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types of mortgages

There are many types of mortgages from which you can choose. Which type you choose usually depends on the length of time you think you'll be in your home or the other financial obligations you have. If you think you'll be in your home for many years, then you may want a fixed rate mortgage with the lowest interest rate you can get.

There may be other considerations, however. What if you have kids who are going to be entering college in 10 years? In that case, you might consider getting an adjustable rate mortgage, or a mortgage with a balloon payment so you can keep your payments low for the first few years in order to save for college. Once the kids are out of college, you can refinance at the current rate. If you don't think you'll be in your home for that long, then you may also want to look at other options.

fixed rate mortgages

This mortgage offers an interest rate that will never change over the entire life of the loan. If you lock in a rate of 7 percent that calculates a payment of $1,247 per month, then you know that in 20 years you'll still be paying $1,247 per month. The only things that will change will be the property tax and any insurance payments that are included in your monthly payment. The length (known as the term) of your fixed rate mortgage can be 15, 20 or 30 years. These terms have an affect on the various benefits you'll get from your mortgage.

30-year fixed-rate: The 30-year term gives you the maximum tax advantage by having the greatest interest deduction. While the fact that you're paying more interest may not seem like a benefit, you make lower payments with the longer-term fixed-rate loan and you get a bigger tax deduction. If you will be staying in your home for many years (especially if you think your income may not increase tremendously), this may be the best option. This type of loan is also the easiest to qualify for.
20-year fixed-rate: You can shorten your mortgage by 10 years and usually get a lower interest rate with the 20-year mortgage. These aren't offered through as many banks and lenders, however, so you may have to shop around to get one. The advantage with the shorter term, besides paying your loan off sooner, is that you'll also have more equity in your home sooner than you will with a 30-year loan; however, your payments will be higher.
15-year fixed-rate: This loan term has the same benefits as the 20-year term (i.e., quicker pay-off, higher equity, lower interest rate), but you will also have a higher monthly payment.

adjustable rate mortgages

An adjustable-rate mortgage (ARM) has an interest rate that changes based on changing market rates and economic trends. They usually offer an initial interest rate that is two to three percentage points lower than fixed-rate mortgages, but they don't offer the stability or assurance of a known mortgage payment in the years to come. If you don't expect to be in your home for many years, however, an ARM may be just what you need.

How often your interest rate adjusts: is determined by the terms of the loan. You may choose a six-month ARM, a one-year ARM, a two-year ARM, or some other term. There is usually an initial period of time during which the rate won't change. This might be anywhere from six months to several years. For example, a 5/1-year ARM would mean the initial interest rate would stay the same for the first five years and then would adjust each year beginning with the sixth year. A 3/3-year ARM would mean the initial interest rate would stay the same for the first three years and then would adjust every three years beginning with the fourth year.
There will also be caps: or limits to how high your interest rate can go over the life of the loan and how much it may change with each adjustment. Interim or periodic caps dictate how much the interest rate may rise with each adjustment. For example, the terms of the loan may be that the rate can go up as high as one percentage point each year depending upon the market. Lifetime caps specify how high the rate can go over the life of the loan. For example, the terms of the loan might specify that the rate cannot go up by more than a total of six percentage points.
The interest rates for ARMs: can be tied to one-year U.S. Treasury bills, certificates of deposit (CDs), the London Inter-Bank Offer Rate (LIBOR), or other indexes. When mortgage lenders come up with their rates for ARMs, they look at the index and add a margin of two to four percentage points. Being "tied" to these index rates means that when those rates go up, your interest goes up with it. The flip side is that if they go down, your rate also goes down. Try this ARM calculator to see how your payments might change with an adjustable rate mortgage.

balloon mortgage

A balloon mortgage offers an initial interest rate that is lower than fixed-rate mortgages. It keeps this low fixed rate for five to seven years and then requires a "balloon" payment. The balloon payment is the final payment of the loan and pays off the entire balance. Monthly payments are low because the payments for those first five to seven years are amortized at a low interest rate over the total length of the loan. If you plan on either selling your home, paying it off or refinancing it before the balloon payment is due, then this type of mortgage is good deal.

federal housing administration loans

Government housing loans help lower the costs of mortgages so that more people can afford to own their own home. There are three government agencies that insure mortgages. The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development, the Veterans Administration (VA), and the Rural Housing Service (RHS), which is a branch of the U.S. Department of Agriculture. Only approved lenders can offer these loans, and there will be required standards that the property has to meet in order to qualify.

The FHA offers a mortgage-financing program that insures home loans. The FHA doesn't make the loans itself; rather, it serves as an insurance policy for lenders. Because the financial requirements for FHA loans are relaxed compared to traditional commercial loans, more people are able to afford to buy homes.

FHA insurance makes lenders more willing to work with someone who might not completely fit their usual loan qualification requirements. FHA requirements reduce the debt-to-income ratio from 28/36, which is the traditional loan requirement, to 29/41 for FHA loans. FHA loans also require a low down payment of 5 percent or less, and allow 100 percent of the money used for the down payment and closing costs to come from a family member. Traditional loans won't allow you to borrow the money used for those payments. There are maximum loan limits with FHA loans. These limits vary by state or region. Visit the FHA Web page to find the limit for your area.

veterans administration loans

VA loans are designed for qualified veterans and offer more relaxed standards for qualification than either FHA loans or traditional loans. As of 2002, loans can be for amounts up to $240,000 and require no down payment. Like FHA loans, these loans are not made by the Veterans Administration, but are simply guaranteed by the Administration.

rural housing service loans

If you live in a rural area or small town, you may qualify for a low-interest loan through the Rural Housing Service. RHS offers both guaranteed loans through approved lenders and direct loans that are government funded. These loans enable low-income families to get loans for homes.

reverse mortgages

Reverse mortgages pay you money as long as you live in your home. These loans are designed for people age 62 and older that own their homes and need an inflow of cash. The loan is against the equity and isn't paid off until you sell or move out of your home. Until then, you receive regular payments in the amount set up in the terms of the loan. Reverse mortgages are offered by state and local governments as well as banks and mortgage lenders. Shop carefully for these loans because interest rates and fees tend to be higher than in traditional mortgages. The AARP Web site offers additional information about reverse mortgages.

conventional vs. jumbo loans

A conventional loan is one that falls under the loan limit set by Fannie Mae or Freddie Mac. These limits change annually based on the single-family home price survey done by the Federal Housing Finance Board each October.

Loans that are above that limit are called jumbo loans. Because jumbo loans don't offer the same Fannie Mae and Freddie Mac backed safety to investors as conventional loans, their interest rates tend to be higher by about 0.25 percent to 0.50 percent. When the conventional loan limit changes, the FHA loan limit usually changes along with it.

important credit information

Before you can resolve your loan with your lender, you will need to find out your credit standing. The credit section of this site will help you find many answers to the questions you might have about your credit score.

What exactly is credit?
How do I get credit?
Where does credit come from?
What's on a credit report?
How do I fix errors on my credit report?
What does my credit report say about me?
How do I establish a good credit history?
How do I protect my good credit standing?
Can bad credit be repaired? How?

WHAT EXACTLY IS CREDIT?

Credit permits you to obtain something now for little or no money out of your pocket, and pay for it over a specific period of time. Today, almost everyone uses credit in one form or another.

Open-ended credit - is extended on an ongoing basis, but usually with a limit on how much you may borrow. It is often referred to as revolving credit in that as you repay the balance due, credit up to a specified limit is then available to you again to use at anytime in the future. Credit cards, such as VISA and MasterCard, are the most common form of open-end credit.
Closed-ended credit - is extended on a one-time, limited basis, such as a car loan or a personal loan. Although you may still have a positive relationship with the lender after paying off the obligation, you still must re-qualify each time you want another loan.

HOW CAN I GET CREDIT?

You complete a credit application at the place of your choice, and when your credit application is approved, you will get credit from department stores, finance companies, oil companies, credit unions, commercial banks and credit card companies. The organizations, which extend credit, are called creditors.

HOW DOES A CREDITOR DECIDE IF THEY WILL GIVE ME CREDIT?

For credit to be extended to you, a creditor looks at two things:

You, as a credit risk. Each creditor has different ways of evaluating applications for credit. By reviewing various factors such as income, length of employment, how long you've lived at one residence, previous credit history, amount of outstanding debts, stability of your checking and savings accounts, number of dependents and so on, creditors can determine, to a certain degree, whether you will repay the amount borrowed over a certain period of time.
Collateral you are purchasing. If you fail to make payments on collateral purchased with credit, it's easier for a creditor to repossess items like furniture and appliances than to foreclose on a home. The interest rate for installment debt is much higher than the interest rate for mortgage loan debt and affords the creditor the opportunity to assume a higher level of overall risk in the event of nonpayment. Therefore, credit may be extended to even those with a questionable ability to pay when it comes to purchases like refrigerators and stereo systems.

Where a home has been posted as collateral for a loan, the foreclosure process can be costly and time-consuming. The lender assumes a greater amount of risk at a lower interest rate. Therefore, the lender is going to evaluate you and your credit history more carefully when you're trying to buy a house. Unfortunately, this is where most people learn their first real credit lesson - when credit is really important - because they are stunned and surprised when denied, based on their credit card use.

HOW CAN I ESTABLISH GOOD CREDIT HISTORY?

Establishing a good credit history is actually pretty simple:

Open a checking and savings account. Maintain your checking account by keeping enough money in it to cover all outstanding checks. Make regular deposits in your savings account to establish a history of savings.
Apply for credit gradually once your checking and savings accounts are in good working order and if you believe your budget can handle the financial load - through retail store credit cards, a major bank credit card or a gasoline credit card.
Don't apply for more credit that you can manage. A credit card establishes you with credit as soon as your application has been approved.
Make regular payments for the products or services you purchase with credit. Every time you make a payment as agreed to a creditor, you are building a favorable credit history. If you consistently repay your debts, your positive credit history will build.

HOW CAN I PROTECT MY GOOD CREDIT STANDING ONCE I HAVE IT?

Failure to repay the credit extended as agreed is where most people get in trouble.

Late payments affect your credit history. It doesn't matter that the credit card balance is only $5, or that the payment is only one day late, or that you pay the late fee. Failure to pay on time will put a black mark on your credit history, a black mark that will last for a year or more.
Minimum payments are another trouble spot. While making the minimum payment - generally about 2% to 3% of the outstanding balance - is acceptable, it does very little to reduce your outstanding debt.

Say, for example, you buy a $2,500 computer using a credit card, and make the minimum payment of $50 per month. Assuming you don't make any additional purchases with that credit card, how long do you think it will take you to pay for that computer? Would you believe EIGHT YEARS? It's true. By the time you've paid for the computer, you'll probably be using it as a doorstop.

Don't assume you have a great credit history just because of the continuous offers for revolving credit you receive in the mail. Make sure that you have credit when you need it for a mortgage or a personal loan. You don't want to be denied due to poor history or overextension of credit cards. What is more valuable - a house or a sweater? It's up to you.
Use credit effectively. Determine how much credit you can comfortably afford - 15% to 20% of your take-home pay is a good rule of thumb. Develop a household budget - a detailed list of your income and expenses. If you find that you cannot afford credit purchases, considering your current income and expenses, you should still concentrate on establishing good credit, but continue making most of your purchases using cash. Credit purchases should generally be limited to those that can be paid off at the end of the month. Larger purchases should be evaluated based on need; a usable life (remember the computer) and a payment schedule established to assure that the debt is paid off quickly.

WHAT TYPES OF THINGS ARE LISTED ON A CREDIT REPORT?

The credit report just provides information. It's up to the creditor to use this information to determine whether you are a good or bad credit risk. Each creditor will analyze the information differently when deciding whether to extend credit to you. The credit report typically includes four types of information:

Identifying information: your name, nicknames, current and previous addresses, Social Security number, year of birth, current and previous employers, and if applicable, your spouse's name.
Credit information: the credit accounts you have with banks, retailers, credit card issuers and other lenders. For each account, your credit report will list the type of loan (revolving credit, student loan, mortgage, etc.), the date you opened the account, your credit limit or loan amount, the account balance, and your payment pattern during the past two years. The report also states whether anyone else besides you (your spouse or cosigner, for example) is responsible for paying the account.
Public record information: state and county court records related to bankruptcies, tax liens or monetary judgments. In some states, credit reports list overdue child support payments.
Inquiries: the names of all credit grantors and potential employers who obtained a copy of your credit report for any reason. The inquiries section of your report contains a list of anyone who accessed your report for up to two years. (Federal law requires the two-year retention for employer inquiries, but only six months for credit grantor inquiries.) These time periods protect you as a consumer or job applicant.

Almost as important as what is in your credit report is what isn't: no information about your race, religious preference, medical history, personal lifestyle, personal background, political preference or criminal record.

WHAT DOES MY CREDIT REPORT TELL LENDERS ABOUT ME?

To obtain a copy of your credit report, contact any of these credit-reporting agencies:

Experian
Trans Union LLC
Equifax

Experian charges an $8.50, with the exception of the following states and the District of Columbia: California, Connecticut, Hawaii, Minnesota, Nebraska, New Mexico, New York, South Carolina, Texas and West Virginia. Call for the applicable charges for these locations.
To request a copy of your credit report, you can either submit a neatly printed, written request or order online. You will need to provide the following information:

EXPERIAN INFORMATION:
Experian
National Consumer Assistance Center
P.O. Box 2002
Allen, TX 75013-2104
www.experian.com · 1-888-397-3742

your first name, middle initial and last name (including Sr., Jr., III, etc., if applicable)
spouse's first name (if applicable)
current address and addresses for the last five years (include apartment numbers and zip codes)
if you've moved in the last six months, you will need to submit a written request to obtain your credit report and include copies of two proofs of residency that reflect your name and current address. These documents can be in the form of a valid driver's license, telephone bill, utility bills or bank statements.
Social Security number (include spouse's, if applicable)
year of birth

Trans Union charges an $8.50 fee for an individual credit report for residents in most states. In the following states/territories fees vary: California, Connecticut, Maine, Minnesota and the Virgin Islands. Call or check the Trans Union website for the applicable fees. Credit reports for residents in the states of Colorado, Georgia, Maryland, New Jersey and Vermont are provided at no charge; however, these reports cannot be ordered through the Internet. Residents in these states must submit their requests in writing or over the phone. You will need to provide the following information:

TRANSUNION
TransUnion
Consumer Relations
P.O. Box 1000
Chester, PA 19022
www.transunion.com · (440) 779-7200

your first name, middle initial and last name (including Sr., Jr., III, etc., if applicable)
spouse's first name (if applicable)
current address (if at current address for less than 2 years, list previous addresses)
Social Security number (include spouse's, if applicable)
date of birth
phone number
sign the request if written (spouse must sign, if applicable

Equifax charges $8 for each credit report requested in all states except Maine, Maryland and Vermont. Call 1-866-233-3778 or refer to the Equifax website for the applicable fees for these states. You can order a copy of your credit report over the Internet, submit written requests via fax or mail, or make a request over the phone, under certain circumstances. You will need to provide the following information:

EQUIFAX INFORMATION:
Equifax
P.O. Box 740256
Atlanta, GA 30348-5496
www.equifax.com
Fax: 1-888-677-5577 · Phone: 1-800-356-4715

your first name, middle initial and last name (including Sr., Jr., III, etc., if applicable)
spouse's first name (if applicable)
current address and addresses for the last five years
Social Security number (include spouse's, if applicable)
date of birth
day and evening phone numbers
Phone requests are accessible by touch tone phone - enter your address - social - zip code, press the digit stating you were denied credit in the last 30 days.

HOW CAN I FIX ERRORS ON MY CREDIT REPORT?

To correct any errors on your credit report from a credit card company, you have to write to the credit card company and explain the error. If the creditor agrees that an error has occurred, the credit card company must report and correct the error to the credit-reporting agency.

Be sure to choose a reputable non-profit credit counseling organization such as:

Consumer Credit Counseling Service
1-800-388-CCCS (2227)

The good news is that if you work to reduce your debt by regularly making payments on time for at least a year, then your credit history will be much better looking to future creditors. Although establishing good credit may take a year, once you start making on-time payments, your credit history begins to improve immediately.

real estate glossary

(Alphabetized by AvoidForeclosure.com for your convenience)

acceleration clause: A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
acceptance: An offeree's consent to enter into a contract and be bound by the terms of the offer.
additional principal payment: A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
adjustable-rate mortgage (ARM): A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.
adjusted basis: The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
adjustment date: The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
adjustment period: The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
administrator: A person appointed by a probate court to administer the estate of a person who died intestate.
affordability analysis: A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.
amenity: A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.
amortization: The gradual repayment of a mortgage loan by installments.
amortization schedule: A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
amortization term: The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
amortize: To repay a mortgage with regular payments that cover both principal and interest.
annual mortgagor statement: A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
annual percentage rate (APR): The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
annuity: An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.
application: A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.
appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection.
appraised value: An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
appraiser: A person qualified by education, training, and experience to estimate the value of real property and personal property.
appreciation: An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
assessed value: The valuation placed on property by a public tax assessor for purposes of taxation.
assessment: The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
assessment rolls: The public record of taxable property.
assessor: A public official who establishes the value of a property for taxation purposes.
asset: Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
assignment: The transfer of a mortgage from one person to another.
assumable mortgage: A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
assumption: The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.
assumption clause: A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
assumption fee: The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
attorney-in-fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.
balance sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.
balloon mortgage: A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
balloon payment: The final lump sum payment that is made at the maturity date of a balloon mortgage.
bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
before-tax income: Income before taxes are deducted.
beneficiary: The person designated to receive the income from a trust, estate, or a deed of trust.
bequeath: To transfer personal property through a will.
betterment: An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.
bill of sale: A written document that transfers title to personal property.
binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
biweekly payment mortgage: A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
blanket insurance policy: A single policy that covers more than one piece of property (or more than one person).
blanket mortgage: The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
bona fide: In good faith, without fraud.
bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.
breach: A violation of any legal obligation.
bridge loan: A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."
broker: A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See mortgage broker.
budget: A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
budget category: A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary" is a typical income category.
building code: Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
buydown account: An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.
buydown mortgage: A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.
call option: A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
cap: A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease. See lifetime payment cap, periodic payment cap, and periodic rate cap.
capital: (1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.
capital expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.
capital improvement: Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.
cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
certificate of deposit: A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.
certificate of deposit index: An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. See adjustable-rate mortgage (ARM).
Certificate of Eligibility: A document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.
Certificate of Reasonable Value (CRV): A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
certificate of title: A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
chain of title: The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
change frequency: The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
chattel: Another name for personal property.
clear title: A title that is free of liens or legal questions as to ownership of the property.
closing: A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."
closing cost item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.
closing costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.
closing statement: See HUD-1 statement.
cloud on title: Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.
coinsurance: A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.
coinsurance clause: A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.
collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
collection: The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
co-maker: A person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, because the borrower and the co-maker are equally responsible for the repayment. See endorser.
commission: The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.
commitment letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."
common area assessments: Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.
common areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
common law: An unwritten body of law based on general custom in England and used to an extent in the United States.
Community Home Improvement Mortgage Loan®: An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs. The repair work can account for as much as 30 percent of the appraised value.
Community Land Trust Mortgage Loan: An alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.
community property: In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
Community Seconds®: An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
comparables: An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
compound interest: Interest paid on the original principal balance and on the accrued and unpaid interest.
condemnation: The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.
condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.
condominium conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
condominium hotel: A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.
construction loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
consumer reporting agency (or bureau): An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
contract: An oral or written agreement to do or not to do a certain thing.
conventional mortgage: A mortgage that is not insured or guaranteed by the federal government. Contrast with government mortgage.
convertibility clause: A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified time frames after loan origination.
convertible ARM: An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
cooperative (co-op): A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
cooperative corporation: A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.
cooperative mortgages: Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.
cooperative project: A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.
corporate relocation: Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.
cost of funds index (COFI): An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).
covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
credit history: A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
credit life insurance: A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.
creditor: A person to whom money is owed.
credit report: A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.
credit repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
debt: An amount owed to another. See installment loan and revolving liability.
deed: The legal document conveying title to a property.
deed-in-lieu: A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a "voluntary conveyance."
deed of trust: The document used in some states instead of a mortgage; title is conveyed to a trustee.
default: Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
delinquency: Failure to make mortgage payments when mortgage payments are due.
deposit: A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit.
depreciation: A decline in the value of property; the opposite of appreciation.
discount points: See point.
dower: The rights of a widow in the property of her husband at his death.
down payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
due-on-sale provision: A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
due-on-transfer provision: This terminology is usually used for second mortgages. See due-on-sale provision.
earnest money deposit: A deposit made by the potential home buyer to show that he or she is serious about buying the house.
easement: A right of way giving persons other than the owner access to or over a property.
effective age: An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
effective gross income: Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
eminent domain: The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
Employer-assisted housing: A special Fannie Mae housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.
encroachment: An improvement that intrudes illegally on another's property.
encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.
endorser: A person who signs ownership interest over to another party. Contrast with co-maker.
Equal Credit Opportunity Act (ECOA): A federal law that 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.
equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
escrow account: The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.
escrow analysis: The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.
escrow collections: Funds collected by the servicer and set aside in an escrow account to pay the borrower's property taxes, mortgage insurance, and hazard insurance.
escrow disbursements: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
escrow payment: The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
eviction: The lawful expulsion of an occupant from real property.
examination of title: The report on the title of a property from the public records or an abstract of the title.
exclusive listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.
executor: A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.
Fair Credit Reporting Act: A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
fair market value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Fannie Mae: Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages. Over the past 30 years, Fannie Mae has provided nearly $2.5 trillion of mortgage financing for over 30 million families.
Fannie Mae's Community Home Buyer's ProgramSM: An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
Fannie 97®: A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with either a 25- or 30-year term. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and is designed to expand home ownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home-buyer education session to qualify for a Fannie 97 mortgage.
Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
fee simple: The greatest possible interest a person can have in real estate.
fee simple estate: An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA coinsured mortgage: A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.
FHA mortgage: A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
finder's fee: A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
firm commitment: A lender's agreement to make a loan to a specific borrower on a specific property.
first mortgage: A mortgage that is the primary lien against a property.
fixed installment: The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.
fixed-rate mortgage (FRM): A mortgage in which the interest rate does not change during the entire term of the loan.
fixture: Personal property that becomes real property when attached in a permanent manner to real estate.
flood insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
foreclosure: 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.
forfeiture: The loss of money, property, rights, or privileges due to a breach of legal obligation.
401(k)/403(b): An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.
401(k)/403(b) loan: Some administrators of 401(k)/403(b) plans allow for loans against the monies you have accumulated in these plans -- monies must be repaid to avoid serious penalty charges.
fully amortized ARM: An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
government mortgage: 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 mortgage.
Government National Mortgage Association: 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.
grantee: The person to whom an interest in real property is conveyed.
grantor: The person conveying an interest in real property.
ground rent: 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.
group home: 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.
growing-equity mortgage (GEM): 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.
guarantee mortgage: A mortgage that is guaranteed by a third party.
guaranteed loan: Also known as a government mortgage.
hazard insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Home Equity Conversion Mortgage (HECM): 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.
home equity line of credit: 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.
home inspection: 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.
HomeKeeperSM: Fannie Mae's adjustable-rate conventional reverse mortgage, which allows older homeowners to borrow against the value of their homes and receive the proceeds according to the payment option they select. The amount available is based on the number of borrowers and their ages and the adjusted property value. Anyone 62 years or older who either owns his or her own home free and clear or has very low mortgage debt is eligible.
homeowners' association: 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: An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
homeowner's warranty (HOW): 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.
HomeStyle® Mortgage Loan: A mortgage that enables eligible borrowers to obtain financing to remodel, repair, and upgrade their existing homes or homes that they are purchasing. The financing takes the form of a conventional second mortgage or a Federal Housing Administration (FHA) Section 203(k) first mortgage.
housing expense ratio: The percentage of gross monthly income that goes toward paying housing expenses.
HUD median income: Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
HUD-1 statement: 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."
income property: Real estate developed or improved to produce income.
index: 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.
in-file credit report: An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
inflation: 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.
initial interest rate: 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."
installment: The regular periodic payment that a borrower agrees to make to a lender.
installment loan: Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.
insurable title: A property title that a title insurance company agrees to insure against defects and disputes.
insurance: 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.
insurance binder: 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.
insured mortgage: 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.
interest: The fee charged for borrowing money.
interest accrual rate: 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.
interest rate: The rate of interest in effect for the monthly payment due.
interest rate buydown plan: 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.
interest rate ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
interest rate floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
investment property: A property that is not occupied by the owner.
IRA (Individual Retirement Account): 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.
joint tenancy: A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.
judgment: A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
judgment lien: A lien on the property of a debtor resulting from the decree of a court.
judicial foreclosure: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
jumbo loan: A loan that exceeds Fannie Mae's legislated mortgage amount limits. Also called a nonconforming loan.
late charge: The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
lease: A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.
leasehold estate: A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
lease-purchase mortgage loan: An alternative financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.
legal description: A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
liabilities: A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
liability insurance: Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
lien: A legal claim against a property that must be paid off when the property is sold.
lifetime payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. See cap.
lifetime rate cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.
line of credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit.
liquid asset: A cash asset or an asset that is easily converted into cash.
loan: A sum of borrowed money (principal) that is generally repaid with interest.
loan commitment: See commitment letter.
loan origination: The process by which a mortgage lender brings into existence a mortgage secured by real property.
loan-to-value (LTV) percentage: The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.
lock-in: A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
lock-in period: The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.
margin: For an adjustable-rate mortgage (ARM), the amount that is added to the index to establish the interest rate on each adjustment date, subject to any limitations on the interest rate change.
master association: A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.
maturity: The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
maximum financing: A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.
merged credit report: A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.
modification: The act of changing any of the terms of the mortgage.
money market account: A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.
money market fund: A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.
monthly fixed installment: That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.
monthly payment mortgage: A mortgage that requires payments to reduce the debt once a month.
mortgage: A legal document that pledges a property to the lender as security for payment of a debt.
mortgage banker: A company that originates mortgages exclusively for resale in the secondary mortgage market.
mortgage broker: An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.
mortgagee: The lender in a mortgage agreement.
mortgage insurance: A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan. See private mortgage insurance (MI).
mortgage insurance premium (MIP): The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
mortgage life insurance: A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.
mortgagor: The borrower in a mortgage agreement.
multi dwelling units: Properties that provide separate housing units for more than one family, although they secure only a single mortgage.
multifamily mortgage: A residential mortgage on a dwelling that is designed to house more than four families, such as a high-rise apartment complex.
negative amortization: A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
net cash flow: The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.
net worth: The value of all of a person's assets, including cash, minus all liabilities.
no cash-out refinance: A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).
nonliquid asset: An asset that cannot easily be converted into cash.
note: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
note rate: The interest rate stated on a mortgage note.
notice of default: A formal written notice to a borrower that a default has occurred and that legal action may be taken.
original principal balance: The total amount of principal owed on a mortgage before any payments are made.
origination fee: A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
owner financing: A property purchase transaction in which the property seller provides all or part of the financing.
partial payment: A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
payment change date: The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.
periodic payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period. See cap.
periodic rate cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be. See cap.
personal property: Any property that is not real property.
PITI: See principal, interest, taxes, and insurance (PITI).
PITI reserves: A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
planned unit development: See PUD.
point: A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
power of attorney: A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
prearranged refinancing agreement: A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.
preforeclosure sale: A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor.
qualifying ratios: Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
quitclaim deed: A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
radon: A radioactive gas found in some homes that in sufficient concentrations can cause health problems.
rate-improvement mortgage: A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.
rate lock: A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. See lock-in.
real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Settlement Procedures Act (RESPA): A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
real property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
Realtor®: A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors®.
recission: The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.
recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
recording: The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
refinance transaction: The process of paying off one loan with the proceeds from a new loan using the same property as security.
rehabilitation mortgage: A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an existing property.
remaining balance: The amount of principal that has not yet been repaid. See principal balance.
remaining term: The original amortization term minus the number of payments that have been applied.
rent loss insurance: Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
rent with option to buy: See lease-purchase mortgage loan.
repayment plan: An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."
replacement reserve fund: A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
revolving liability: A credit arrangement, such as a credit card, that allows a customer to borrow against a preapproved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
right of first refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
right of ingress or egress: The right to enter or leave designated premises.
sale-leaseback: A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.
second mortgage: A mortgage that has a lien position subordinate to the first mortgage.
secondary mortgage market: The buying and selling of existing mortgages.
secured loan: A loan that is backed by collateral.
security: The property that will be pledged as collateral for a loan.
seller take-back: An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See owner financing.
servicer: An organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
servicing: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.
settlement: See closing.
settlement sheet: See HUD-1 statement.
special deposit account: An account that is established for rehabilitation mortgages to hold the funds needed for the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.
standard payment calculation: The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
step-rate mortgage: A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or lease.
subordinate financing: Any mortgage or other lien that has a priority that is lower than that of the first mortgage.
subsidized second mortgage: An alternative financing option known as the Community Seconds® mortgage for low- and moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
survey: A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
sweat equity: Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
tenancy by the entirety: A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.
tenancy in common: A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.
tenant-stockholder: The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.
third-party origination: A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market. See mortgage broker.
title: A legal document evidencing a person's right to or ownership of a property.
title company: A company that specializes in examining and insuring titles to real estate.
title insurance: Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
title search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
total expense ratio: Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.
trade equity: Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased.
transfer of ownership: Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an inter vivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.
transfer tax: State or local tax payable when title passes from one owner to another.
Treasury index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. See adjustable-rate mortgage (ARM).
Truth-in-Lending: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
two-step mortgage: An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
two- to four-family property: A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
trustee: A fiduciary who holds or controls property for the benefit of another.
underwriting: The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
unsecured loan: A loan that is not backed by collateral.
VA mortgage: A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.
vested: Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Department of Veterans Affairs (VA): An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
what-if analysis: An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.
what-if scenario: A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.
wraparound mortgage: A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

Foreclosure Facts

the process

We will walk you through a simple step-by-step process that will provide everything necessary for us to resolve your defaulted loan situation. We provide you with all the information to help you build your "complete" loan resolution package that we will forward to your loan servicer for approval. If you fail to provide all necessary documents, you will not be approved. We will guide you and assist you in preparing the necessary supporting documents required by your lender. Should you attempt this on your own, expect to spend 15-25 hours to duplicate what we can do together in 30-45 minutes. We know what it takes to succeed. For each suggested component you choose to eliminate, your chances of keeping your home grow slimmer. Let AvoidForeclosure.com provide this service for you and considerably increase your chance for keeping your home.

step by step process

Figure out why you are in default and how much you may owe.
Complete your financial analysis statement to see where your money goes and what's available.
Send fax to order payoff and re-instatement figures from lender / attorney.
Gather all your supporting documents - payroll, bank statements, hardship letter. We will assist you in preparing your letter if you need help.
Fax the necessary documents to AvoidForeclosure.com to complete your resolution package.
We will submit the package to your lender and negotiate on your behalf.
We will call your lender daily to speed your workout approval.
We will contact you to let you know the programs for which you will qualify.

tips for avoiding foreclosure

Don't ignore the problem
The further behind you become, the harder it will be to reinstate your loan and the more likely you will lose your home.
Contact your lender as soon as you realize that you have a problem.
Lenders do not want your house. They have options to help borrowers through difficult financial times.
Open and respond to mail from your lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later, mail may include important notices of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
Know your mortgage rights.
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state (since every state is different).
Prioritize your spending.
After healthcare, keeping your home should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses - cable TV, memberships and entertainment that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
Contact a loss mitigation company
If, for some unforeseen circumstance, you are unable to make you mortgage payment and are in jeopardy of losing your home, contact a reputable loss mitigation company to help you by negotiating with your lender to resolve your situation. AvoidForecloure.com is here to help.

items you will need to provide to your loss mitigation company

You will need to assemble the following information in a package very similar to what you provided when you obtained your loan. Once you have that information, your AvoidForeclosure.com loss mitigation specialist will organize it and assemble it in a package to submit to your lender.

For each borrower, you will need:

Your most recent mortgage statement & account number
Your hardship statement explaining the circumstances regarding your defaulted loan.
Your completed Financial Worksheet
Your current pay stubs for last two months or a year-to-date profit/loss statement.
Your past two months' bank statements. Include all pages and all accounts.
The "real" dollar amount you have available "today" and 15 days from now to apply toward your mortgage delinquency.
Your credit card, debit card, or PayPal account that will allow you to order necessary supporting documents or services that will expedite the process.
Your email address where you can receive your approval package
A fax number where you can send and receive documents.
A photocopy of your Social Security card and photo ID, preferably your driver license.
Your after hours telephone number and an alternate number
If you absolutely can't save your home, we will provide other resolution options
We will give you tips of how to write a hardship letter, which your mortgage company will require, along with your other documents listed above.

Once you decide to contact Avoid Foreclosure.com, you should have your necessary documents together to help make the process go smoothly.

how the foreclosure process works

AvoidForeclosure.com can help you:

Avoid foreclosure
Transfer overdue payments to the end of the loan
Lower your monthly payment
Keep your home

Foreclosure is the extinguishment of ownership and rights over a property in order to sell it for the purpose of paying a debt. For this to happen, the following must be true:

The debt must be collateralized by the property to be sold.
The debt must be in default. This means payments are not up to date.
The creditor must fulfill the legal requirements of the state where the property is located.

Contrary to common homeowner belief, the bank does not own the home. Unlike an auto or boat loan (where the bank's name is on the title), real estate is owned by the borrower. The property is collateral to the loan. "Foreclosure" is not "repossession". Foreclosure does not happen immediately after an owner is late on the mortgage payment. The foreclosing creditor must take specific legal steps. Each state has different laws governing the foreclosure process.

Foreclosure is the culminating event of a legal process. This is the foreclosure process. A property is not foreclosed until it is sold at auction in accordance with the state's foreclosure process. That "the lender is foreclosing" or that a "property is in foreclosure" really means that the lender has initiated and is proceeding through the legal process to foreclose a property.

Typically, as soon as there is a default, the lender initiates a collection process. This is known as the collections period. This is the best moment for a homeowner in default to reinstate and bring the payments up to date. The length of this collections period varies with each lender. However, generally speaking, if after three months the homeowner has not resolved the situation, the lender takes more drastic steps.

The foreclosure process starts if the creditor fails to collect. The foreclosure process always starts with a legal notice to the owner stating that if the loan is not paid or reinstated within a period of time, the property will be sold at auction in order to pay the debt. This period is known as pre-foreclosure. The length of the pre-foreclosure stage depends on the state's law. The owner has until the foreclosure date to resolve the default. Solutions for resolving the default range from reinstatement (bringing the loan current by catching up on past due payments), refinancing, paying off the debt in full, or the selling the property to another party in order to satisfy the debt. If none of the above happens by the auction date, the property will be sold to the highest bidder. Foreclosure is a short and specific event. The proceeds from the debt are used to pay the creditors. Anything left belongs to the owner of the foreclosed property.

Troublesome foreclosures happen when properties are over-mortgaged. In other words, the amount of money owed exceeds the value of the property. In these situations, the only way for the property owner to get out of debt (other than paying the debt) is for a short sale to happen prior to foreclosure.

Over-mortgaged properties are common. This usually occurs when second, third and sometimes fourth mortgages are taken out on a property. Liens are another reason. 100% financing is another source of this problem. 100% financed properties rapidly become over-mortgaged if there is a default, because if the owner stops paying, the debt on the property will usually increase faster than the property's appreciation. In addition, once the owner is in default, usually taxes, homeowner association fees and even utilities get neglected. Furthermore, and very commonly, maintenance is deferred and the property quickly starts becoming less valuable.

Sometimes accumulated debt can exceed 130% of the property value. In a pre-foreclosure situation, these secondary mortgages are at the mercy of the lender who is in first position. They worry about the chances of recovering their money if the first mortgage holder forecloses and the property sells at the auction for a low amount. The subordinate lenders are often willing to negotiate discount prior to foreclosure in order to mitigate their losses.

Knowing the foreclosure process is a critical component in pre-foreclosure investing. If you ability to repay your mortgage loan is compromised because you owe much more than your home is worth, sometimes a short sale is your best option.

what is a short sale?

A short sale is the sale of a property, with the authorization of the creditors, for less than what is owed on it. Short sales are done all the time. Whether it is the forgiveness of debt owed by a nation or an individual, it simply means that someone is willing to settle for less than what they originally anticipated. It's part of business. All lenders know that they will not win all the time.

Risk and loss of capital is an anticipated cost in the lending industry. Changing economic conditions, conflicts, and Mother Nature are among some of the many causes of unforeseen situations that turn good lending contracts into bad. In the context of foreclosure on secured assets, a short sale occurs when debtors agree to settle their liens for a known amount of money as opposed to taking a chance at auction. Auction prices are often unpredictable and usually greatly discounted.

Many lenders are willing to mitigate further risk of loss by making deals before auction. Bad debt is sold by lenders all the time. For instance, there is a huge market for unsecured credit card debt that is sold for pennies on the dollar to collection agencies. That's self-effectuated short sales. Lenders are more than happy to discuss resolution of aged debt. Their business is to lend capital, not dispose of foreclosed assets.

how can everyone win?

Bad feelings are often associated with respect to people making money over the misfortune of others. There are countless scams in the finance industry that prey on vulnerable people. These scammers rush in and get out quickly. They don't build long-term viable businesses that are good for a community. Contrary to what many think, there does not have to be a big loser in order to make money in the foreclosure business. It is a matter of choice. A valuable service can be provided that benefits both the property owner and lenders. People with predator mentality do not last long in this business.

Undoubtedly, the issues leading up to foreclosure are stressful and potentially volatile for all parties. Unforeseen underlying problems often exist. A professional in the foreclosure business, such as AvoidForeclosure.com, mediates a settlement that all parties can agree on. In a short sale, the lender has agreed to settle the matter without further claims, and the property owner clears their obligations without the lingering negative effects of a foreclosure and subsequent garnishment of additional monies that auction did not bring. Your professional loss mitigation company will handle all the negotiating with your mortgage company for you and will help greatly to eliminate your stress.

Call AvoidForeclosure.com today to help you keep your home!

available programs

The federal government and the mortgage industry established loss mitigation programs in order to help prevent home foreclosures. There are several programs available, and each lender has its own policies regarding the use of these programs. In addition, each program has its own complexities and rules that must be followed.

Because of our extensive experience, as well as our close working relationships with mortgage lenders, we are able to help you successfully navigate through those complexities and rules, which may otherwise be overwhelming for you as you work to save your home.

First, we perform a thorough assessment of your personal finances and analyze your lender's loss mitigation policies. Then, our professional loss mitigators will negotiate with your lender to get you the best possible solution to your home foreclosure problem. We can help you save your home through any one of these loss mitigation options:

REPAYMENT PLAN
A great many people have short-term financial problems and may have no choice but to miss a payment or two on their mortgage. Once that short-term problem is over, they can go back to making their mortgage payment, but they can't come up with enough money to also pay the missed payments.

This is the most common mortgage problem, and a repayment plan is the most common solution. Your lender and you, with our help, set up a repayment plan whereby, in addition to your normal mortgage payment, you also pay a bit of what you owe on the missing payments, until you are caught up.
FOREBEARANCE PLAN
If you can show your lender that you will be able to pay your mortgage loan after a certain length of time, you may qualify for a special forbearance. Your lender will allow you to make reduced payments for a certain amount of time, or indeed, no payments at all. However, during this time period, interest on the loan will continue to accrue.

The special forbearance is often combined with a repayment plan.
LOAN MODIFICATION
A Loan Modification is "a permanent change in one or more of the terms of a mortgagor's loan, which allows the loan to be reinstated and results in a payment the mortgagor can afford. In other words, your interest rate can be lowered, your remaining balance re-amortized and/or the current term of your loan extended in order to reduce your monthly payment.

There are costs and fees associated with a modification that you will be responsible for, and for which you will have to make an immediate payment.

In order to qualify for a Loan Modification, all property taxes must be current, or you must be participating in an approved payment plan with your taxing authority. If you have any additional liens or mortgages with other lenders - they must agree to be subordinate to the first mortgage.
VA LOAN MODIFICATION / REFUNDING
The VA Loan is a program set up by the Veterans Administration to help active duty and retired military personnel purchase homes. With a loan through the VA, the home is financed completely, so that you don't have to pay mortgage insurance, and they also set limits on the types of fees that can be charged by your lender. If you're having temporary problems, it is possible to do a Loan Modification on a VA loan.

If your lender will not do a loan modification, but intends to foreclose, the VA also has an option, called "re-funding" - where they will buy your loan from your original lender and re-amortize the loan so you can afford to make the new payments. This is; however, entirely up to their discretion.
PARTIAL CLAIM
If you do not qualify for a repayment plan or loan modification, you may still be able to obtain a partial claim - if your mortgage is through the Federal Housing Authority (FHA).

With a partial claim, you are taking out an interest-free second mortgage through HUD to assist you in paying the first mortgage.

As the HUD website puts it: Under the Partial Claim option, a mortgagee will advance funds on behalf of a mortgagor in an amount necessary to reinstate a delinquent loan (not to exceed the equivalent of 12 months PITI [principle, interest, taxes and insurance]). The mortgagor will execute a promissory note and subordinate mortgage payable to HUD.

FHA mortgage holders may qualify for a partial claim if their loan payments are more than 4 months, but no more than 12 months overdue, and they have the proven financial stability to begin meeting their payments.
DEED IN LIEU OF FORECLOSURE
If you have had your home listed with a real estate agent for at least 30 days, with no success in selling it and if it is in sellable condition, and if there are no claims or liens against it - other than your mortgage, of course, you may be eligible for a "deed in lieu of foreclosure."

What this means is that you transfer the deed of your house to your lender, so they do not have to foreclose on the property. They obtain ownership of the property immediately, and the remainder of your debt is forgiven. Note that this program does not save your house.
SHORT PAYOFF
A "short payoff," also known as a "short sale," or a "pre-foreclosure sale," is really the option of last resort, and requirements to have this occur are very stringent. Loss mitigation companies are not authorized to approve such loans - only the lender can do it.

It is defined as "A sale in which a lender allows the property securing a mortgage or deed of trust loan to be sold for less than the existing loan balance, due to factors such as the borrower's financial circumstances, the property's physical condition and local real estate market conditions." The money thus gained from the sale belongs to the lender. The homeowner cannot benefit financially from a short sale.

To qualify for a "short sale," you must have suffered a long term financial hardship - for example, you or an immediate family member have suffered a catastrophic illness, your employer has transferred you out of the area and you're unable to sell or rent the property, you've suffered a disabling injury that precludes you from ever working again, and so on. There are several reasons that lenders will allow a "short sale."

Complete the online form or call us today at 1-888-AVOID-IT to find out which program will work best for you.

Tips for Avoiding Foreclosure

Don't ignore the problem
The further behind you become, the harder it will be to reinstate your loan and the more likely you will lose your home.
Contact your lender as soon as you realize that you have a problem.
Lenders do not want your house. They have options to help borrowers through difficult financial times.
Open and respond to mail from your lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later, mail may include important notices of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
Know your mortgage rights.
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state (since every state is different).
Prioritize your spending.
After healthcare, keeping your home should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses - cable TV, memberships and entertainment that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
Contact a loss mitigation company
If, for some unforeseen circumstance, you are unable to make you mortgage payment and are in jeopardy of losing your home, contact a reputable loss mitigation company to help you by negotiating with your lender to resolve your situation. AvoidForecloure.com is here to help.