A wet loan is a loan that is made in order to purchase a property that has already been built or is currently under construction. The loan is typically used to finance the purchase of a new home, and the borrower typically makes a down payment of 20% of the purchase price. What is a … Read more
A defective title is a title to real property that has one or more outstanding claims or encumbrances against it. This means that the title is not clean and clear, and that the owner may have difficulty selling or transferring the property. In some cases, a defective title may even make the property uninsurable. There … Read more
The constant default rate (CDR) is a statistic used to measure the percentage of mortgage loans that are expected to default within a certain period of time. Mortgage-backed securities (MBS) are investment vehicles that are backed by a pool of mortgage loans. The CDR is one of the key metrics used by investors to assess … Read more
A Price Level Adjusted Mortgage (PLAM) is a mortgage in which the interest rate is adjusted periodically based on changes in a specified price level. The most common price level used in this type of mortgage is the Consumer Price Index (CPI). PLAMs are similar to adjustable-rate mortgages (ARMs), but the interest rate is adjusted … Read more
A conventional mortgage or loan is a mortgage that is not backed by a government agency, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA). Lenders who issue conventional loans have more flexibility when it comes to underwriting guidelines, including credit score requirements … Read more
A servicing fee is a charge assessed by a lender to cover the cost of servicing a loan, which includes such activities as collecting monthly payments, maintaining account records, and providing customer service. Servicing fees are typically a percentage of the loan amount and are paid by the borrower as part of their monthly payment. … Read more
An adjustable-rate mortgage (ARM) with a monthly payment that can change, based on changes in the index used to calculate the interest rate. The payment can increase or decrease, but will never increase more than the fully indexed rate plus the margin. What happens after a 7 year ARM? Assuming you’re referring to a 7/1 … Read more
The housing expense ratio is a metric used by lenders to determine how much of a borrower’s income is being spent on housing costs. This includes mortgage payments, property taxes, and insurance. Lenders use this information to assess a borrower’s ability to make their monthly payments and to determine what size loan they may be … Read more
A take-out loan is a type of long-term financing that replaces interim financing, such as a construction loan. Take-out loans are usually mortgages with fixed interest rates and terms of up to 30 years. This type of loan is usually taken out by the buyer of a property who intends to occupy it as a … Read more
A junior mortgage is a loan that is subordinate to another loan, typically a first mortgage. This means that if the borrower defaults on the loan, the lender of the junior mortgage will only be able to collect on the loan after the lender of the first mortgage has been paid in full. Junior mortgages … Read more
