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GLOSSARY
Assumption
Assumption is an agreement between the buyer and seller where a buyer assumes a seller's mortgage and takes over the payments on the exisiting mortgage. This is a big saving for a buyer as it does not entail the clsoing costs and high interest rates of a new mortgage. It is not very popular anymore and the Buyer should be wary.
Automated Valuation Model (AVM)
This provides computer generated home appraisals for mortgages. AVM mortgage appraisals are designed to replace the work completed by licensed real estate appraisers. Most lenders use AVM mortgage appraisals to speed up the process and reduce costs. There is controversy debating whether this is a good implementation for evaluating property and its accuracy when compared to using an appraisal management company or AMC.
Avigation easement
An avigation easement grants aircraft the right to fly, land, or take off in unobstructed airspace above a parcel of real property. Such an easement often prohibits the property owner from installing structures that exceed a specified height. The easement also provides for outcomes typically associated with aircraft by allowing for the right to make noise and generate dust.
Award letter
An award letter is the written notification provided to a prospective college student from a financial aid office detailing the amount and type of financial aid for which that student has qualified.
B/C Loan
B/C loan refers to the class of debt facilities provided to borrowers with less-than-optimal credit qualifications. B/C loans have higher interest rates and more restrictive terms due to the higher level of risk involved for the lender. A credit-challenged borrower can use a B/C loan to establish a reliable payment history, thus improving his or her credit profile.
Back title letter
A back title letter is an official document produced by a title insurance company that specifies the condition of a property's title (i.e., who owns the land, and if there any liens or restrictions exist) as of certain date.
Back to back escrows
A closing arrangement that is set up so that the buyer can finalize the purchase of one property and the sale of another simultaneously.
Back-door trojan
A back-door trojan is malicious code or software that's hidden within another program. When the program is installed on a computer, the trojan code activates remote access to the system, so that a hacker can gain entry to the computer and its files. This remote access gives the hacker the ability to manipulate files and view confidential data, among other things.
Back-end load
Back-end load is a sales charge that's assessed when an investor sells mutual fund shares. These charges are usually structured to discourage frequent trading; the fee is highest in the first year of share ownership, and decreases as the shares are held for longer periods.
Back-end ratio
The back-end ratio is the percentage of an individual's (or household's) pre-tax, monthly income that's used to pay monthly debt obligations. Debt obligations include the mortgage payment, real estate taxes, mortgage insurance, and all credit account payments, including credit cards and car loans. The ratio is calculated by adding up the debt obligations and dividing the sum by the pre-tax monthly income.
Back-end ratio or back ratio
The back-end ratio is the percentage of an individual's (or household's) pre-tax, monthly income that is used to pay monthly debt obligations. Debt obligations include the mortgage payment, real estate taxes, mortgage insurance and all credit account payments, including credit cards and car loans. The ratio is calculated by adding up the debt obligations and dividing the sum by the pre-tax monthly income.
Back-to-back escrow
A back-to-back escrow is arranged so that a homeowner can sell one property and purchase another simultaneously. This arrangement is useful in cases where the homeowner can only carry one mortgage at a time. Back-to-back escrow allows for the transition from an existing mortgage on the property that's being sold directly to a new mortgage on the purchased property. Including a back-to-back escrow contingency in a home purchase offer makes the offer less appealing to the seller.
Back-to-back loans
between two companies for the purpose of hedging against foreign exchange rate fluctuations. Two companies in different countries would borrow corresponding amounts from one another. A U.S. company, for example, would loan a specified amount in dollars to a Japanese company, and the Japanese company would loan the U.S. company an equivalent amount in yen.
Backend ratio
A ratio that indicates what portion of a person's monthly income goes toward paying debts, mortgage, credit cards, car payments, student loan. Traditionally, lenders were loath to extend borrowers' back-end ratios past 36 percent, but they often do now. Lenders use this ratio in tandem with the front end ratio to approve mortgages. This is also known as a debt to income ratio.
Backup offer
A bid for a property that the owner will consider if the current transaction falls through. If your bid for a house comes in second, be sure to make a backup offer. This will put you in line if the first offer falls through.