Bay Mortgage - Located in Traverse City, Michigan


Bay Mortgage Northern - Traverse City, Michigan
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Mortgage Glossary

The mortgage world is full of terms that you hear every time someone discusses their mortgage transaction.  "Did you pay points?" someone might ask.  As you wonder "What's a point?  Did I miss out on something?"  "Who are Fanny Mae and Freddie Mac?"

You don't need to memorize these terms prior to your next new home purchase, simple refinance or cash out debt consolidation refinance - but please use this tool if you would like to learn more.  Thank you for choosing Bay Mortgage - your local mortgage specialists  based in Traverse City, Michigan

Adjustable Rate Mortgage (ARM): Mortgage loans under which the interest rate s periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan.

Affidavit: A written statement of declaration, sworn to before an officer or notary public who has the authority to administer an oath.

Amortization: Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments.

Amortization Schedule: A schedule showing each payment of a loan to be amortized (see Amortization) and breaking down the payment into the amount applied to principal and the amount applied to interest.

Annual Percentage Rate (APR): The finance charge calculated over one (1) year, taking into consideration all costs (includes origination fees, lender fees and certain closing costs) of the loan as required by the Truth in Lending Act.

Appreciation: An increased value of property due to either a positive improvement of the area or the elimination of negative factors. Commonly, and incorrectly, used to describe the increase in value through inflation.

Assignment: A transfer to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, deeds of trust, but the general term encompasses all transfers of title.

Assumption of Mortgage: Agreement by the buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender must usually approve the new debtor in order to release the existing debtor (usually the seller) from liability.

Bay Mortgage:  Your preferred choice for financing on your new home purchase, refinance or debt consolidation.  Our business is built on honesty and integrity.

Balloon: The final payment (balance due) of a balloon note.

Balloon Note: A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to the maturity, so that the principal sum known as a "balloon" is due at maturity.

Blanket Mortgage: One (1) mortgage that places a lien on more than property.

Buy Down: A loan program that allows a borrower to have a lower initial interest rate (start rate). The rate will increase during the first few years of the loan (usually the first 1-5 years) and then level out. The rate is bought down by paying of financing part of the finance charge up front. The advantage to a "buy down" program is that initial payment amount is used in calculating the debt to income ratio.

Closing: In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

Closing Costs: Expenses incurred when buying or refinancing a home. The costs can include, but are not limited to, attorney fees, origination fees, lender fees, appraisal costs, land survey, title search fees, title insurance fees and recording fees.

Collateral: The property (can be real property or personal property) used as security for a loan.

Commitment: Title insurance term for the preliminary report issued before the actual policy. Said report shows the condition of the title and the steps necessary to complete the transfer of title as contemplated by buyer and seller.

Conveyance: The transfer of ownership from one party to another.

Credit Report: A report on the past ability of a loan applicant to pay installment payments. Several national and local companies make such reports.

Deed: Actually, one of the many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale.

Deed Restrictions: Limitations on the use of property placed in the conveyancing deed by the grantor, which bind all future owners.

Default: Failure to fulfill any obligations stating in the promissory note (i.e. failure to make payments as stated in the contract).

Deferred Maintenance: Repairs necessary to put a property in good condition.

Discount Points: A fee that allows a borrower to obtain a lower interest rate. The borrower will usually pay this fee at the time of closing. One (1) point equals one (1) percent of the loan amount.

Earnest Money: The money given by the buyer with an offer to purchase. Shows good faith. Also called a deposit.

Easement: A right created by grant, reservation, agreement, prescription or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross "A" to get to "B", or in "gross", such as a public utility easement.

Encroachment: Generally, construction onto the property of another, as of a wall, fence, building, etc.

Equal Credit Opportunity Act: Federal law granting women certain independent status, and preventing lenders from considering such negative credit aspects as the possibility of a woman having children and dropping out of the labor market.

Equity: The market value of real property, less the amount of existing liens.

Escrow Account (Impound Account): Account held by a lender for the payment of taxes, insurance or other periodic debts against the property.

Fair Credit Reporting Act: A federal law giving one the right to see his or her credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the borrower which company issued the report. The borrower may see the report without charge if refused credit, or for a charge if just curious.

Fair Market Value: Price that would probably be negotiated between a willing seller and a willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.

Fannie Mae: Federal National Mortgage Association. A private corporation dealing in the purchase of first mortgages, at a discount.

Federal Tax Lien: A lien attaching to property for the non-payment of a federal tax (estate, income, etc.). A federal tax lien differs from other liens in that it is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien (except by judicial foreclosure).

FHA (Federal Housing Administration): A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

Finance Charge: Fees charged by the lender to borrow money (the fee paid for immediate use of future income).

Fixed Rate Loan: A mortgage having a rate of interest which remains the same over the life of the mortgage.

Foreclosure: 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.

Freddie Mac: Federal Home Loan Mortgage Corporation. A federal agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System and the Federal Home Loan Bank System.

FSBO: For Sale By Owner.

Fully Amortized Loan: A loan of equal, regular payments which cause the principal and interest to be completely paid by the due date.

Good Faith Estimate: A required statement from the lender disclosing all fees anticipated in conjunction with obtaining a loan.

Gross Income: Pre-tax monthly income earned by the borrower(s).

Hazard Insurance: Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.

Homeowner's Insurance: Includes the coverage of Hazard Insurance plus added coverage such as personal liability, theft away from the home (items stolen from the insured's car), and other such coverage

Homestead: The dwelling (house and contiguous land) of the head of the family. Some states grant statutory exemptions, protecting homestead property (usually a set maximum amount) against the rights of creditors. Property tax exemptions (for all or part of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded.

In Rem: Pertaining to property or people in general.

Insured Mortgage: A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure. May be insured by F.H.A., V.A. or by independent mortgage insurance companies.

Interest: Money charged for the use of money.

Judgment Lien: A lien against the property of a judgment debtor. An involuntary lien.

Junior Mortgage: Any mortgage of lesser priority than the first mortgage.

Land Contract: An installment contract for the sale of land. The seller has legal title until paid in full. The buyer has equitable title during the contract term.

Lease With Option To Purchase: A lease under which the lessee has the right to purchase the property. The price and the terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.

Legal Description: A method of geographically identifying a parcel of land, which is acceptable in a court of law.

Leverage: The use of borrowed money to purchase property.

Lien: An encumbrance against a property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens.

Loan Origination Fee: Fee paid to the loan originator, usually by the borrower, for the services render in securing the mortgage loan.

Loan Policy: A title insurance policy insuring the mortgagee, or beneficiary under a deed of trust, against loss caused by invalid title in the borrower, or loss of the priority of the mortgage or deed of trust.

Marketable Title: Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Maturity: The date on which the mortgage or note becomes due.

Mortgage (Deed Of Trust): The legal document that gives the mortgage lender a security interest in the property.

Mortgage Broker (Loan Broker): One, who for a fee, brings together a borrower and a lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.

Mortgagee: The lender in the loan transaction.

Mortgagor: The borrower who gives his/her property as collateral for a loan.

Negative Amortization: A condition created when a loan payment is less that the interest alone. Even though payments are made on time, the balance owing increases.

Note: A unilateral agreement containing an express and absolute promise of the signer to pay a named person, or order, or bearer, a definite sum of money at a specified date or on demand. Usually provides for interest, and concerning property, is secured by a mortgage or deed of trust.

Owner's Policy: Title insurance for the owner of the property, not the lien holder.

Per Diem: Daily.

Personal Property: Any property which is not designated by law as real property.

PITI: Principal, interest, taxes and insurance. Used to indicate what is included in a monthly payment on real property.

Point: One point represents one (1) percent of the initial principal amount of the loan.

Power Of Attorney: An authority by which one person (principal) enables another (attorney in fact) to act for him. (1) General power - Authorizes mortgaging, sale, etc., of all property of the principal. (2) Special power - Specifies property, buyers, price and terms. How specific it must be varies by state.

Prepayment Penalty: A penalty under a note, mortgage or deed of trust, imposed when a loan is paid before its maturity date.

Principal: The original amount borrowed at the inception of the loan.

Principal Balance: The remaining balance owed on a loan.

Private Mortgage Insurance (PMI): Insurance that protects the lender in the event that the borrower defaults on the loan.

Property Tax: Generally a tax levied on both real and personal property; the amount of the tax is dependent upon the value of the property.

Rate Lock: When a borrower is approved for a loan at a specific rate of interest. Because rates fluctuate, an approved rate is only valid (or locked) for a specific period of time.

Real Property (Real Estate): Land and anything permanently affixed to the land, such as buildings, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures or other such items that would be personal property if not attached. The term is generally synonymous with real estate, although in some state there is a fine distinction.

Recording: Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors or other interested parties.

Realtor: A designation given to a real estate broker or sales associate who is a member of a board associated with the National Association of Realtors? or with the National Association of Real Estate Boards.

Refinance: The repayment of a loan with the proceeds of a new loan using the same security as collateral.

Reconveyance: An instrument used to transfer title from a trustee to the equitable owner of the real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release.

Release: An instrument releasing property from the lien of the mortgage, judgment, etc.

Rescind: To void or cancel in such a way as to treat the contract or other object of recision as if it never existed.

RESPA (Real Estate Settlement Procedures Act): A federal statute effective June 20, 1975, requiring disclosure of certain costs in the sale or refinance of residential (one to four family) improved property.

Satisfaction: Discharge of an obligation by payment of the amount due, as on a mortgage, trust deed or contract; or payment of a debt awarded, such as satisfaction of judgment.

Secondary Financing: A loan secured by a mortgage or trust deed, which is junior (secondary) to another mortgage or trust deed.

Secondary Mortgage Market: The buying and selling of first mortgage and trust deeds by banks, insurance companies, government agencies and other mortgagees. This enables lenders to keep an adequate supply of money for new loans. The mortgages may be sold a full value (par) or above, but are usually sold at a discount.

Survey: The measurement of the boundaries of a parcel of land, its area and sometimes its topography.

Tax Lien: (1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach all property of the one owing taxes.

Term: A period of time, such as the term of a lease.

Title Insurance: An insurance policy that protects the property owner and mortgage lender against loss resulting from defects of title to a specifically described parcel of real property.

Title Company: An agency issuing the policy of a title insurance company.

Tract: A parcel of land. In some states it is synonymous with a subdivision.

Truth In Lending (Regulation Z): Part of the Consumer Credit Protection Act. Federal legislation designed to protect borrowers by requiring lenders to furnish information regarding the cost of the loan. The law requires interest to be expressed as the annual percentage rate (APR) to the nearest 1/8 of one percent. The APR must include charges such as loan fees, discount points, servicing fees, etc., as well as interest. The law applies to one to four residential family property only. Also applies to consumer loans.

V.A. Loans (Veteran Administration): Housing loans to veterans by banks, savings and loans or other lenders which are insured by Veteran's Administration, enabling veterans to buy a residence with little or no money down.

Warranty Deed: A deed used in many states to convey fee title to real property. Until the widespread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee of defective title.

Be sure to Apply Online today!

BAY MORTGAGE Northern - Located in Traverse City, Michigan

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