Magnitude Realty
263 Ellmar Oaks Loop
San Jose CA, 95136
Phone: 408-238-2018
Fax 408-270-1003


Buy On Your Terms

MAGNITUDE REALTY is also a smart way to buy. We can help you buy any property on the market. MAGNITUDE REALTY puts you in the driver's seat, giving you tools to search for properties on your own and leaving the choice of when to involve one of our licensed real estate professionals up to you. Preview over thousands of properties around the country on my website.We'll even send you an email when a home matching your dream house comes on the market.
Rather than "selling" you on a property, I act as a professional consultant - answering questions, giving information on neighborhoods and schools, and putting you in touch with lenders who can help realize your goals.

1. Consult with a MAGNITUDE  REALTOR.
2. If you have not arranged for a lender already, an appointment will be scheduled with a lender where you will discuss loan programs and obtain pre-approval.
3. Develop a list of needs and wants with your MAGNITUDE REALTOR and then begin your home selection process.
4. Choose a home, then let your MAGNITUDE REALTOR begin the negotiation process on your behalf.
5. Great news! Your offer has been accepted! Your MAGNITUDE REALTOR will track the progress of your loan and make sure all contract details and/or contingencies are met on time.
6. Your MAGNITUDE REALTOR will attend any inspections with you and discuss results.
7. The Realtor will call with the time and place of your closing. You will also receive information regarding any money due at signing. The MAGNITUDE REALTOR will be at your closing to assist with any last minute concerns.
8. Congratulations on your new home! Once you're settled, a Home Services Specialist will contact you to offer assistance or recommendations for your new home's needs.
Every buyer of real estate has certain rights regarding the purchase of a property. The following is a summation of those rights:
1. You have the right to be represented by a real estate agent, exclusive or otherwise, to protect your best interests.
2. You have the right to purchase any/all properties that you choose, without being discriminated against by a Seller on the basis of your race, color, religion, handicap, familial status, or national origin.
3 . You have the right to complete disclosure of all property information, including, but not limited to, water supply, insulation, waste disposal system and hazardous materials.
4. You have the right to ask for information regarding the previous year's property taxes, and/or maintenance and fuel costs.
5. You have the right to receive a market price comparison analysis for the properties you wish to make offers on, prior to signing the offer.
6. You have the right to receive a copy of the Agreement of Sale, prior to signing it, to allow you time to have it reviewed by an attorney.
7. You have the right to choose the lender that will finance the property and to receive full disclosure from that lender regarding the type and term of the loan and the true cost of the loan.
8. You have the right to test and/or inspect the property's systems and to choose the person(s) to complete those tests or inspections.
9. You have the right to walk through the property one last time prior to closing to confirm it meets the conditions of the Agreement of Sale.
10. You have the right to use the homeowner's insurance company of your choice.
11. You have the right to purchase personal coverage title insurance from the company of your choice.
12. You have the right to purchase a home warranty program from the provider of your choice.
13. You have the right to review the Settlement Statement prior to closing.

The Facts
1. The Seller's motivation, current market conditions, types of financing, and average length of time for properties on the market are some of the key factors impacting the negotiating process. Please discuss these with the Broker/Agent prior to signing an offer, counter offer or withdrawal
2. Recognize the competitive nature of the real estate market and the likelihood of competing offers. Realize that in a competing offer situation, only one offer will result in a sale and one or more Buyers may be disappointed.
3. It is very important to accept that a Seller is not obligated to acknowledge, counter or reject an offer. In addition, a Seller may or may not inform other Buyers of the existence of an offer to obtain better terms or price.
4. Confirm with your Broker about how decisions will be made, negotiated or presented for offers, counter offers or withdrawals. Remember that decisions are made by the Buyer.
What's its Value:

Value means different things to different people, depending on how they are involved in a real estate transaction. The Buyer may have stars in their eyes and see the castle of their dreams when they look at the property they are purchasing.
Assessed Value
 The tax assessor will see a very different picture.
The assessor wants to create value equality among the town or city's citizens in order to fairly assess taxes and share the tax burden in an equitable manner amongst all property owners. Towns periodically undertake re-evaluations to update their assessed market valuations for all property. While based upon historical sales data, it does not always represent current market data. It is a useful tool in comparing the values of similar properties.
 Appraised Value
Appraisers must protect the interest of the lender and therefore must be more conservative in the value they place on a property. The appraised value is more typically based upon historic sales data and may or may not agree with market value.
Market Value
Market value is what a ready, willing, and able buyer pays to a ready, willing and able seller in a transaction with no undue influences. It is a negotiated value which changes relative to market conditions, supply of homes, demand, and seasonality in some cases. Market value is created by the buyer and seller. Too often, buyers and sellers have a notion some other factor determines market value, when in reality, those two parties determine market value.
The Importance Of Prequalification

Almost all homebuyers, especially first-time buyers, want to buy the home of their dreams. They are eager to rush out and see the best that is available. While their excitement and enthusiasm is understandable, it is not always beneficial. Viewing properties that are not within the buyer's correct price range is a waste of everyone's time, and always leads to disappointment. Lenders will never allow any buyer to purchase a property that they cannot afford. Affordability is based on many factors, not just income. Credit ratings must be looked at, how much debt a person has must be factored in, and not all mortgage programs have the same rate of interest. That's why pre-qualification is important. Once all factors have been examined, a lender will provide a buyer with a monthly payment amount that fits the buyer's means, and that saves time for everyone. Pre-approval is also very important. It is a preliminary commitment from the lender, that based on your application and the documentation you have provided, you stand a very good chance of getting final approval for your loan, pending appraisal. If you were a seller and two buyers made an offer on your property, would you choose the buyer who has a letter of pre-approval from a lender attached to their offer, or would you risk selling to the buyer who has not been pre-approved and is perhaps not even pre-qualified?

Communication Is Very Important
 Each Buyer should discuss the offer and negotiation process with their MAGNITUDE REALTOR during the initial counseling process and before any offer is presented. This will ensure that the Buyer understands the process, the possibility of competing offers, and what the Seller's options are.
 Broker Advises And Buyer Decides
All decisions about how offers will be presented, negotiated and ultimately accepted, are made by the Buyer and/or Seller, NOT the MAGNITUDE REALTOR. The MAGNITUDE REALTOR will communicate the offer, advise and keep their respective client informed of all activities. They will NOT make the decisions. The Buyer makes the decisions.
 Offers In Writing
 All offers and counter offers should be in writing to ensure that the terms, time frames and legal obligations of the parties are clearly understood and communicated without misunderstanding, withdrawals, counter offers and/or any changes to offers should be done in writing, signed and dated.
The terms of all offers, counter offers, withdrawals and terminations may not be disclosed by the MAGNITUDE REALTOR without the prior consent of both the Buyer and Seller.
Existence Of Offers
The Seller decides whether the Seller and Broker is able to disclose that another competing offer has been received, contemplated, or is being negotiated. The Buyer's Broker will disclose this information to the Buyer if it is received. The Buyer is NOT entitled to this information without express permission from the Seller.
 Full Price Offers
The Seller is NOT obligated to sell the property even if the Buyer makes a full price, contingency-free offer.
Priority Of Offers
The first or highest offer made does not bind or otherwise limit the Seller to act upon that offer before considering other offers. There is no priority of offers. The Seller makes all decisions.
Brokers And Attorneys
Brokers are NOT Attorneys! Brokers advise Buyers and Sellers to seek legal counsel from Attorneys regarding any question about the legal status of an offer, counter offer or contract.

When an offer is made
Presenting Your Offer
At the appropriate time, your MAGNITUDE REALTOR will present your offer to the Seller on your behalf. At MAGNITUDE REALTY, we feel that simply handing a copy of the Agreement of Sale to the Seller or Seller's Agent and letting them sort it out themselves is not enough. You, the Buyer, are a real person with real dreams of home ownership. Personalizing your offer helps the Seller to realize this, and they may be more inclined to give a less-than-full-price offer additional consideration, even in a multiple offer situation.
 In addition to the offer, the MAGNITUDE REALTOR will typically provide the Seller or Seller's Agent with a quick profile of who you are, where you work, and a brief list of features that attracted you to the property. They will also provide a letter of pre-approval from your mortgage lender that tells the Seller that you have taken the time to get your finances in order and are therefore a good risk for the offer being presented. And, in some cases, the MAGNITUDE REALTOR may provide a personal letter, written by you, which tells the Sellers in your own words why you chose their property for your new home.
Once presented, the Seller has several options. One option is to simply accept the offer as written. Another option is to counter your offer by changing the price or any terms. A third option is to reject your offer. And, a fourth option is to ask for additional time for consideration. One important factor to remember whenever an offer is made is that other offers from other buyers may be made at the same time, without you knowing of them. Buyers do not automatically have the right to know of the existence of other offers. It is the exclusive right of the Seller whether or not to share this information. Most buyers do not wish for this information to be transmitted to other agents and/or buyers. Therefore it is important to keep this in mind whenever making an offer to a Seller.
House Hunting FAQs

1. When I start visiting homes, what should I be looking for the first time through?
The house you ultimately choose to call home will play a major role in your family's life. A home can be an excellent investment, of course, but more importantly, it should fit the way you really live, with spaces and features that appeal to everyone in the family.

At each home, pay close attention to these important considerations.

1. Is there enough room for you now, and in the near future?
2. Is the home's floor plan right for your family?
3. Is there enough storage space? Will you have to replace the appliances, carpet, or mechanicals?
4. Is the yard the size that you want?
5. Are there enough bathrooms?
6. Will your present furniture work in this home?
2. Is an older home as good a value as a new home?
It's a matter of personal preference. Both new and older homes offer distinct advantages, depending upon your unique taste and lifestyle. New homes generally have more space in the rooms where today's families do their living, like a family room or activity area. They're usually easier to maintain, too. However, many homes built years ago offer more total space for the money, as well as larger yards. Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they're concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.
3. Do I need to bring anything along when I'm looking at homes?
 Bring your own notebook and pen for note taking and a flashlight for seeing enclosed areas. Be prepared to snoop around a little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their home is on the market, it will be looked over pretty thoroughly. If you need to go back to a home for another look, we will be happy to schedule another viewing appointment. Be sure to ask any questions you have about the home, even if you feel you're being nosey. You have a right to know.
When you find a home you may be interested in buying, make sure we ask the owner the following questions:

1. How much money do you pay for monthly utilities?

2. What features have you enjoyed most about living in this home?
3. Are there defects or problem areas that need to be fixed?
4. How old is the furnace and central air conditioning system?
5. How old is the roof? Have you experienced any leaking?
4. What should I ask my Broker about each home that I look at?
As a rule of thumb, ask any questions you have about specific rooms, features or functions. Pay particular attention to areas that you feel could become problem areas-additions, defects, areas that have been repaired. And above all, if you don't feel your question has been answered, ask until you do understand and are satisfied. In most cases, we will be able to provide you with detailed information.

5. What should I tell you about the homes I look at?
 Tell us what you liked and didn't like about each home you saw. It is important for us to really get a feel for what you're looking for in a home in order to find your dream home. Don't be shy about talking about a home's shortcomings. Was the home perfect except for the carpeting? Let us know that, too!

6. How many homes should I look at before I buy?
There is no set number of homes you should look at before you decide to make an offer on one. That's why providing us with as many details as possible up front is so helpful. The perfect home may be waiting for you on your first visit. Even if it isn't, the house-hunting process will help you get a feeling for the homes in the community and narrow your choices to a few homes that are worth a second look. You'll be one house closer to your home!If you're looking in more than one community, try to make the most of each house-hunting trip. Stop by the local Chamber of Commerce to pick up promotional literature about the community. Or ask us for welcome kits, maps, and information about schools, churches, and recreational facilities. Also, be sure to take along a camera and snap some pictures of all the homes you like. That'll make it easier to remember.

7. What should I think about when I'm deciding which community I want to live in?
Good city services, nice parks and playground facilities, convenient shopping and transpor tation, a track record of sound development and good planning-these are just a few considerations that are important to many people when they choose a community in which to live.
As for individual neighborhoods within a city, there is no better source of information than MAGNITUDE REALTORS. We know the people and the communities we serve, and chances are we can help you find a neighborhood that really fits your family's needs.
8. Where can I get information about local schools?
 We are your best source. We know where the local schools are, and can provide you with valuable information about school districts, including test scores, extracurricular activities, bus service and more. If you're relocating, we may even be able to put you in touch with teachers and principals when you visit the area.

9. How can I find out what homes are selling for in a given neighborhood?
 Home sales are a matter of public record, so ask us! If you're interested in a particular home, we may be able to provide you with a list of comparables - sale prices of homes in your area that are roughly the same size and age as the home you're considering. Although there will certainly be some differences between the homes - the house next door may have an extra bedroom, or the one down the block may be older than the one you're looking at - it's a good way to evaluate the seller's asking price.

 Mortgage FAQs
1. What is a mortgage, and what are the benefits of different kinds of mortgages?
 Simply put, a mortgage is a loan that a home buyer obtains directly from a lender to purchase real estate. The mortgage is a lien on the property that secures a promissory note (promise to repay the debt) that states the terms of the loan, including the interest rate, and the number of payments.
The most popular mortgages available to home buyers today can be divided into two general categories: those which offer fixed interest rates and monthly payments, and those where one or both of those factors are adjustable.
Fixed rate/fixed payment loans are more traditional, and remain the most popular home financing method, currently accounting for about two-thirds of all residential mortgages. Their advantages are well-known: You always know what your monthly principal and interest payment will be, so your basic housing cost will remain unaffected by interest rate changes until the mortgage is paid off.
Mortgages that entail flexible rates and/or payments have grown in popularity during periods of high interest rates and/or rapidly rising home prices. Many, including the popular ARMs (Adjustable Rate Mortgages), offer lower-than-market initial interest rates that allow buyers a measure of affordability unavailable in fixed-rate loans. The tradeoff may be higher interest rates and higher monthly payments later on. As yourself the question: Is my income expected to go up in the future, or not?
2. What are the different types of lenders, and how do I choose the right one for me?
Before someone lends you the money to purchase your home, they'll want to know a lot about you. And you're entitled to know as much as you can about them, too.

It's important because getting a mortgage is not just a one-time signing of documents, a handshake and a check. You will be depending on your lender to fund the loan as promised, on time, and over the life of the loan, to keep good payment records, pay your taxes and insurance (if included in your monthly payment) and many other continuing services.
Look for a lender that has the authority to approve and process your loan locally. It's easier to obtain information on the status of your loan and discuss conditions directly with the person who will approve your loan, rather than some far away loan committee. It's important that your lender know home values and conditions in your local area. And while biggest doesn't always mean best, financial stability, reputation, qualifying procedures, and unique programs benefit are what they offer home buyers.
3. Are there any mortgages especially designed for first-time home buyers?
Today, first-time home buyers enjoy a number of mortgage options that make purchasing a home more affordable by minimizing down payments and keeping monthly payments as low as possible during the early years of the loan.
Most ARMs feature an interest rate that is often below market for the first year, and may only rise gradually after that.
VA and FHA-insured loans call for extremely low down payment (0-5% of the purchase price), and often offer a below market interest rate. Similarly favorable terms can also be arranged with the help of conventional loan PMI (Private Mortgage Insurance) or FHA loan MIP (Mortgage Insurance Premium).
Finally, first-timers who can find a cooperative seller or third-party investor can look into such non-traditional financing methods as a lease/buy arrangement.

4. Can I get an FHA or VA mortgage?
Just about anyone can apply for an FHA-insured mortgage through banks and other lending institutions. They are particularly well-suited for buyers of low to moderate income; and have low down payment requirements (as low as 3% of the purchase price).
Similarly, VA-guaranteed loans often require no down payment. These loans are reserved for either active military personnel or veterans, or spouses of veterans who died of service-related injuries.
If there is a downside to these loans, it's the qualifying process. Though you apply for government-insured financing through a lending institution, the Federal Housing Administration or the Department of Veterans Affairs must insure or guarantee the loan and may require specific documentation or procedures not necessarily required for conventional financing. That may take more time than is generally required for conventional mortgage approval. Additionally, FHA-required insurance (MIP) must be added to your payment. Make sure the lender you select has approved authority by each of these agencies to ensure a quicker loan process.

5. How much of a down payment will I need to buy a home?
 A down payment of 20 percent has been the benchmark for conventional financing, but today, many options are available, some requiring as little as 3 percent down. For buyers who qualify for conventional financing but can't handle the high down payment requirements, lenders offer this financing with PMI, or Private Mortgage Insurance. Designed to protect the lender against default by the borrower, PMI allows you to obtain traditional financing with a down payment significantly lower than the standard 20 percent. By using PMI, you may be able to get a fixed rate or adjustable rate mortgage by putting as little as 5 percent down.
As with an FHA-insured loan, you must pay premiums for PMI coverage, the amount of which are determined by the lender. Moreover, PMI premiums are often lower than FHA insurance, and may be paid as part of your monthly mortgage payment, in annual installments, or in a lump sum at the time you obtain the loan. Your mortgage expert can help you determine which down payment option is right for you and your budget.

6. How does a lender determine the maximum mortgage I can afford?
 The three primary areas lenders examine in determining the size of mortgage you can handle include your monthly income, non-housing expenses, and cash available for down payment, moving expenses and closing costs.
7. What are the steps involved in the loan process?
The information your lender needs is not much different than what is needed when you apply for a major credit card: names and addresses of your employer and bank account numbers and balances. The lender will also need other financial information such as installment payments, auto loans, charge cards, and department store accounts. The location and description of the property also are required. Your lender will verify this information with your present and past employers, order a routine mortgage credit report on your current and past accounts, and order a professional appraisal of the property you're wanting to purchase.
8. What is APR, and how is it calculated?
The Annual Percentage Rate is a calculated rate of interest for a loan over its projected life. This rate includes the interest, all points (which are considered prepaid interest), mortgage insurance, and other charges associated with making the loan that the lender collects from the borrower.
The APR is calculated by a standard formula that all lenders use. This enables the borrower to comparison shop between lenders and/or loan products.

9. How can I find out what my property tax bill will be?
 Usually, the total amount of the previous year's property taxes is included on the listing information sheet for the home you're interested in. Remember, tax rates change from year to year, so the previous year's bill should be considered simply as a ballpark figure of what you would pay. For a more precise projection, call the local auditor's office for assistance, or simply ask us.
10. What is the difference between pre-qualifying and pre-approval?
Pre-qualifying for a mortgage up to a certain amount is a verbal exchange in which the lender tells you in advance approximately how much money the buyer is able to borrow, based upon the information you provide the lender on your debt and income. Pre-approval goes a step further than pre-qualifying. It is an actual commitment to lend, provided that, when the borrower is ready to buy, he or she still meets all the qualifying conditions that were met at the time of conditional approval. We strongly recommend it to give you the best negotiating position!
a b c d f g h i j l m n o p r s t u v w
Acceleration Clause
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

Adjustable rate mortgage (ARM)
Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

Adjustment interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Annual percentage rate A.P.R.
Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan. Appraisal An estimate of the value of property, made by a qualified professional called an "appraiser". Assessment A local tax levied against a property for a specific purpose, such as a sewer or street lights.

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Balloon (payment) mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage.

Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers us ally charge a fee or receive a commission for their services.

The action to pay additional discount points (buy down subsidy) to the lender in exchange for a lower interest rate. The reduced rate may apply for all or a portion of the loan term. This subsidy amount may be paid by the buyer, lender, seller or a combination of parties.

Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)

Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 request for Determination of Eligibility. Certificate of Reasonable Value (CRV) A certification for an appraisal issued by the Veterans Administration showing the property's current market value.

Certificate of veteran status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) or 6 years in the reserves. It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status). This document enables veterans to obtain lower down payments on certain FHA insured loans.

The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

Co Borrower (co signer, co mortgagor)
One who signs a mortgage contract with another party or parties and is hereby jointly obligated to repay the loan. Generally a co borrower provides some assistance in meeting the requirements of the loan, and receives a share of interest in the encumbered property.

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. construction loan (interim loan): A loan to provide the funds necessary to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.contract sale or deed: A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Construction loan
A short term interim loan for financing the cost of construction. The lender advance funds to the builder at periodic intervals as the work progresses.

Conventional loan
A mortgage not insured by FHA or guaranteed by the VA.

Credit Report
A report documenting the credit history and current status of a borrower's credit standing.

Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans). See housing expenses-to-income ratio.

Deed of trust
In many states, this document is used in place of a mortgage to secure the payment of a note.

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred interest:
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. see negative amortization

Failure to make payments on time. this can lead to foreclosure.

Department of Veterans Affairs (VA)
An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans. Discount Point see point

Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount. Down payments can range from 3 percent to 20 percent or more of the sales price on conventional loans.

A clause inserted in a mortgage that allows the lender to call the loan due and payable at its option upon the transfer of the property also known as paragraph "17" in FNMA/ FHLMC Mortgage.

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA)
Is 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.

The value an owner has in real estate over and above the obligation against the property.

Funds that are set aside and held in trust, usually for payment of taxes and insurance on real property. Also earnest deposits held pending loan closing.

Refers to a neutral third party who carries out the instruction of both the buyer and seller to handle all the paperwork of settlement or closing." Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.

Fannie Mae
see Federal National Mortgage Association.

Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB)
A regulatory and supervisory agency for federally chartered savings institutions.

Federal Home Loan Mortgage Corporation(FHLMC)
also called "Freddie Mac" A quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers

Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Federal National Mortgage Association (FNMA)
also know as "Fannie Mae" A private corporation, federally chartered to provide financial products and services that increase the availability and affordability of housing for low-, moderate-, and middle-income Americans. The largest corporation in America, Fannie Mae has $287 billion in assets and an additional $544 billion in Mortgage-Backed Securities outstanding. Next to the U.S. Treasury, it is often the second largest borrower in the capital markets. Fannie Mae is traded on the New York Stock Exchange (FNM) and has approximately 190,000 shareholders.

FHA loan
A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($155,250), they are generous enough to handle moderately-priced homes almost anywhere in the country.

FHA Mortgage Insurance Premium (MIP)
An amount equal to 2.25 percent of the loan amount paid at closing or financed into the loan amount. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

The Federal Home Loan Mortgage Corporation provides a secondary market for saving and loans by purchasing their conventional loans. Also known as "Freddie Mac."

Firm Commitment
A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.

Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

The federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

A legal procedure in which property securing debt is sold by the lender to pay the defaulting borrower's debt.

Freddie Mac
see Federal Home Loan Mortgage Corporation

Ginnie Mae
see Government National Mortgage Association.

Government National Mortgage Association (GNMA)
also known as "Ginnie Mae provides sources of funds for residential mortgage, insured or guaranteed by FHA or VA

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hazard Insurance (Homeowners Insurance)
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields (T-Bills), the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

A money source for a lender (FNMA, FHLMC, GNMA).

Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Jumbo Loan
A loan which is larger (more than $207,000) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

LNOV (Lenders Notification Of Reasonable Value)
A certification for an appraisal issued by the Lender in place of a CRV showing the property's current market value.

Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MIP: Mortgage Insurance Premium
A monthly premium paid by the homeowner in addition to the Up Front MIP that is generally financed. The monthly mortgage insurance is equal to the mortgage amount multiplied by .005 divided by 12. ($100,000 x .005 / 12 = $41.67 per month)

Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.

The lender

The borrower or homeowner

Negative Amortization
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. the danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.

Net Effective Income
The borrower's gross income minus federal income tax.

Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

The signed obligation to pay a debt, as a mortgage note.

Origination Fee
The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.

Permanent Loan
A long term mortgage, usually ten years or more. Also called an "end loan."

Principal, Interest, Taxes and Insurance. Also called monthly housing expense.

Pledged account Mortgage (PAM):
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

Power of Attorney
A legal document authorizing one person to act on behalf of another.

Prepaid Expenses
Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan association, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA, etc.

The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are required to carry private mortgage insurance which is generally paid monthly, and obtained by the lender through a Private Mortgage Insurance Company (GE, MGIC, United Guarantee, Amerin, PMI, etc).

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.

Negotiable Rate Mortgage (RBM)
a loan in which the interest rate is adjusted periodically. See adjustable rate mortgage.

Short for the Real Estate Settlement Procedures Act. RESPA is a federal law that allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

Reverse Annuity Mortgage (RAM)
a form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loan is paid in full. Also called a "release of mortgage."

Second Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first one.

Secondary Mortgage Market
The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders. security.

All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

Settlement/Settlement Costs
see closing/closing costs

Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation.

Simple Interest
Interest which is computed only on the principle balance.

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any buildings.

Sweat Equity
Equity created by a purchaser performing work on a property being purchased. term mortgage see balloon payment mortgage.

A document that gives evidence of an individual's ownership of property.

Title Insurance
A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is us ally a function of the value of the property, and is often borne by the purchaser and/or seller.

Title Search
An examination of municipal records to determine the legal ownership of property. Usually is performed by an attorney or title company.

A federal law requiring disclosure of the Annual Percentage Rate and other loan terms to home buyers within 72 hours of loan application per regulation Z.

Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. the lender sometimes has the option to call the loan due with 30 days notice at the end of 7or 10 years. also called "Super Seven" or "Premier" mortgage.

The decision whether to make a loan to a potential home buyer based on income, assets, credit, collateral and other factors and the matching of this risk to an appropriate rate and term or loan amount.

Interest charged in excess of the legal rate established by law.

VA Loan
A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee
A premium of up to 3 % (depending on the size of the down payment, and previous use of benefits) paid on a VA-backed loan. An eligible veteran who is using his eligibility for the first time will pay a 2% funding fee which can be financed.

Variable Rate Mortgage (VRM)
see adjustable rate mortgage

Verification of Deposit (VOD)
A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts. This document is generally not needed if recent bank statements are available.

Verification of Employment (VOE)
A document signed by the borrower's employer verifying his/her position and salary. This document is generally not needed if recent pay stubs are available.

Warehouse Fee
Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee.


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