Glossary
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Impound Account
The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses. See
Escrow Income Property
Any property developed or improved to produce income. Index
A published rate, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on an adjustable-rate mortgage (ARM).
Index of Leading Economic Indicators (LEI):
Indicators reflecting future changes in economic conditions. The index indicates the direction of the economy in the next six or nine months. It helps to forecast business trends; hence, the reference "leading indicators." It includes as one element Residential building permits for private housing. Note that gains in building permits signal business upturns. Inflation
An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less. Initial Interest Rate
The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser." Inspection Fees
Fees paid by a homebuyer for professional inspections of the property being purchased. The most common inspections are structural/mechanical inspection, termite inspection, and radon test. Others may be necessary depending on the property. Installment
The regular periodic payment that a borrower agrees to make to a lender. Installment Loan
Borrowed money that is repaid in equal payments, known as installments. A car loan is often paid for as an installment loan. Insurable Title
A property title that a title insurance company agrees to insure against defects and disputes. Insurance
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium. Insurance Binder
A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date. Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount. Interest
The fee charged for borrowing money. Also, a right, title, or share in property. Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations. Interest Rate
The cost to borrow money expressed as a percentage per year. Interest Rate Buy Down Plan
An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate. Interest Rate Ceiling (CAP)
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note. Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note. Interim Interest
An amount you will pay when your loan is funded. It's the interest due on your loan to cover the number of days from the day you get your money to the beginning of the next month. For example, if your loan is funded on September 15, you would pay 15 days of interest when the loan closes to cover the period between September 15th and the 30th. Your first payment in this scenario would be due on October 1. You may hear interim interest also referred to as "odd days interest." Investment Property
A property that is not occupied by the professional loan officer. IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds. |
