Appraisal - A written opinion of a property's current market
value prepared by a qualified appraiser.
Balloon Note - A long-term loan, often a mortgage, that has
one large payment (the balloon payment) due upon maturity.
A balloon note often has the advantage of low payments, thus
requiring very little capital outlay during the life of the loan.
Basis Point - Basis points are used to describe the movement
of interest rates or yields in hundredths of a percent. A basis
point is .01 percent, thus 100 basis points equal one percent.
Closing Costs - Costs for services required to close a mortgage
loan, such as title insurance, inspections, appraisals, loan closing
fees and attorney's fees.
Cooperative Lender - A lender that is owned and controlled
by its customers. Each member has one vote.
EIR (Effective Interest Rate) - Similar to the consumer
APR, or annual percentage rate, the effective interest rate is an
expression of a customer's total cost of borrowing in the first
12 months of a loan, including stock purchase, origination fees
and interest, expressed as an interest rate.
Fixed-Rate Loan - A loan in which the interest rate is fixed
for a pre-established time frame. The fixed-rate period can
run for as long as the full term of the loan, or for some fixed
period shorter than the full term.
GFE (Good Faith Estimate) - A document that discloses
estimates of closing costs that borrowers are required to pay
at loan closing. It is required by federal law to be delivered
to home loan applicants within three days of receipt of an
application.
Inspection - An inspection of a prospective home or structure
done by a professional to establish the structural and mechanical
integrity of the building.
LIBOR (London Interbank Offered Rate) - The interest
rate that international banks charge each other for short-term
interbank loans. It is usually quoted for 1, 3 and 6-month
periods, and is a key reference rate used throughout the world
financial markets. LIBOR is typically used as the base index for
short-term loans and adjustable-rate mortgages. LIBOR rates
are published daily in the Wall Street Journal.
Lot Loan - A lot loan is designed for people who wish to
finance an unimproved property on which they intend to
build a home in the future. Limited agricultural activity may
occur on the property, but no intensive farming.
One-Time Close - Saves closing costs by combining your
land loan, interim construction financing and permanent
mortgage loan into one package. |
Patronage - The portion of a cooperative's net earnings, after
payment of all operating expenses, that are distributed to the
cooperative's members on a pro rata basis. Patronage refunds
are a unique economic feature of cooperatives. They are paid
in cash, allocated equities, stock or any combination of these,
and lower the effective cost of borrowing from a cooperative.
Preapproval - A general term that means a borrower has
completed a loan application and has provided their debt,
income and savings information, which an underwriter has
reviewed and approved prior to an actual transaction.
Prequalification - A preliminary step in the loan application
process, a prequalification is a lender's written opinion
of the ability of the borrower to qualify for a particular loan
amount. The amount prequalified by the lender is determined
based on inquiries into the borrower's credit history, debt,
income and savings.
Prime Rate - A short-term, variable interest rate quoted by commercial
banks as an indication of the rate being charged on loans
to its best commercial customers. Even though banks frequently
charge more and sometimes less than the quoted prime rate, it
is a benchmark against which other variable rates are measured.
Rate Lock - An option exercised by the borrower, at the time of
the loan application or later, to "lock in" the rates and points
prevailing in the market at that time. The lender and borrower
are committed to those terms, regardless of what happens
between that point and the established closing date.
Stock - Each Farm Credit borrower becomes an owner of the
cooperative through the purchase of stock equal to 2 percent of
their loan amount, not to exceed $1,000. In most cases, funds
for the stock can be included in the loan. Ownership of this
stock gives borrowers voting rights in the co-op. The stock investment
is repaid to the borrower when the loan is paid in full.
TLS (Truth in Lending Statement) - A federal law, the
Truth in Lending Act of 1968 requires lenders to fully disclose,
in writing, the key terms of the lending arrangement and all
the fees, terms and conditions associated with a loan.
Variable-Rate Loan - Refers to any type of loan that does
not have a fixed rate of interest over the life of the loan. Such
a loan is adjusted periodically, usually according to changes in
a standard index rate outside the control of the lender, such as
the prime rate, LIBOR or Treasury bonds or notes.
- Staff |
