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Package loan A loan secured by real property plus personal property
Budget loan A loan where the monthly payment includes not only principal and interest but taxes and insurance-called the PITI payment
PITI Principal, interest, tax, insurance-a common payment for amortized loans
Balloon loan A partial amortization loan-equal regular payments of principal and interest, but long before the debt is amortized a final payment, substantially larger that the others is required to pay off the debt-the balloon payment
Participation loan Two or more lenders own a share-to lessen the lenders' risk; or the lender who collects principal interest plus a percent of the profits on the investment property
Shared Appreciation loan A loan with an investor/lender who collects principal and interst payments and then a percent of the profits when the property is sold
Open-end loan A home equity line of credit-similar to a credit card but secured by real property
Adjustable Rate Mortgage-ARM A loan with an interest rate tied to a readily available index-the rate will be adjusted periodically causing payment changes
Margin On an adjustable rate mortgage the percent added to the index
Construction loan Short term financing with funds advanced periodically during the stages of construction-term loan
Wraparound loan A new mortgage on a property is placed in a secondary lien position it includes both the unpaid balance of the first mortgage plus additional amounts-the first mortgage is not paid off
GPM-Graduated Payment Mortgage A loan whose payments start low and rise every year, usually for live years, after which they level off by the remaining term of the loan-can resulrt in negative amortization
Negative Amortization An increased in debt due to payments less than the interest owed- can be associated with a graduated payment mortgage
Reverse Annuity Mortgage A home equity loan available to homeowners over 62 years of age the lender makes payments to the borrower based on the equity in their property-the loan comes due upon the sale of the property or the death of the owner
Sub-prime loan A loan with risk based pricing for borrowers with a credit rating in the A minus to F range-the interest rate will be one to live five percent higher than for a prime borrower
Primary Market Where consumers go to borrow money-banks, mortgage companies, ect
Secondary Market Where lenders go to borrow money-Fannie Mae, Ginnie Mae, Freddie Mac
Conforming loan A standarized conventional loan written on uniform documents that meets the purchase requirements of Fannie Mae and Freedie Mac-both loan amount and borrower characteristics must meet the guidelines
Non-Conforming loan A loan unable to be sold to Fannie Mae or Freddie Mac-for example a sub-prime loan
Truth in lending TIL, REG Z, Regulation Z, or the Consumer Credit Protection Act-a law passed to help consumers understand the true cost of borrowing money
Created by: Shirilyn