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Real Estate Terms: I to O
Income Property: Real estate developed or improved to produce income.
Index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, 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 the ARM. This interest rate is subject to any caps that are associated with the mortgage.
In-file Credit Report: An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.
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."
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 furniture 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 (MI). 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.
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 rate of interest in effect for the monthly payment due.
Interest Rate Buydown 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: 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.
Investment Property: A property that is not occupied by the owner.
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.
Joint Tenancy: A form of co-ownership that gives each tenant equal interest and equal rights in the property, including the right of survivorship.
Judgment: A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor.
Judgment Lien: A lien on the property of a debtor resulting from the decree of a court.
Judicial Foreclosure: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.
Jumbo Loan: A loan that exceeds Fannie Mae’s legislated mortgage amount limits. Also called a nonconforming loan.
Late Charge: The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
Lease: A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.
Leasehold Estate: A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
Lease-purchase Mortgage Loan: An alternative financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a downpayment will accumulate.
Legal Description: A property description, recognized by law, that is sufficient to locate and identify the property without oral testimony.
Liabilities: A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Liability Insurance: Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
Lien: A legal claim against a property that must be paid off when the property is sold.
Lifetime Payment Cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. See cap.
Lifetime Rate Cap: For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.
Line of Credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower. See home equity line of credit.
Liquid Asset: A cash asset or an asset that is easily converted into cash.
Loan: A sum of borrowed money (principal) that is generally repaid with interest.
Loan Commitment: See commitment letter.
Loan Origination: The process by which a mortgage lender brings into existence a mortgage secured by real property.
Loan-to-value (LTV) Percentage: The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has a LTV percentage of 80 percent.
Lock-in: A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
Lock-in Period: The time period during which the lender has guaranteed an interest rate to a borrower. See lock-in.
Original Principal Balance: The total amount of principal owed on a mortgage before any payments are made.
Origination Fee: A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
Owner Financing: A property purchase transaction in which the property seller provides all or part of the financing.
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