CAPP Personal Finance Chapter 9

Manufactured home

A housing unit that is fully or partially assembled in a factory before being moved to the living site.

Lease

A legal document that defines the conditions of a rental agreement.

Title insurance

Insurance that, during the mortgage term, protects the owner and lender against financial loss resulting from future defects in the title and from other unforeseen property claims not excluded by the policy.

Second mortgage

A cash advance based on the paid-up value of a home; also called a home equity loan.

Deed

A document that transfers ownership of property from one party to another.

Conventional mortgage

A fixed-rate, fixed payment home loan with equal payments over 15, 20, or 30 years.

Cooperative housing

A form of housing in which a building containing a number of housing units is owned by a nonprofit organization whose members rent the units.

Adjustable rate mortgage

A home loan with an interest rate that can change during the mortgage term due to changes in market interest rates.

Balloon mortgage

A home loan with fixed monthly payments and a large final payment, usually after three, five or seven years.

Rate cap

A limit on the increases and decreases in the interest rate charged on an adjustable-rate mortgage.

Payment cap

A limit on the payment increases for an adjustable-rate mortgage.

Reverse mortgage

A loan based on the equity in a home, that provides elderly homeowners with tax-free income and is paid back with interest when the home is sold or the homeowner dies.

Mortgage

A long-term loan on a specific piece of property such as a home or other real estate.

Earnest money

A portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer.

Appraisal

An estimate of the current value of a property.

Condominium

An individually owned housing unit in a building with several such units.

Buy-down

An interest rate subsidy from a home builder, a real estate developer or by the buyer that reduces a home buyer's mortgage payments during the first few years of the loan.

Closing costs

Fees and charges paid when a real estate transaction is completed; also called settlement costs.

Escrow account

Money, usually deposited with the lending financial institution, for the payment of property taxes and homeowner's insurance.

Points

Prepaid interest charged by a lending institution for the mortgage; each discount point is equal to 1 percent of the loan amount.

Zoning laws

Restrictions on how the property in an area can be used.

Refinancing

The process of obtaining a new mortgage on a home to get a lower interest rate.

Amortization

The reduction of a loan balance through payments made over a period of time.