Real Estate Scrabble - July 17, 2010
With so many efforts being made to revitalize the housing industry all kinds of programs and services have been created to stabilize and boost the market. It’s almost comical how many acronyms have become a part of daily conversations in the Real Estate market. With so many programs and therefore terms, even I, as an everyday practitioner in the industry, have to stop and think what some of them mean. I’ve listed below a glossary of acronyms and terms to guide you through the jungle of meanings. In fact, there are so many new acronyms that a new version of Scrabble could become a best seller.
| ☺ | HUD – The Department of Housing and Urban Development for our Federal Government. This agency administers much of our nation’s housing policy including the FHA and VA loan programs. |
| ☺ | FHA – the Federal Housing Administration. An agency of HUD which insures mortgage lenders in the event of a foreclosure of a lowdown payment loan. An FHA loan typically need only 3 ½ % down as opposed to 20% down needed for a non FHA loan. Created almost 80 years ago and has been a pillar of the Real Estate industry. |
| ☺ | VA – Veterans Administration. And agency of HUD which insures mortgage lenders in the event of a foreclosure to a United States veteran. This loan is typically made with no money down in return for the services given by the veteran. This loan program has one of the lowest foreclosure rates. |
| ☺ | PMI – Private Mortgage Insurance. Insures mortgages in the event of a foreclosure for conventional loans or non FHA/VA loans. |
| ☺ | ARM – Adjustable Rate Mortgage. A type of mortgage where the finance charge changes periodically based on some combination of a specified index, margin, time, yield, and any preselected caps. Not as easy to understand as a fixed rate mortgage. There are many different types of ARMs. Please take the time to understand what you are committing to. |
| ☺ | HAFA – Housing Affordable Foreclosure Alternative program. A Federal program which tries to stream line the short sale process. |
| ☺ | HAMP – Housing Affordable Modification Program. A Federal program which tries to give incentives to lenders and borrowers to change the terms of existing mortgages for borrowers who have encountered a hardship and have unsustainable existing terms. |
| ☺ | HARP – Housing Affordable Refinance Program. A Federal program for non hardship borrowers who would normally refinance into a more desirable loan product but have insufficient equity in their property to get a conventional loan. A conventional loan will usually allow a refinance up to 80% loan to value. HARP will allow a qualified existing borrower to refinance up to a 125%. This allows the so called “underwater” homeowner to better their rate and terms. Cash out is not allowed. |
| ☺ | LTV – Loan to Value ratio. The percentage of the mortgage amount in relation to the value of the property. This has always been a major criteria for loan approval. This criteria was often overlooked by lenders during the Real Estate boom several years ago. |
| ☺ | NEG AM – Negative Amortization. A type of mortgage where the required monthly payment only pays a lesser portion of that month’s interest. The remaining monthly interest is added to the top of the loan balance. The result is your loan balance increases beyond what you originally borrowed. Probably called negative for a good reason. |
| ☺ | REO – a term used by lenders for a bank owned property which refers to the lenders portfolio of Real Estate owned. Another term meaning foreclosure. |
This is just a partial list of the many terms that should be understood when making Real Estate decisions. You should consult your local realtor and mortgage professional so that together you can choose your best options.
