A glossary full of knowledge and technical terms

Repayment of the loan through regular, periodic installments of principal and interest, as opposed to interest-only payments.

List with all payments of a loan and breakdown of the amounts into repayment and interest.

The effective interest rate taking into account the financing costs.

Credit application

Estimate of the current market value of a property by a licensed appraiser. An appraiser determines the value by comparing it with at least three other properties that are similar in location, construction and price, are within a one-mile radius and have been sold in the past 12 months.

Variable-rate mortgage loan (e.g. 3-year ARM = mortgage with a fixed interest rate for three years, which then adjusts once every 12 months)

Processing fee charged by the lender when an existing loan is taken over.

Transfer of the mortgage when selling real estate. Most banks reserve the right to call in a loan if the property is sold. This means that the buyer has to apply for a new mortgage.

Direct debit procedure, which guarantees punctual monthly repayments.

Mortgage that is not fully amortized during the term. At the end of the term, the outstanding repayment portion is due in full.

If the last installment payment is higher than the previous installment and the outstanding debt balance is paid in full.

Bridge financing

Limitation of a possible increase in interest rates guaranteed by the lender before the loan is granted in the case of variable interest rates. A 2/5 cap means, for example, that the interest rate cannot rise by more than 2% from one year to the next and by more than 5% within the total term of, for example, 30 years. Caps limit the interest rate risk for the borrower.

The equity required for closing.

Bank-guaranteed check drawn on the issuing bank.

Conclusion that precedes the land register entry known to us. When a property is purchased, the seller is paid at the closing, the loan amount is paid out and the new owner and mortgage are registered.

Closing costs, including the fees of the banks and all other service providers as well as insurance, taxes, etc. During an initial meeting with the bank or mortgage broker, a list of the expected closing costs will be provided.

The contractually stipulated and agreed date for the completion of the real estate transaction, binding for both parties.

A statement listing the final costs incurred by the buyer and seller in the course of selling or refinancing the property.

Binding commitment. A mortgage commitment obliges the lending bank to make the mortgage available under the conditions specified in the commitment.

A system of individual ownership interests in an apartment building, combined with common ownership rights to the common areas of the building and land.

Construction financing, which in most cases is automatically converted into final financing after completion of construction. During the construction phase, only installments per construction phase are paid out to the construction company in the case of construction financing. The borrower does not pay any commitment interest, but only interest on the amount disbursed.

A so-called “finance contingency” in the purchase agreement can make the fulfillment of the purchase agreement dependent on a successful financing request.

The option of converting certain variable-rate loans into fixed-rate loans. This option is usually offered for a predetermined and limited period of time.

A deed that is used in many states instead of a mortgage. The borrower transfers the property to a trustee for the benefit of the lender. This is then transferred back after full payment.

Documents that refer to certain terms and conditions and in which, for example, banks fulfill their disclosure obligations (e.g. reference to possible closing costs, insurance, interest rates, etc.)

Advance fee (advance interest) charged by the lender for lower interest rates.

Deed or transfer tax, which is calculated as a percentage.

Down payment, equity

Down payment made by the buyer when purchasing a property as a sign of good faith.

Land charges, rights of way, inheritance, usufruct or other rights of use

Proportion of the monthly loan installment that is withheld by the lender for the payment of property tax, home liability insurance and mortgage insurance.

Trust or escrow account, into which advance payments are usually deposited, or property taxes and insurance premiums are accumulated.

A so-called “finance contingency” in the purchase agreement can make the fulfillment of the purchase agreement dependent on a successful financing request.

Fixed interest rate

GFE – To the best of our knowledge and belief, the expected potential closing costs of a financing. The GFE also includes the amount of the estimated monthly charges and any other fees associated with the transaction.

Home insurance. The usual insurance packages for real estate include insurance in the event of storm, fire, liability, household contents, etc.

Inspections of e.g. condition of the house, construction progress, termite infestation, water quality etc.

Insurance. The usual insurance packages for real estate include insurance in the event of storm, fire, liability, household contents, etc.

Tax on intangible assets, which is calculated as a percentage.

Interest

Interest rate

Land description as registered with us at the land registry.

Lenders, both institutional and private.

Lien that can be legally obtained, e.g. through unpaid services, or an agreed right in the case of a land charge.

Credit

Loan amount

Credit application

One-off fee charged by the lender.

The amount of the mortgage in relation to the lower of the sale price or appraised value of the property sale price or appraised value of the property.

The lender guarantees the interest rate and program for the specified term of the contract. The fixed term usually applies for 15 to 60 days.

Loan to Value Ratio – The amount of the mortgage in relation to the lower of the sales price or appraised value of the property sales price or appraised value of the property.

Mortgage, loan secured by a land charge.

Mortgage broker who works on behalf of the client, i.e. compares interest rates, negotiates with banks, obtains appraisals and credit reports, arranges for inspections and surveys and coordinates the entire transaction.

Fixes the terms of the mortgage agreement.

Mortgage lender

Mortgagor

Person authorized in the USA (without special approval) who, for example, confirms the authenticity of signatures.

One-off fee charged by the lender or mortgage broker, usually calculated as a percentage of the loan amount (points).

Inspection of the property for acute or past infestation by termites and microorganisms.

Repayment, interest, property tax, insurance. The regular monthly charge for financing includes PITI.

Fees for a mortgage loan that must be paid in advance by the buyer at closing, e.g. pro rata interest, insurance, property tax.

Early repayment penalty. Most loans in the USA have no prepayment penalty, so the borrower can repay their loan at any time without paying penalty interest.

Repayment

Processing (of the financing request)

Promise of payment by the borrower to the lending bank.

Interest rate used to determine the borrower’s ability to repay, e.g. after a possible increase in interest rates.

Registration of changes of ownership and/or encumbrances and restrictions on a property.

Full repayment and deletion of a mortgage.

Servicing of the current loan; practiced by the bank, which, among other things, collects the monthly direct debits for the repayment of the loan.

Measurement of property and building boundaries.

Title insurance that protects the owner and the lender against third-party claims. The Title Insurance Policy enjoys public faith.

Document that must be handed over to the borrower by the mortgage broker and the bank. Includes the “Annual Percentage Rate”, possible total costs of financing, possible monthly charges, prepayment penalty, interest on arrears and other conditions.

Check or approve the loan.

Credit application

An interest rate that can adjust up and down based on a predetermined index.

VOA – Statement of assets

VOD – Proof of deposit paid.

VOE – confirmation from the employer.

VOI – Confirmation of income

VOM – Proof of a current mortgage (check for punctual loan payments in the past).

VOR – Proof of punctual rental payments.

Deed of conveyance naming the owner of a property.