The initial stage in which a lender evaluates a borrower's financial capability to approve a specific loan amount, providing prospective homebuyers confidence and an advantage during the home buying process.
A pre-foreclosure sale is a transaction in which a third-party buyer purchases a property after the underlying mortgage has been posted for foreclosure but before the property has been repossessed by the lender or liquidated to pay the debt.
Prepaying a mortgage involves retiring the principal balance, either in full or partially, before the scheduled due date according to the mortgage contract. This action can release the borrower from future interest payments and may lead to early ownership of the property.
Prepayment Privilege refers to the right of a borrower to retire a loan before its maturity date without incurring any prepayment penalty. This feature provides borrowers with the flexibility to pay off loans faster, potentially saving on interest costs over the life of the loan.
Prequalifying is an essential step in the home-buying process. It helps buyers estimate the maximum home price they can afford based on their income and liquid assets. While prequalifying does not promise or commit specific financing, it provides an outline of potential affordability.
A loan typically used outside the United States, whose payments are adjusted according to the rate of inflation, making payments predictable in terms of real value.
The term 'Principal' in real estate can refer to the owner or user of the property, the client of an agent or broker, or the amount of money borrowed in a mortgage, excluding interest.
Principal and Interest Payment (P&I) refers to a periodic payment, usually made monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance, commonly seen with amortizing loans.
A prior lien is a legally enforceable claim or hold on a property that takes precedence over other liens. It is established before any subsequent liens and typically has higher priority in the event of default.
A Rate Lock secures a specified interest rate for a mortgage, assuring homebuyers or refinancers that their rate will not increase between the date of the agreement and the closing date of the loan, provided the borrower closes within the specified time frame and there are no changes to their application.
Recourse refers to the legal right of a lender to claim money from a borrower in the event of default, in addition to repossessing the property pledged as collateral.
The act of curing a default by paying off all overdue loan payments and applicable penalties before a lender can initiate foreclosure proceedings.
A Reduction Certificate is a document issued by a mortgage lender, acknowledging the sum due on the mortgage loan, and is crucial when mortgaged property is being sold and the buyer assumes the existing debt.
Refinancing replaces an old loan(s) with a new loan(s), potentially securing better terms, reduced payments, or accessing cash.
Refinancing refers to the process of replacing an existing mortgage with a new one, typically to secure better loan terms such as a lower interest rate or a different type of loan structure. Often abbreviated as 'refi,' this process involves paying off an old loan with a new loan, typically to take advantage of lower interest rates, different loan terms, or to switch from a variable-rate mortgage to a fixed-rate mortgage.
A Release Clause in a mortgage is a provision that allows the borrower to pay off a portion of the mortgage debt, thereby freeing a corresponding portion of the property from the mortgage lien. This is especially useful for subdivided properties or developments where individual parcels are intended to be sold separately.
A formal process that frees real estate from a mortgage or other lien, indicating that the debt has been fully paid off. This is crucial in ensuring that the property is clear of legal claims and can be sold or transferred without encumbrances.
The Remaining Term refers to the amount of time left before a loan or mortgage reaches its maturity date. It represents the period remaining for the borrower to fulfill the debt obligation according to the contractual agreement.
Resale proceeds refer to the amount a seller receives from the sale of a property after deducting transaction costs, outstanding mortgage, and applicable taxes. Measuring the net financial benefit, it is essential for homeowners and investors alike.
To retire a debt means to pay off the principal on a loan, thereby fulfilling the obligation under the loan contract, which can be done through regular payments or a lump sum. It is a significant financial milestone indicating that the borrower has met the terms laid out by the lender.
The right of redemption is a legal provision allowing a mortgagor to reclaim their property once they've satisfied debts before foreclosure is completed, thereby preventing loss of property ownership.
A seasoned loan refers to a loan that has a history of timely payments made over a period of time, making it more attractive to investors.
A Secured Loan is a loan that is backed by an asset or collateral, reducing the risk for the lender and often resulting in lower interest rates for the borrower. Examples include mortgages and auto loans.
Security in real estate is an important concept that can refer to collateral for a debt or a financial instrument that represents ownership rights. Proper understanding of security mechanisms protects investments and aids in ensuring lawful exchanges.
A security instrument is an interest in real estate that allows the property to be sold upon a default on the obligation for which the security interest was created.
Security interest refers to a legal claim on collateral that has been pledged, usually to obtain a loan or other obligation.
A self-amortizing mortgage, also known as a fully amortizing mortgage, is one that retires itself through regular principal and interest payments over the life of the loan. At the end of the term, the loan balance reaches zero, meaning it is completely paid off.
Seller financing, also known as owner financing, involves the seller providing a loan to the buyer to help facilitate the purchase of a property when traditional third-party financing may be expensive or unavailable. This method can be used to bridge the gap between the purchase price and what the buyer can immediately finance through other means.
A short sale is a financial arrangement where a mortgagor settles their outstanding mortgage debt with a payment that is less than the principal balance owed. This process helps avoid foreclosure and can be used as an alternative solution for struggling homeowners.
Special Servicing refers to a specialized department within a lender’s organization tasked with managing loans that are in default or are at risk of default. The primary objective is to resolve the issues, either through collection strategies or by reworking the loans to bring them back into good standing.
A specific lien is a claim on a specific piece of property used as collateral for a loan. This differs from a general lien, which is a claim on all assets of an individual.
A spreading agreement is a financial arrangement that extends collateral over multiple properties, often used to secure additional loans or consolidate existing loans.
Acquiring property with an existing mortgage, but the buyer does not become personally liable for the debt. Contrasted with assumption of mortgage.
A subprime loan is a type of loan offered to individuals with less-than-perfect credit ratings. These loans typically carry higher interest rates and stricter lending terms as compared to standard mortgage loans.
A tax and insurance escrow account, often required by mortgage lenders, is used to fund annual property tax assessments and hazard insurance premiums for the mortgaged property. This account is funded through monthly contributions by the mortgagor.
Title theory states are where the law splits the title of mortgaged property into legal title, held by the lender, and equitable title, held by the borrower. The borrower gains full title to the property upon retiring the mortgage debt. Lenders are granted a more immediate cure for a default than in lien theory states.
A Two-Step Mortgage, also known as a Hybrid Mortgage, combines an initial fixed interest rate period with an adjustable rate for the remainder of the loan term.
A real estate term used to describe a situation where the market value of a property is less than the outstanding balance on the mortgage. This condition can complicate selling the property or refinancing the mortgage.
Upfront charges refer to various fees and costs that a homeowner must pay at the closing of a real estate transaction. These include points, recording fees, mortgage title policy, appraisal fees, and credit report fees.
A VA Loan or Mortgage is a home loan guaranteed by the U.S. Department of Veterans Affairs (VA) typically available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves.
A variable interest rate is an interest rate on a loan or security that fluctuates over time because it is based on an underlying benchmark interest rate or index that changes periodically.
A Vendor’s Lien, also known as a Purchase Money Mortgage, gives the seller a security interest in the property sold until the buyer pays the full purchase price.
A voluntary lien is a claim on a property that the owner agrees to, commonly seen in the form of a mortgage. Unlike involuntary liens, which are imposed without the owner's consent, voluntary liens are willingly granted by property owners to secure debt.
WASTE refers to property abuse, destruction, or damage caused by a possessor that goes beyond normal wear and tear, affecting the rights and interests of other stakeholders in the property. This is often addressed in mortgage or lease contracts, as well as in life estates.
‘Without recourse’ is a term used in endorsing a note or bill to indicate that the holder cannot look to the debtor personally for payment if the debtor defaults. The recourse is only to the property involved. It is similar to a nonrecourse loan and is often used as a form of exculpation.
