Glossary

Glossary of Terms	W

Windermere Bellevue Commons Inc 1200 112th Ave NE B100 Bellevue, WA 98004 (425) 462-8000

Adjustable Rate Mortgage (ARM): A mortgage that permits the lender to adjust its interest rate periodically on the basis of movement in an index.
application: A form used to record information concerning a prospective mortgagor and the proposed security.
appraisal: A report of a property's estimated value created by a qualified person.
acquisition cost: The lesser of the finished appraised value or the acquisition price plus the rehabilitation cost.
caps: A provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease.
cash-out refinance: When your property value is worth more than the balance of your loan, you have equity. A cash-out refinance uses the equity you have established and allows for you to use it as money for various purposes. Many people take cash out of equity to consolidate debt, buy cars, and pay for purchases unrelated to real estate. There is a danger in this approach, however, since the loan may outlast the item that was purchased. It does make sense when the underlying asset has a similar expected life as the loan. Making improvements to your property or purchasing a second home are examples of when cash-out refinancing is advantageous
closing costs: Money paid by the borrower to effect the closing of a mortgage loan. This normally includes origination fee, title insurance, survey, attorney's fees, and such prepaid items as taxes and insurance escrow payments.
credit history: A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness.
discounted annual Metro pass: An annual one-zone metro pass will be discounted 25% and made available to borrowers at the time of loan closing. HomeStreet™ Bank, Fannie Mae, and PMI will subsidize the discounted pass for up to two years.
down payment: The difference between the sales price of real estate and the mortgage amount.
finished value: The lesser of the finished appraised value or the acquisition price plus the rehabilitation cost.
Fannie Mae (also FNMA — Federal National Mortgage Association): A tax-paying, public corporation created by the U.S. Congress to support the secondary mortgage market. It purchases and sells residential mortgages and guarantees mortgage-backed securities.
Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting. FHA does not lend money or plan or construct housing.
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.
interest: The rate quoted by the lender, on which the principal and interest of your mortgage payment is based. This is not the Annual Percentage Rate (APR).
investor: The holder of a mortgage or a permanent lender for whom the lending bank services the loan. Any person or institution that invests in mortgages.
Loan to Value (LTV): The relationship between the amount of the mortgage loan and the appraised value of the security expressed as a percentage of the appraised value.
lock-in period: The time period during which the lender has guaranteed an interest rate to a borrower.
mortgage insurance: Insurance that insures a mortgage lender against loss caused by a mortgagor's default. This insurance may cover part or all of the mortgage loan depending on the type of mortgage insurance. It is paid for by the borrower and provided by either private companies or the FHA.
no cash-out refinance: Once you have purchased a home and are making monthly payments, you are in the process of building equity. In an effort to save money, you may find that a refinance is in order. A no cash-out refinances your existing mortgage at a better rate, if rates have lowered since the time of your original mortgage, hence a lower payment. A no cash-out refinance allows for a loan amount that is no more than your current mortgage balance. Typically you are allowed the same loan to value ratios as purchases.
Purchase and Sale Agreement: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
qualifying guidelines: 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.
Rural Housing Service: An agency within the Department of Agriculture that operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers who want to buy property in rural areas and are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.
settlement agent: The person or organization having fiduciary responsibility to both the buyer and the seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out.
title report: An examination of public records, laws, and court decisions to disclose the past and current facts regarding ownership of real estate.
underwriting: The analysis of risk and matching that risk to an appropriate rate and term.
Veterans Administration (VA): An independent agency of the federal government created in 1930. The Serviceman's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.