Cedric Billings

Contrary to myth, a credit bureau neither tracks all aspects of your personal life nor evaluates credit applications. Credit bureaus are simply organizations that collect and transmit four principal types of information.

WHAT A CREDIT REPORT COVERS:

IDENTIFICATION AND EMPLOYMENT DATA: Your name, birthdate, address, Social Security Number, employer and spouse's name are routinely noted. The bureau also may provide other information, such as your employment history, home ownership, income and previous address, if a creditor requests it.

PAYMENT HISTORY: Your account record with different creditors is listed, showing how much credit has been extended and how you have repaid it. Related events, such as referral of an overdue account to a collection agency, may be noted as well.

INQUIRIES: Credit bureaus are required to maintain a record of all creditors who have requested your credit history within the past six months. They normally include such creditor inquiries in your credit file for at least this long.

PUBLIC RECORD INFORMATION: Events that are a matter of public record and are related to you credit worthiness, such as bankrupticies, foreclosures, or tax liens, may also appear in your report.

Why does a lender require Title insurance?

Hypothetically, your best friend comes up to you and wants to borrow $100,000

I know, spare change for most people but come on its hypothetical. Your friend tells you he's getting a $100,000 windfall next month and will pay you back with interest. It's only a month and you'll get back more than you loaned. You decide you'll loan the money...but then find out your friend has already borrowed another $100,000 from someone else. Would you loan the money now? Who will be paid back first?

When a person goes to a lender to borrow money to buy or refinance a home that lender wants to know the money they are loaning will be paid back first. In Title terms it's called "first position". The Title company searches for any outstanding debts on behalf of the lender and then insures the lender's position so the money they loan isn't at risk by claims from another entity.

It is insurance that the borrower purchases on behalf of the lender as part of the agreement to loan money.

This was written by a guest of Cedric Billings, Paul Martin with First Integrity Title, a National Title Company. Paul can be reached at 303-947-8408 if you are in need of a title company.

All views expressed are soley of the author.

RATE CAPS - Used in adjustable rate mortgages (ARMs), these caps limit the increase or decrease in the interest rate of the mortgage. There can be caps for each period as well as the life of loan caps.

REFINANCE - To pay off an existing loan with a new one.

RELEASE OF LIABILITY - Releasing a mortgagor from personal liability for a mortgage loan.

SEASONED LOAN - FHA requires a loan to be outstanding for twelve months before it is seasoned. Other secondary marketers may have varying guidelines.

SECOND MORTGAGE - A real estate mortgage that is a second, or junior mortgage to the first, or senior mortgage.

SETTLEMENT - For real estate purposes, same as closing.

SOLVENT - A financial position of being able to meet one's current financial obligations.

SURVEY - A drawing completed by a licensed surveyor who details the measurements of a land parcel as well as the improvements to the land. Surveys used for loan transactions will need to be performed no more than 90 days before the closing of the loan, and must be accompanied by a certificate.

TAX LIEN - Lien made by the federal or state government against property for unpaid taxes.

TITLE - Documentation to the rightful ownership. In real estate, refers to the rightful ownership of real property.

TITLE INSURANCE - Also called a lender's policy, protects a creditor against losses related to defects in title.

TRUST DEED - See "Deed of Trust"

TRUTH IN LENDING ACT - A 1969 law requiring full disclosure in writing of any and all costs associated with the credit side of a purchase, including the Annual Percentage Rate, if applicable.

VA - Veterans Administration.

WRAP-AROUND MORTGAGE - A type of financial allowing a junior mortgage (new) to be treated as a prior or senior mortgage. The wraparound mortgage payment is a combination of all mortgage payments.

ZONING ORDINANCES - Local government's authorized rules regarding building codes and restrictions for property land usage.

All views and opinions are solely that of the author.

LATENT DEFECT - A defect that is hidden or concealed. It is not easily seen or discoverable by the purchase or inspector, but known by the sellers.

LEASE PURCHASE - Sellers and Purchasers can enter into agreements to purchase property with the rent payments going towards the sales price, most often towards the down payment. Most lenders provide guidelines for this type of plan. If the rent paid is less than fair market rent, the lender can view the transaction as the seller giving the buyer the down payment via reduced rent.

LIEN - Claims made against the property of another as security for the money owed. Liens can be general or specific, and can be statutory or equitable.

LITIGATION - Legal action, including all proceedings therein, a lawsuit.

LOAN AGREEMENT - The written agreement to repay a loan. If it is secured by a mortgage, it is a note describing how the payments will be made and any other actions will be performed.

LOAN COMMITMENT - A document from a lender agreeing to lend a specific amount of money for a specific purpose over a specific amount of time.

LTV (LOAN TO VALUE RATIO) - Percentage amount borrowed in the acquisition or refinancing of property. If a property is worth $100,000, and the loan is for $80,000, then the loan-to-value ratio is 80%.

MARKET VALUE - The price at which, barring distress, a purchaser is willing to pay and the seller is willing to sell.

NEGATIVE AMORTIZATION - Results in mortgage loan balance actually increasing instead of decreasing. The monthly payments do not pay the full interest due for the month, and the remaining interest rolls over and is added to the principal.

OPEN END MORTGAGE - When mortgagor and mortgagee agree, future advances of principal can be arranged. The borrower will receive a limit of the total outstanding balance. Similar to a line of credit.

PERSONAL PROPERTY - Items such as cash, jewelry, furniture and securities that are not classified as real property or real estate.

PITI - Principal, Interest, Taxes and Insurance.

PMI - See "Private Mortgage Insurance"

POWER OF ATTORNEY - Written permission for one person or party to act on the behalf of another person or party.

PREPAYMENT - An advanced payment on a Loan. Loans can either permit such payments without penalty, or there may be a penalty for such prepayments.

PRINCIPAL - In mortgage terms, the loan balance. Can also indicate a party to a transaction, or the principal can hire an agent to represent him in either a purchase or sale.

PRIVATE MORTGAGE INSURANCE, OR PMI - Insurance against the default of a loan. Costs are dependent on amount of insurance required and guidelines in force at the time of the loan.

All views and opinions are solely that of the author.

FAIR CREDIT REPORTING ACT (FCRA) - Designed to regulate the consumer credit reporting industry, ensure accurate, fair, and timely reporting of consumer credit information, and impose disclosure obligations on users of consumer credit reports.

FAIR HOUSING ACT - A low dictating that when selling or leasing residential property, it is unlawful to discriminate based on color, race, sex, creed or national origin.

FIRST MORTGAGE - The primary "original" mortgage, taking precedents over all prior loans, making those loans "junior" to the first mortgage. The property security, which is collateral for this primary mortgage, is evidence of the full appraised value at the precise time the loan is made.

FORECLOSURE - Legal action taken by a creditor or mortgagee to force the sale of property to satisfy a debt secured by the property. Judicial foreclosure, non-judicial foreclosure, and strict foreclosure are three types of foreclosure.

GIFT LETTER - If some or all of a downpayment is in the form of a gift from a relative, most lenders require a gift letter to verify the source of the funds. Each lender has different requirements as to what must be in the gift letter, and limitations of the specifics of the gift.

GOOD FAITH ESTIMATE - An estimate of the settlement charges the borrower will incur at closing. This written documentation is required by the Real Estate Settlement Procedures Act (RESPA).

HAZARD INSURANCE - Insurance covering physical damage to property. Guidelines for hazard insurance are established by each lending institution for the minimum coverage required.

HOME EQUITY LOAN - A second mortgage based on the equity the owner possesses in a home. Can be used to improve the property, or other uses.

HOUSING CODE - Municipal legislative ordinance that regulates heating, plumbing, occupancy standards, roofing and other standards for occupied structures.

IMPOUND - See "Escrow"

INSPECTION CERTIFICATE - Lenders often require a certificate to insure the collateral used for a loan is the same as indicated in a loan application.

INSURANCE - For a residential property, insurance normally covers four types of coverage; damage to the property, known as hazard insurance; losses resulting from a foreclosure, known as private mortgage insurance; PMI to cover the mortgage in the event of the mortgagor; and to cover the mortgagor in the event of disability.

JOINT AND SEVERAL LIABILITY - A lender can sue one or all of the borrowers to force satisfactory performance. An obligation form all or one of the borrowers to the lender.

All views solely the opinon of the author