortgage Association
A governement agency within the Department of Agriculture that operates under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers in communities of less than 25,000 who are unable to obtain these loans else here. The agency makes loans with funds borrowed from the US Treasury.
A regulatory and supervisory agency for federally chartered savings institutions. It oversees the operations of the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Mortgage Corporation (FHLMC).
A private corporation authorized by Congress. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal and interest guaranteed by the federal government through FHLMC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages.
A government agency established by the federal government in 1934 through the National Housing Act to foster home ownership by providing insurance protection to private lenders who provide mortgage insurance financing to home owners. Note that the FHA is an INSURING agency, a federal MGIC if you will. The FHA does not make an FHA loan, it merely insures loans made by lenders. The FHA operates under the auspices of the Department of Housing and Urban Development (HUD). The FHA insures fixed rate, assumable loans according to terms established between the mortgagor and mortgagee, and also offers an excellent Adjustable Rate Mortgage. FHA loans have no prepayment penalty.
A private, quasi-government corporation that is organized to provide secondary mortgage assistance for residential housing through the purchase of eligible FHA-insured/VA-guaranteed mortgages. Fannie Mae's function is to buy FHA/VA mortgages and leave the servicing in the hands of the originating lender. Mortgages thus purchased are sold to permanent private investors whenever the market permits. Fannie Mae's is directed by Congress and has three separate functions: 1) to provide a secondary market for federally underwritten loans; 2) to assist in financing selected types of mortgages originated under special housing programs; and 3) to assist in management and liquidation of mortgages held or acquired by contract under its previous charter.
A form designed and reproduced locally by lenedrs to comply with disclosure requirements of the Federal Truth in Lending Act.
The greatest possible interest a person can have in real estate.
The number used to identify a HUD-FHA mortgage in HUD's records. It is a 12-digit number, in three sections (XXX-XXXXXX-XXX). The first three digits identify the HUD-FHA office in whose jurisdiction the property is located and theo ffice responsible for processing the application. The six or seven center digits are assigned serially by the HUD-FHA office, in the order in which applications are received. The final three digits identify the program under which the mortgage is insured. In some cases, this is the same as the section of the National Housing Act, but there are many variations. The central six digits are expanded to seven when HUD's automated processing system is in use.
The value established by FHA as the basis for determining the maximum mortgage that may be insured on a specific property. It includes the appraised value of the property and the HUD-FHA estimate of required closing costs. See also “Appraised Value,“ “Closing Costs“ and “loan-to-Value Ratio“.
FHA terminology for mortgage commitment. An agreement to insure a loan on a specific property, for a specific borrower, at a maximum amount, interest rate and term. In HUD-FHA transactions, the Firm Commitment is conditioned on compliance with requirements imposed by the conditional commitment with respect to the property, and other conditions imposed by the Firm Commitment itself, usually with respect to the borrower or to the transaction as a whole.
A real estate loan that creates a primary lien against real property.
In most government programs, a person applying for mortgage insurance or guaranty who has not owned real estate during the three years immediately preceding the date of the application. There are some exceptions. For example a person who sold a home to move to a distant community might qualify as a first-time home buyer in the new community.
VA Form 26-1843p. A form that accompanies the CRV and specifies the conditions related to the property that must be met before VA will guarantee the loan. Some conditions are general in nature and apply to all cases, while others are specific to the property identified in the CRV.
An unnumbered, locally-produced form, standardized locally by most HUD-FHA and VA offices. When an applicant intends to rely upon a gift to meet settlement requirements, both HUD-FHA and VA require evidence that the funds are truly a gift, from someone who could logically be expected to make the gift, and that repayment is neither required nor expected. Some offices also require verification that the donor actually has the funds on deposit.
Colloquial term used to describe a mortgage loan guaranteed by the VA.
A corporate entity of the United States government within the Department of Housing and Urban Development (HUD). Ginnie Mae's operations are financed by the US Treasury and by private capital. All benefits of its operation are passed on to the government. Ginnie Mae is authorized to conduct: 1) special assistance mortgages; 2) management and liquidation functions to manage and liquidate its portfolio of mortgages; 3) trustee for participation certificate sales; and 4) guarantor of mortgage-backed securities.
Securities guaranteed by GNMA that are issued by mortgage bankers, commercial banks, savings and loan associations, savings banks, and other institutions. The GNMA security holder is protected by the “full faith and credit of the United States.“ GNMA securities are backed by pools of HUD-FHA, VA or FmHA mortgages.
The person to whom an interest in real estate is conveyed.
The person conveying an interest in real property.
A contract for the rental of land, usually on a long-term basis. Improvements on land that is leased are said to be subject to a ground lease or ground rent.
The earnings of improved property allocated to the ground itself after allowance is made for earnings of the improvement. Also, payment for the use of the land in accordance with the terms of a ground lease.
A loan guaranteed by VA, FmHA, or any other interested party.
A promise by one party to pay a debt or perform an obligation contracted by another in the event that the original obligor fails to pay or perform as contracted. A guaranty is usually distinguished from insurance primarily by the absence of the payment of any premium.
A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards.
VA Form 26-1803. A form attached to a CRV or conditional commitment describing areas of the structure which might be altered to provide energy savings. The form also makes recommendations for specific improvements.
A mortgage loan secured by a residence for one, two, three or four families. Also known as the “single family mortgage,“ even though the property may be designed for more than one family.
An organization of homeowners residing within a particular development. The organization's major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.
A multiple-peril hazard insurance policy commonly called a package “policy.“ It is available to owners of private dwellings and covers the dwelling and contents in the case of loss due to specific hazards enumerated in the policy. It generally provides insurance against loss due to personal liability related to the property.
Local standards that ensure that maintenance and improvements of housing meet accepted standards and are adequate for occupancy. Generally, the property standards imposed by lenders, insurers and guarantors of mortgage loans exceed those of local housing codes, and evidence of compliance is not required. Compliance with code is required on the appraisal when an addition has been made into the original structure, or when the structure has been substantially modified (as in the case of the conversion of a garage to a room).
A government form that is essentially a closing statement. Required on closings of all federally related mortgages.
That portion of the mortgagor's monthly payment held by the lender to pay taxes, insurance premiums, lease payments and other items as they come due. See also “Escrow Account“ and “Escrow Payment“.
Land having utilties, roads or other improvements.
Those additions to raw land that normally increase its value, such as buildings, streets and sewers.
An unnumbered form, produced locally by many HUD-FHA offices, used to provide details permitting an analysis of the net income available to an applicant from rental properties other than the subject property. Even where a prescribed format for providing this information does not exist, it must be provided with the application for Firm Commitment in some form.
The actual or estimated schedule of income and expense items reflecting net gain or loss during a specific period. Used in evaluating the income of self-employed persons.
The regular periodic payment that a borrower agrees to make the mortgage.
A note requiring periodic payment of a specified sum to satisfy a debt.
A financial institution that invests in mortgages and carries them in its own portfolio. Mutual savings banks, life insurance companies, commercial banks, pension and trust funds, and savings and loan associations are examples.
A contract for indemnification against loss.
A document issued by a title insurance company in connection with a to-be-issued title insurance policy. It protects a mortgagee that is forwarding funds to a title insurance company's agent or approved attorney against an embezzelment of funds or a failure to follow specific closing instructions.
Lender and builder jargon. It refers to a construction loan, done on a draw system. The laon allows for the house to be built, with the loan paid off at the end of construction (hopefully). If you are doing the end loan for the buyer, you will hear from the builder six months after completion what she/he thinks of interim loans.
Any property held as a rental or used purely for sale. Not for owner-occupancy.
A property improvement or manufactured housing loan insured by HUD-FHA under Title I of the National Housing Act. Sometimes improperly used to mean any loan or mortgage insured by HUD-FHA or a private mortgage insurer.
A mortgage insured by HUD-FHA under any title of the National Housing Act other than Title I.
Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share or title in property.
The decimal equivalent of an interest rate on a unit for a period of time. Computed as (interest rate + basic year) x days accrued.
The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.
Jargon for money paid by a lender to a realtor or unlicensed originator for a loan referral or lead. ILLEGAL on FHA and VA loans.
A loan that provides the mortgagor funds to acquire land.
Owner or lessor of real property.
An additional charge a borrower is required to payas a penalty for failure to pay a regular installment when due.
A written document containing the conditions under which the posession and use of real and/or personal property are given by the owner to another for a stated period and for a stated consideration.
An estate or interest in an estate in real property held by virtue of a lease.
A loan to a lessee secured by a leasehold interest in the property. Where a ground leasse exists, any mortgage on the property in which title is subject to the ground lease is a leasehold mortgage.
A property recognized by law, which is sufficient to locate and identify the property without oral testimony.
One holding rights of possession and use of property under a lease.
One who owns property and leases it to a lessee.
A mortgage that provides for a constant, fixed payment at periodic intervals during its term. Part of each payment is credited to interest with the balance of the payment used to reduce the principal.
A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.
Contract term in years of a mortgage.
Common areas assigned to a specific owner for personal private use.
A partnership that consists of one or more general partners who are fully liable and one or more limited partners who are liable only for the amount of their investment.
A written authorization to sell or lease real estate.
VA Form 26-6393. Used by VA as a work sheet to analyze the data submitted in the Application for Home Loan Guaranty.
A package of pertinent papers and documents regarding specific property or properties. It is delivered to a delivered to a prospective for review and consideration for the purpose of making a mortgage loan.
(1) The relationship between the amount of the mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value. (2) IN HUD-FHA transactions, the relationship between the amount of the mortgage loan and “FHA value,“ which is the sum of the appraised value of the property and the estimated closing costs.
An unnumbered, locally-produced form used to request verifications of obligations where the creditor refuses to provide information to credit bureaus and is not identified by the applicant as a depository holding funds of the applicant.