A general contractor is someone whom you may work closely with during your home improvement project. The general contractor is the person who oversees the construction project and handles various aspects such as scheduling workers and ordering supplies.
If you are borrowing mortgage funds to renovate a home, your lender may need to review whether your contractor meets all federal, state, and local registration, licensing and certification standards.
The good-faith estimate is a report from your lender that outlines the costs you will incur to get your mortgage. It is based on the lender’s typical loan origination costs for the area where your home is located. The estimate usually changes between application and closing, so you’ll want to review your settlement form before the closing meeting.
The settlement form will list the actual amount of money you’ll need to bring to closing. You’ll need to pay your closing costs in the form of a certified or cashier’s check because personal checks usually are not accepted.
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortage.
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.
The person to whom an interest in real property is conveyed.
The person conveying an interest in real property.
The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.
A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.
A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.
A mortgage that is guaranteed by a third party.
Also known as a government mortgage.
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.
A Home Equity Conversion Mortgage (HECM) is a type of home loan that lets homeowners aged 62 or over with little or no remaining balance on their mortgage convert their equity into cash. The equity can be paid to the homeowner in a lump sum, in a stream of payments, draws from a line of credit, or a combination of monthly payments and line of credit.
Whatever payment plan you select, you do not have to repay any part of this reverse mortgage until you sell the home or vacate it for another reason. At that time, you pay the loan balance, plus any accrued interest. Any proceeds above that amount go to you or to your estate.
Developed by the Federal Housing Administration (FHA), the HECM mortgage provides a cash growth feature not found with some other reverse mortgages - check with your Fannie Mae approved lender to see how this works based on your personal needs and your payment plan.
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property.
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
The home inspection reviews the structural and mechanical condition of the property. This is not an evaluation of the market value of the home or a determination of whether the home complies with applicable building and safety codes. The inspection does not include a recommendation on whether you should or should not buy the house.
The inspector bases the findings on observable structural elements of the home. Potential home buyers are urged to be present during the inspection - this will allow you to ask questions and be in a better position to learn more about any problems that arise.
You should expect to see an evaluation of:
You should view the home inspection report as a way to identify problems before you buy the home, to help negotiate adjustments in the purchase price if problems exist, and to help get the buyer to make any needed improvements before you buy the home.
Lastly - and for some buyers most importantly - the home inspection report is a way to make you feel confident that the home you are buying includes systems that are in good working condition.
A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
Homeowner’s insurance -- also called “hazard insurance” - should be equal to at least the replacement cost of the property you want to purchase. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss.
Most home buyers purchase a homeowner’s insurance policy that includes personal liability insurance in case someone is injured on their property; personal property coverage for loss and damage to personal property due to theft or other events; and dwelling coverage to protect the house against fire, theft, weather damage, and other hazards.
If the home you want to buy is located near water, you may be able to get flood insurance as part of your homeowner’s protection. In fact, it may be required in some areas, so check with your real estate professional or an approved lender for further information.
Seek out and compare rates from several insurance companies before making your final decision.
Lenders often want the first year’s premium to be paid at or before closing. Your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in an escrow account. The lender then pays your insurance bill out of escrow when it receives premium notices from your insurance company.
A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.
This mortgage gives you the financial power to build your own home - you can borrow money to build a home from the ground up or to finish building a home that’s currently under construction. This loan provides financing from the construction through the purchase phases of your new home.
A mortgage that enables eligible borrowers to obtain financing to remodel, repair, and upgrade their existing homes or homes that they are purchasing.
The percentage of gross monthly income that goes toward paying housing expenses.
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the “closing statement” or “settlement sheet.”
The HUD-1 Settlement Statement itemizes the amounts to be paid by the buyer and the seller at closing. The (blank) form is published by the U.S. Department of Housing and Urban Development (HUD).
Items on the statement include:
The form is filled out by your closing agent and must be signed by the buyer and the seller. The buyer should be allowed to review the HUD-1 Settlement Statement on the business day before the closing meeting to know the closing costs in advance.
An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
Real estate developed or improved to produce income.
A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated with the mortgage.
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as “start rate” or “teaser.”
The regular periodic payment that a borrower agrees to make to a lender.
The regular periodic payment that a borrower agrees to make to a lender. The installment is more often referred to as your monthly mortgage payment.
Installments, or monthly payments, can be made either monthly or biweekly, depending on your mortgage type. Your approved lender may also offer additional payment plans tailored to fit your needs.
Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.
A property title that a title insurance company agrees to insure against defects and disputes.
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
The fee charged for borrowing money.
Simply put, this is the fee that is charged for borrowing money from lenders.
The interest rate is the rate of interest that is in effect when the monthly payment is due. An interest rate ceiling - for an adjustable-rate mortgage (ARM) - is the maximum interest rate, as specified in the mortgage note; the interest rate floor is the minimum interest rate, as specified in the mortgage note.
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
The rate of interest in effect for the monthly payment due.
An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor’s monthly payments during the early years of a mortgage. During the specified period, the mortgagor’s effective interest rate is “bought down” below the actual interest rate.
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
The interest rate on a Home Equity Conversion Mortgage (HECM) adjusts monthly or yearly. It is tied to the weekly average yield of U.S. Treasury securities adjusted to a constant maturity of one year. The interest charged on the HECM loan will be payable to your lender when the loan terminates.
If you’re looking to leverage your mortgage to expand purchasing power, this mortgage offers the benefit of a low, fixed-rate monthly payment.
A property that is not occupied by the owner.
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.