The Bank of Elk River serves the financial needs of individuals and businesses in Elk River, Otsego, and Zimmerman Minnesota.
Adjustable Rate Mortgage – A loan where the interest rate changes at a predetermined interval based on an index. Referred to as an ARM.
Amortization – The process or length of term for paying the principal and interest on a loan.
Appraisal – Report that indicates to the lender the market value of a property.
Balloon – The principal amount remaining on a mortgage at the time it matures.
Ceiling – The maximum rate that a loan can be adjusted to on an Adjustable Rate Mortgage.
Closing – The event when borrowers sign the loan documents and the transfer of funds and ownership occurs.
Closing Costs – Fees or costs incurred by the borrower for receiving a loan. Origination fees, appraisal, credit report, flood certification, recording, mortgage registration tax, title insurance, document preparation fees, etc.
Conforming Mortgage – A mortgage that meets all underwriting standards.
Conventional Loan – A mortgage loan not insured by FHA or guaranteed by the VA or Farmers Home Administration.
Debt to Income Ratio – A ratio determined by dividing the monthly debt obligations by the monthly gross income.
Default – The result of a borrower failing to meet the terms of their loan agreement with the bank.
Down Payment – The amount of money required by the lender that the borrower must apply towards the purchase of a property.
Escrow - A portion of the payment that is held by the mortgage company and used to pay the property taxes and homeowners insurance.
FHA - Federal Housing Administration insured loans that assist lower- and moderate-income individuals with home financing.
FHLMC – Federal Home Loan Mortgage Corporation. Often referred to as “Freddie Mac.” They purchase mortgages from lenders and sell them to investors on the secondary mortgage market.
FNMA – Federal National Mortgage Association. Often referred to as “Fannie Mae.” They are the largest purchaser of mortgages from lenders that sell on the secondary market.
Fixed Rate Mortgages – A mortgage loan where the rate remains the same for the life of the loan.
Floor – The minimum rate for an adjustable rate mortgage.
Foreclosure – The process of extinguishing a borrowers right to redeem the mortgage upon which they have defaulted.
GNMA – Government National Mortgage Association. Often referred to as “Ginnie Mae.” A governmental agency that purchases mortgages from lenders that are sold on the secondary market.
Graduated Payment Mortgage – A loan where the repayment amount starts out lower and increases gradually over time as the borrowers income increases.
Index – The basis upon which an interest rate is determined for an adjustable rate mortgage. It is a published figure readily found in major financial newspapers.
In-House Mortgage – Mortgages that are a part of the bank's loan portfolio. The customers make their monthly payments to the bank and the bank monitors that the borrowers are paying their property taxes and homeowners insurance.
Investor – This is the supplier of the funds that the mortgage banker lends. Mortgage Bankers do not usually lend out their own funds. Mortgage bankers rely on investors to buy the notes that the mortgagors sign.
Legal Description – The surveyed or platted description for a property assigned by the county that the property lies in. For example, Lot 1, Block 2, Hideaway Shores.
Loan Portfolio – The total amount of loans funded by the bank.
Loan to Value Ratio – A ratio determined by dividing the loan amount by the appraised value of the property being mortgaged.
Margin – The difference between the cost of funds for a loan and the rate of interest charged on a loan. Also, it is the difference between an index and interest rate used for adjustable rate mortgages.
Mortgage – The legal document or contract that is signed by the property owners pledging their property as collateral for a loan.
Mortgagee – The lender in a mortgage transaction.
Mortgagor – The borrower in a mortgage transaction.
Mortgage payments – The monthly amount that must be paid to cover the principal, interest, taxes and insurance in order to repay the loan over the determined term.
Non-Conforming Mortgage – A mortgage that does not meet underwriting standards. For example, if the customer has derogatory credit or high debt to income ratio, their mortgage will have a higher interest rate than a conforming mortgage.
Origination Fee – A percentage of the principal loan amount paid by the borrower to the lender in order to receive the loan.
Priority Lien – A lien against a property that is superior to any other liens on the property. A first mortgage is to be the priority lien against a property superior to any other liens.
Private Mortgage Insurance - Insurance paid by the borrower when the loan to value ratio exceeds 80% to insure the lender against default. The premium is included in the monthly mortgage payment.
Promissory Note – A loan agreement between the bank and the borrowers whereby the borrower agrees to repay the bank according to the agreed terms.
Secondary Market Mortgage – A mortgage and loan that is agreed upon by a lender and borrower that is sold to a secondary lender.
Title Insurance – This type of insurance policy protects the lender from defects in title. It also assures the lender of priority lien rights against the property. The lender's claim to the property is ahead of any others in the event that a borrower should default.
Title Search – Procedure performed by a title company or a real estate attorney to determine what liens, if any, encumber a property from being mortgaged.
Trade Area – The geographical vicinity served by a bank.
Underwriting – The process completed by a lender to determine if a borrower is approved for a loan.
VA – Veteran's Administration. A governmental agency that guarantees loans made to qualified veterans of the military services.