Mortgage Glossary of Refinance Terms and Real Estate Principles

What is Alt-A, does it still exist?

2018-01-30T20:31:00.000-08:00

Alt-A: If you ask 5 different mortgage persons what they are, you are likely to get 5 different answers. However, most will probably be pretty close, just a bit different perspective.

"A classification of mortgages where the risk profile falls between prime and subprime. The borrowers behind these mortgages will typically have clean credit histories, but the mortgage itself will generally have some issues that increase its risk profile. These issues include higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower's income."

"Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category."
Source: https://en.wikipedia.org/wiki/Alt-A

As real estate professionals or consumers using the services of a real estate professional, you will be exposed to an onslaught of acronyms. The Alt-A -- or Alternative A-Paper (also known as prime and conforming) mortgage type is not lacking. Falling in the middle of the three general categories (oh, don't forget the government categories FHA and VA :), these are famous for their acronyms which bleed over to the Prime and sub-prime arena as well:

1. SIVA -- Stated Income, Verified Assets -- also known as "Stated"
Your income is stated, your job (not income) is verified and so are your assets

2. SISA -- Stated Income, Stated Assets
Both your income and assets are stated, but not verified, job is verified

3. NIVA -- No Income, Verified Assets
No job verification but assets are verified

4. NINA -- No Income, No Assets
Neither your job nor your assets are verified (can't understand why this caused a problem in the mortgage market :)

5. No Ratio -- No Ratio
Your Debt-To-Income Ratio is not taken into consideration

6. No Doc-- No Documentation (clever with that one)
They don't care anything about, job or assets, just credit score

All of the above are credit score driven and were as Investopedia said these mortgages were typically given to clients with clean credit histories.

Many, many lenders have temporarily or permanently shut down these type of loan programs and others were put out of business b/c of their use. We still have a few brave lenders out there willing to fund these loans. Since the secondary market (where lenders and bank sell these loans and replenish their funds) lost their appetite for these, the rates have begun to climb dramatically. Only time will tell whether these loans will come back. I believe they will, but we are not likely to see the near Prime rates that we once had.

The virtues, or lack thereof, of these programs, can be discussed 'til the cows come home. Feel free to comment, but I hope this provides a little introduction as to what these products were/are.

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Deducting Mortgage Points For My 2018 Tax Return

2018-01-25T19:28:00.000-08:00

Real Estate Agent
Gina B. Gonzales

You may be faced with fees in terms of mortgage points as part of owning a home.

You can often deduct points on your taxes by paying mortgage points. Sometimes this makes good financial sense. You have decided to buy a new home, the largest debt you'll ever take on is most commonly a mortgage.

FAQ: Mortgage Points - What are they?

One percent of your loan amount on the mortgage is equal to a point. One point of a $100,000 home loan is equal to $1,000. Two types of points are used in the home mortgage industry, origination points and discount points. Origination points are typically equal to the income of the loan originator, discount points are a type of prepaid interest and are often fully deductible.

Citing from the TurboTax Website for your 2018 Tax Return:

"Qualifying for a Deduction

Generally, the Internal Revenue Service (IRS) allows you to deduct the full amount of your points in the year you pay them. If the amount you borrow to buy your home exceeds $1 million, you are generally limited on the amount of points that you can deduct. The same is true if your home equity debt exceeds $100,000. The IRS also imposes the following requirements to deduct mortgage points:
• The mortgage must be used to buy or build your primary residence
• The points must be a percentage of your mortgage amount
• The use of points must be a normal business practice in your area
• The amount of points paid must not be excessive for your area
• You must use cash accounting on your taxes
• The points must not be used for items that are typically stand-alone fees, such as property taxes
• You cannot have borrowed the funds to pay for the points from the mortgage lender or broker
• The amount you pay must be clearly itemized as points on your statement

If you aren't able to deduct your points in the year you pay them, you may still qualify to deduct them over the life of the loan.

How to Deduct Points

As far as filing taxes goes, claiming a tax deduction for mortgage points is a fairly straightforward process. Mortgage points are considered an itemized deduction and are claimed on Schedule A of Form 1040. Here are the specifics:
• Usually, your lender will send you Form 1098, showing how much you paid in mortgage points and mortgage interest
• Transfer this amount to line 10 of Form 1040 Schedule A
• If any of your points were not included on Form 1098, enter the additional amount you paid on line 12 of Form 1040 Schedule A"

How Can I Receive Rental Property Tax Deductions for Depreciation

2015-01-29T11:21:00.001-08:00

Do you rent property to others?

You must report the rent as income on your taxes. You can deduct, or subtract, your rental expenses (money you spent in your actions as the owner renting out the property) from that rental income, reducing your tax obligation.

Many expenses can be deducted in the tax year you spend the money but depreciation is calculated differently.

What Is Depreciation

A Brief Overview of Depreciation from IRS.gov

"Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.

In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:

The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.

A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.

The property must have a determinable useful life of more than one year."

Depreciation Definition Examples

Business Dictionary.com

"1.Accounting: The gradual conversion of the cost of a tangible capital asset or fixed asset into an operational expense (called depreciation expense) over the asset's estimated useful life.

The objectives of computing depreciation are to (1) reflect reduction in the book value of the asset due to obsolescence or wear and tear, (2) spread a large expenditure (purchase price of the asset) proportionately over a fixed period to match revenue received from it, and (3) reduce the taxable income by charging the amount of depreciation against the company's total income. In effect, charging of depreciation means the recovery of invested capital, by gradual sale of the asset over the years during which output or services are received from it. Depreciation is computed at the end of an accounting period (usually a year), using a method best suited to the particular asset. When applied to intangible assets, the preferred term is amortization.

2.Commerce: The decline in the market value of an asset.

3.Economics: The decrease in the economic potential of an asset over its productive or useful life.

4.Foreign exchange: The reduction in the exchange value of a currency, either by a government or due to weakening of the underlying economy in a floating exchange rate system."

VA loan Program

2014-11-15T09:27:00.000-08:00

Veterans Home Loan Information

A low-cost loan for U.S. veterans that is partially guaranteed by the Department of Veterans Affairs (VA).

If you are a veteran, you can get some VA loans without a down payment. You also can negotiate the interest rate with the lender. The loan amount cannot be more than the VA's appraisal. If it is, you have to pay the difference in cash.
You still need to pay closing costs, including appraisal and title insurance fees, as well as one-time funding fee for about 2% of the loan amount.

VA loans present high risk to a lender since the VA guarantees a portion of the loan amount- usually 25%. So, in case of foreclosure, the VA has two choices: pay the lender the loan's balance and take the property or pay the guaranteed amount and let the lender keep the property.

Usually, to be eligible for VA loan, you must have served at least 181 days of active duty or at least six years in the National Guard.

If you need information contact your regional VA office or call
1-800-827-1000.

Refinancing with a VA Loan

Through the powerful VA Loan program, those eligible are also able to refinance in a couple of different ways. The most popular types of refinance options include the VA Streamline Refinance (also known as an Interest Rate Reduction Refinance Loan, or IRRRL) and a VA cash-out refinance.

Streamline Refinances allow Veterans with a VA Loan already to refinance to a lower interest rate. Cash-Out Refinances give the borrower the opportunity to use the equity of the home and use it as cash.

Home Loans

VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.

VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

Veterans Crisis Line:
1-800-273-8255 (Press 1)

Risk of a Second Mortgage

2014-11-09T01:04:00.000-08:00

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A loan that in the event of foreclosure is paid off after the first mortgage.

You can have one or more mortgages on your property. Buyers often use second mortgages when they can not get enough financing from a lender to pay for a home. For example, you can ask the seller to reduce a home's selling price by $15,000 and offer to pay back this amount along with interest in monthly installments.

This $15,000 is secured with a second mortgage. The seller, though, is taking a risk - if you default on the first mortgage and the lender forecloses on the home, there might not be enough money from the sale to cover both the first mortgage and the seller's loan. Second mortgages usually have a higher interest to offset this risk. In some states, a second mortgage is called a junior trust deed.

Disadvantages in Taking a Second Mortgage

One disadvantage with second mortgages is the risk you are taking by using one. This is a serious risk to your home: if you cannot pay back the loan, the lender can potentially foreclose on your property and force you out. Make sure the intended use of funds is worth the risking your home by using a second mortgage.

Second disadvantage is that a second mortgage has slightly higher rates than a first mortgage, because the second mortgage won’t be paid until the first mortgage is, should you default. Because the loan is riskier than a standard mortgage, it costs you more even if the rate is lower than alternative sources like credit cards or unsecured personal loans.

Date of last delinquency

2014-11-08T21:49:00.000-08:00

The date when you last missed a regular monthly payment

The date of last delinquency shows up on your credit report, a document that outlines your credit history and current credit. Even if you make a partial payment of a debt, the creditor can still report you to a credit bureau as delinquent. Some creditors report a delinquency right away, others do not. Often you can negotiate with a creditor to get a more flexible pay back plan before they report you as delinquent.

"The significance of the referenced dates is based on the credit report periods set forth in the FCRA. The FCRA sets specific periods for adverse items reported to your credit report, after which they can no longer continue to be included in your CR.

Those dates are based on the date of occurence of the type of adverse item, not upon when they are reported or any subsequent action on the part of the one who reported it.

For monthly OC account delinquencies, they must cease to be included in your CR after 7 years from their date of occurence. Date of account opening, last reporting, etc., are irrelevant. It is your record of your activity on the OC account that sets those dates.

Collections and charge-offs have their own peculiar date for CR exclusion, which is based on ONLY one date... the date of first delinquency on the OC account that led to the collection or charge-off. The DOFD is fixed by your first delinquency in the most recent chain of account delinquencies with the OC preceding the charge-off or collection.

Here is a sample of how DOFD works:

30 late 4/2005 this initially sets the DOFD at 4/2005

60 late 5/2005 DOFD remains 4/2005 account paid back into good-standing

6.2005 DOFD remains 4/2005

.....pattern repeats through the last chain of delinquencies.......last chain:

30 late 2/2006 this resets the DOFD to 2/2006, as a new chain of delinquencies begins

60 late 3/2006 DOFD remains 2/2006

90 late 4/2006 DOFD remains 2/2006

120 late 562006 DOFD remains 2/2006

Charge-off 6/2006 DOFD remains 2/2006

Collection 9/2007 DOFD remains 2/2006

Under this example, both the charge-off and the collection are required to be excluded from the consumer's credit report after 8/2013 (7 years plus 180 days from DOFD).

DOFD is not required to be reported to the CRA until such time as a charge-off or collection referral is reported. Thereafter, any party reporting any information on the charged-off or collection debt must provide the DOFD to the CRA.

If you do not have a charge-off or collection reported,there will most likely be no reported DOFD in your credit file."

Source: http://ficoforums.myfico.com/t5/General-Credit-Topics/date-of-last-activity-vs-date-of-first-delinquency/td-p/1244495

Tips for Avoiding Reverse Mortgage Scams

2014-10-10T11:58:00.000-07:00

The FBI and the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) urge consumers, especially senior citizens, to be vigilant when seeking reverse mortgage products.

Reverse mortgages, also known as home equity conversion mortgages(HECM), have increased more than 1,300 percent between 1999 and 2008, creating significant opportunities for fraud perpetrators.

Reverse mortgage scams are engineered by unscrupulous professionals in a multitude of real estate, financial services, and related companies to steal the equity from the property of unsuspecting senior citizens or to use these seniors to unwittingly aid the fraudsters in stealing equity from a flipped property.

In many of the reported scams, victim seniors are offered free homes, investment opportunities, and foreclosure or refinance assistance. They are also used as straw buyers in property flipping scams. Seniors are frequently targeted through local churches and investment seminars, as well as television, radio, billboard, and mailer advertisements.

A legitimate HECM loan product is insured by the Federal Housing Authority. It enables eligible homeowners to access the equity in their homes by providing funds without incurring a monthly payment. Eligible borrowers must be 62 years or older who occupy their property as their primary residence and who own their property or have a small mortgage balance. See the FBI/HUD Intelligence Bulletin for specific details on HECMs as well as other foreclosure rescue and investment schemes.

Tips for Avoiding Reverse Mortgage Scams:

Do not respond to unsolicited advertisements.
Be suspicious of anyone claiming that you can own a home with no down payment.
Do not sign anything that you do not fully understand.
Do not accept payment from individuals for a home you did not purchase.
Seek out your own reverse mortgage counselor.

If you are a victim of this type of fraud and want to file a complaint, please submit information through our electronic tip line or through your local FBI office. You may also file a complaint with HUD-OIG at www.hud.gov/complaints/fraud_waste.cfm or by calling HUD’s hotline at 1-800-347-3735.
Read our intelligence bulletin on reverse mortgages.

Additional Resources on Frauds Impacting Seniors:
- USA.gov Resources for Seniors
- Resources from the United States Senate Special Committee on Aging

Deed of Record

2014-10-10T11:45:00.000-07:00

What is a Deed of Record?

To make a document (Record) available to the public

Your home’s purchase is official the moment that you record the deed at the county courthouse. Usually, the title company or escrow agent is responsible for recording the deed and you will be responsible for a small fee. If you wanted to do a little investigating into the former owners of your home, you could go to the county clerk’s office and check the files - this list of owners is called the chain of title.

Any claims on your home, including a mortgage and liens for unpaid debts, are also recorded there. The county clerk who records a deed can be called the county recorder or the registrar of deeds.
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Auctioneers Seeking Buyers of Foreclosed Properties
Another foreclosure record was set in November as 1,336 properties were offered to the highest bidder on the courthouse steps in Modesto, Merced and Stockton.

Auctioneers Seeking Buyers of Foreclosed Properties

2014-10-10T11:41:00.002-07:00

By J.N. SBRANTI
jnsbranti@modbee.com
last updated: October 10, 2014 11:23:07 PM

Courthouse-step auctions offer 1,336 properties in foreclosure and 17 are sold.

Another foreclosure record was set in November as 1,336 properties were offered to the highest bidder on the courthouse steps in Modesto, Merced and Stockton.

Now here's the real surprise: Only 17 of them sold, despite lenders offering deeply discounted prices.

Every weekday, starting about noon, auctioneers seek buyers for foreclosed properties of all shapes and sizes. But more times than not, no one bids.

That's because foreclosed homes typically have unpaid mortgage debt far in excess of their current value. When no bidder is willing to pay off that debt, lenders usually get stuck owning the homes.

That happened 411 times in Stanislaus County last month, sticking lenders with more than $139 million in unpaid mortgages, according to ForeclosureRadar, which tracks mortgage defaults.

Of the 419 Stanislaus County homes that went to foreclosure auctions in November, only eight attracted bidders.

Those who do bid are getting increasingly sweet deals, however, as lenders have begun slashing the prices they're willing to accept for foreclosed homes. To lure potential buyers, lenders have begun accepting starting bids far below the outstanding debt on foreclosed properties.

"Investors at auctions typically will buy at a 30 percent discount to market," explained Sean O'Toole, who owns ForeclosureRadar. "So lenders are trying to give as much of a discount as possible to entice investors to buy."

On Friday, O'Toole said, a foreclosed five-bedroom Modesto home on Hemstead Avenue went up for auction with a starting bid of $301,500, even though the lender was owed $537,000 from a delinquent mortgage.

But that $235,500 discount apparently wasn't enough. O'Toole said no one bid, so the lender now owns the house.

Lenders get more desperate

O'Toole said the size of these discounts continues to grow as lenders get more and more desperate to unload properties.

Early in 2007, O'Toole said, discounts were offered on about one-third of the homes in foreclosure auctions statewide, and those discounts averaged about $9,000. By November, he said, two-thirds of the state's homes in foreclosure auctions were discounted, with discounts averaging $48,000.

Many of the foreclosed houses in Stanislaus, San Joaquin and Merced counties, however, are being discounted by $100,000 or more, O'Toole said.

Dave Rhodes of Oakdale recently took advantage of one such deal. Two weeks ago, he bid $1 over the starting price for a 1,356-square-foot home on Poppy Patch Drive in Modesto. He was the only bidder and bought the house for $163,181, even though the lender had been owed about $264,000.

"I'm not a big spender. I'm a bottom feeder," said Rhodes, who has been a regular at Modesto's foreclosure auctions for more than a year. He researches many of the homes being foreclosed, but rarely bids at auctions. His last purchase was in January, when he bought a fixer-upper in Empire.

Hundreds receive no bids

Discounted starting bids "have become more and more prevalent the last three months" in Modesto, Rhodes said. That's why he comes prepared to bid on great deals.

Before potential buyers are allowed to bid, they must show the auctioneer a cashier's check for the full amount they're willing to bid. Rhodes said he had a cashier's check for $185,000 with him the day he bought the Poppy Patch home, so he could have gone higher had someone bid against him and he wanted to keep bidding.

Competitive bidding is rare, however, even with discounted starting prices.

Example: An Oakdale home on Ranger Street sold new in 2006 for $610,000. It went into default with an outstanding loan balance of $530,892. Last month at the foreclosure auction, the starting price was $395,000. No one bid.

Also last month, a Manteca home on South Sonora Avenue that had an outstanding loan balance of $487,956 was offered for a starting bid of $331,500. No one bid.

And in Merced, a home on West 22nd Street with an outstanding mortgage of $279,785 was offered at $153,000. No one bid.

"There are literally hundreds of examples in these counties," O'Toole said about discounted properties going unpurchased. "They ... represent good opportunities for folks to buy properties directly from the bank at a deep discount."

Lenders don't want the houses

In San Joaquin County last month, for instance, 664 foreclosed homes went to auction, but only eight were sold to bidders. Lenders took back 656 houses with unpaid debts of more than $245 million.

In Merced County last month, 253 homes went to auction, with only one receiving bids and being sold. Lenders took back the rest with unpaid debts of nearly $88.4 million.

Foreclosure Process

2014-10-10T11:24:00.000-07:00

When a lender takes possession of a home and sells it in order to repay a loan in default

When a homeowner can not repay (defaults on) the mortgage and negotiations for an alternative payment plan fail, the lender has no choice but to start the foreclosure process. This process varies from state to state, but in general, a foreclosure is an auction either with or without court action. The sale must be advertised in local newspapers and the highest bidder wins the home. Since the lender only bids on what is owed, a buyer can often find a good deal, especially on an older home.

You still get one final chance to keep your home by paying off all delinquent costs either before the sale or in a judicial foreclosure, before the court approves the foreclosure. Having a foreclosure on your credit is very serious business, often worse than bankruptcy.

Confidential Mortgage Data is Frequently Leaked

2014-10-10T09:19:00.000-07:00

Experts say that estimating how frequently confidential mortgage data is leaked is difficult, because many breaches go unnoticed. For three days in July, however, Bob Segall, a reporter at WTHR-TV in Indianapolis , Indiana , looked into 40 dumpsters behind loan branches and title companies that handle mortgage documents. In 18 of them he discovered sensitive information about various borrowers. "You could see their complete financial lives on paper, dating back 20, 30, 40 years," he said.

"Among the finds inside the mortgage files: a letter from one borrower's counselor saying he was doing well in alcohol rehab..."

Who were the top non-conforming lenders for the first half of 2007? There are no surprises: Countrywide, Wells Fargo, Citibank, Chase, Bank of America, WAMU, Residential Capital, Wachovia, Indymac, and American Home.

Is there any good news out there? Evidently not right now.

    Total Existing Home Sales fell 8.0% and are 19% below a year ago. The national median existing-home price for all housing types was $211,700 in September, down 4.2% from September 2006. Total housing inventory inched up 0.4 percent at the end of September to 4.40 million existing homes available for sale, which represents a 10.5-month supply at the current sales pace.

    The price of the average home Centex sold fell 8% from a year ago, and in some locations prices were slashed 15 to 20 percent, executives said.

    Merrill Lynch took an $8.4 billion hit in the third quarter from revaluing bonds backed by mortgages and other write-downs, and recorded a $2.24 billion loss for the quarter compared with a profit of $1.94 billion a year earlier.

    National City said third-quarter earnings fell 80% and recorded a net loss of $152 million in its mortgage banking business in the third quarter.

    Bank of America issued a short statement announcing the closing of their wholesale operation: “Today Bank of America announced that it will exit the wholesale mortgage business in order to devote increased energy to its expanding retail channels."

Home equity line of credit

2014-10-06T18:55:00.000-07:00

A line of credit, secured by a property, that allows owners to tap into their home’s equity

You can get a line of credit equal to your home’s equity that works like your checking account or credit card. Equity is the difference between the value of your home and the amount you owe on your mortgage.
It’s flexible, so, if your home equity is $20,000, you can withdraw at will up to this amount simply by writing a check.

Note that you’ll have restrictions on how much you can withdraw at one time. You only pay interest on what you borrow and your credit limit is restored as you pay back what you owe. A home equity line of credit typically stays open for 10 years. Once it closes, you normally have 10 to 15 years to pay back what you owe.

The added bonus is that the interest you pay can be deducted from your taxes. But this isn’t free money, if you can’t repay the credit line you could risk losing your home.

Interest rate

2014-10-06T18:39:00.000-07:00

The cost for borrowing a lender’s money

Interest rate takes into account the lender’s risk and how much it costs the lender to get the money for a loan. The more risk the lender takes, the higher the interest rate they charge you. You pay a small portion of the interest that you owe in each monthly loan payment.

The interest rate on a fixed rate loan depends on the going market rate and how many discount points that you payup-front. An adjustable rate loan’s interest rate is made up of the index, which is an economic indicator of overall interestrates, and the lender’s margin.

Adjustable rate mortgage (ARM)

2014-10-04T15:47:00.000-07:00

A loan that has a fluctuating interest rate and monthly payment

ARMs start off with a fixed interest rate and monthly payment, but then adjust to reflect changes in the market interest rate. A 1-year ARM, for example, will have a fixed interest rate for one year and then will adjust on the second year, and continue to adjust annually over the life of the loan. You can also find ARMs that adjust semi-annually and monthly.

You get a low starting interest rate in exchange for taking a risk that rates may rise in the future. There is also a cap on how much the interest rate can go up or down. Figure out if you can afford the highest payment at the maximum interest rate before you choose this type of mortgage. Other common ARMs are: 3/1, 5/1, 7/1 and 10/1.

Mortgage broker

2014-10-04T15:45:00.000-07:00

A company that helps a borrower get a loan in return for a fee

Mortgage brokers don’t lend money - they help you shop for the best loan from a selection of lenders. Since mortgage brokers get discounted rates from lenders, you can get a lower rate from a broker than if you apply for a loan directly from a lender. Online mortgage brokers also charge significantly lower fees than traditional brokers, who can charge up to 2.5% of the loan amount.

Once you apply for the loan, the mortgage broker handles all the documents and works with the lender to make sure your loan gets approved. The mortgage broker may also order a copy of your credit report, the property appraisal and the title insurance. You pay a mortgage broker at closing, when you complete your home’s purchase or refinance.

Also Read: Insurance

Fixed rate mortgage

2014-10-04T15:44:00.000-07:00

A loan with the same interest rate and payment for the life of the loan

When you lock in the interest rate for a fixed rate loan, you’ll have the same rate and monthly payment for the loan’s full term.

The main benefit is that you always know what your housing costs are, which takes out the guesswork when planning ahead.

Reverse mortgage

2014-10-04T15:35:00.000-07:00

A loan for home owners who have already paid off their mortgage but want to tap into their home’s equity

Reverse mortgages come in handy for older home owners who might have a financial hardship or who just want some extra cash without having to uproot and sell their homes.

You can either receive a lump-sum loan, a line of credit or a monthly check based on the amount of equity in your home.

This money is also tax-free, since it is a loan. When you sell your home, you use your home’s equity to pay off the loan and interest.
Keep in mind that you need to pay closing costs, such as a loan origination and processing fees.

Typically, to qualify for a reverse mortgage, you need to be over 60.

Dictionary: Real Property

2014-08-19T21:16:00.000-07:00

1. Rights, interests, and benefits inherent in the ownership of real estate, as distinguished from personal property; frequently thought of as a bundle of rights.

2. Real estate may be loosely defined as land (including air rights) and other properties that are permanently attached to land such as houses, fences, and landscaping.

3. The terms real property and Real Estate are often used interchangeably.

Estates & ownership interests defined

2008-07-22T01:03:00.000-07:00

The law recognizes different sorts of interests, called estates, in real property. The type of estate is generally determined by the language of the deed, lease, or bill of sale through which the estate was acquired. Estates are distinguished by the varying property rights that vest in each, and that determine the duration and transferability of the various estates. A party enjoying an estate is called a "tenant."

Some important types of estates in land include:
Fee simple: An estate of indefinite duration, that can be freely transferred. The most common and perhaps most absolute type of estate, under which the tenant enjoys the greatest discretion over the disposition of the property.

Conditional Fee simple: An estate lasting forever as long as one or more conditions stipulated by the deed's grantor does not occur. If such a condition does occur, the property reverts to the grantor, or a remainder interest is passed on to a third party.

Fee tail: An estate which, upon the death of the tenant, is transferred to his heirs.

Life estate: An estate lasting for the natural life of the grantee, called a "life tenant." If a life estate can be sold, a sale does not change its duration, which is limited by the natural life of the original grantee.

Leasehold: An estate of limited duration, as set out in a contract, called a lease, between the party granted the leasehold, called the lessee, and another party, called the lessor, having a longer lived estate in the property.

For example, an apartment-dweller with a one year lease has a leasehold estate in her apartment. Lessees typically agree to pay a stated rent to the lessor.

A tenant enjoying an undivided estate in some property after the termination of some estate of limited duration, is said to have a "future interest."

Two important types of future interests are:
Reversion: A reversion arises when a tenant grants an estate of lesser maximum duration than his own. Ownership of the land returns to the original tenant when the grantee's estate expires. The original tenant's future interest is a reversion.

Remainder: A remainder arises when a tenant with a fee simple grants someone a life estate or conditional fee simple, and specifies a third party to whom the land goes when the life estate ends or the condition occurs. The third party is said to have a remainder. The third party may have a legal right to limit the life tenant's use of the land.

Estates may be held jointly as joint tenants with rights of survivorship or as tenants in common. The difference in these two types of joint ownership of an estate in land is basically the inheritability of the estate. In joint tenancy (sometimes called tenancy of the entirety when the tenants are married to each other) the surviving tenant (or tenants) become the sole owner (or owners) of the estate.

Nothing passes to the heirs of the deceased tenant. In some jurisdictions the magic words "with right of survivorship" must be used or the tenancy will assumed to be tenants in common. Tenants in common will have a heritable portion of the estate in proportion to their ownership interest which is presumed to be equal amongst tenants unless otherwise stated in the transfer deed.

Real property may be owned jointly with several tenants, through devices such as the condominium, housing cooperative, and building cooperative.

Zoning ordinance

2008-01-15T14:14:00.000-08:00

The division of land into residential, commercial, industrial and rural districts.

Zoning laws, which came about in the 1920s, serve to protect the public’s safety.

Zoning laws restrict the size of a lot, of building’s height and how a property can be used. In general, a residential zone is broken down into single-family, multifamily and mobile home districts.

Commercial areas are divided into retail, office and wholesale space. The government will not give you any money to compensate for a loss in your property’s value that may result from a zoning ordinance.

Wraparound mortgage

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A type of financing where the seller carries the buyer's loan.

Wraparound mortgages are a creative, though rare, way to allow buyers to purchase a home without having to qualify for a loan or to pay closing costs.
The contract is made between the buyer and seller with the lender’s approval.

Here is how it works:
(1) the seller holds onto the existing mortgage
(2) the seller names the property’s selling price
(3) the seller offers the buyer a loan at a higher interest rate than the
existing mortgage
(4) the buyer pays the seller a fixed monthly
amount
(5) the seller uses part of this money towards the
existing loan and then pockets the difference

Unlike an installment sales contract, the buyer gets title (ownership) of the property at closing.
This type of financing is not common since most mortgages have a due-on-sale clause.

Wraparound mortgages are also called all-inclusive trust deeds.

Verification of deposit (VOD)

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A document from a bank vouching for the balance of a person's checking and savings accounts.

A lender may ask for a VOD when you are applying for a loan to make sure that you actually have the money stated on your loan application.

Unsecured loan

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A debt that is not backed by collateral.

Unsecured loans, like credit card debt, doctor bills and student loans, do not require you to sign an agreement pledging collateral, such as property, to secure the loan.

If you fail to pay an unsecured loan, the creditor can only take you to court to get their money. Mortgages and car loans, though, are secured loans. So, in case of default, the lender can take back the collateral-the property or the car-and sell them to pay off the loan.

Underwriting

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Underwriting

A lender's process to evaluate whether or not to give a borrower a loan.
When lenders underwrite a loan, they look at your income, debt and credit history to see if you are a low-risk loan candidate.

Once your loan is approved and you meet all the lender's conditions, you can sign the final loan documents.

The lender will then fund the loan.

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Two-step mortgage

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A type of loan that has a low interest rate for the first 5 or 7 years, then adjusts to a higher interest rate for the remaining 25 or 23 years.

Two-step mortgages are ideal for first-time buyers and if you have a job that demands that you relocate often. Your monthly loan payments are lower for those first years than a regular 30-year fixed loan, and when it is time to adjust to the higher rate, you can do so at no cost. The new rate that you get after 5 or 7 years though can be high, which is when most people decide to move. Two-step mortgages are also called resets.

See: Adjustable rate mortgage