A | B | C | D
| E | F | G | H
| I | J | K | L
| M |
N | O | P | Q
| R | S | T | U
| V | W | X | Y
| Z
A
Acceleration Clause
A common provision of a mortgage or note providing the holder with the
right to demand that the entire outstanding balance is immediately due
and usually payable in the event of default.
Accrued
Interest
Interest earned but not yet paid.
Adjustable Rate Mortgage Loans (ARM)
Loans with interest rates that are adjusted periodically based on changes
in a pre-selected index. As a result, the interest rate on your loan and
the monthly payment will rise and fall with increases and decreases in
overall interest rates. These mortgage loans must specify how their interest
rate changes, usually in terms of a relation to a national index such
as (but not always) Treasury bill rates. If interest rates rise, your
monthly payments will rise. An interest rate cap limits the amount by
which the interest rate can change; look for this feature when you consider
an ARM loan.
Adjustment Interval
The length of time between changes in the interest rate or monthly payment
on an ARM loan.
Agreement of Sale
Contract signed by buyer and seller stating the terms and conditions under
which a property will be sold.
Alternative Documentation
A method of documenting a loan file that relies on information that the
borrower is likely to be able to provide instead of waiting on verification
sent to third parties for confirmation of statements made in the application.
Amortization
Repayment of a loan with periodic payments of both principal and interest
calculated to payoff the loan at the end of a fixed period of time.
Amount Financed
This figure is used to calculate your APR. It represents your loan amount
minus any prepaid finance charges and assumes you will keep the loan to
maturity and make only the required monthly payments.
Annual Percentage Rate (APR)
There are two interest rates applied to your loan: the Actual Interest
Rate and the Annual Percentage Rate. The Actual Rate is the annual interest
rate you pay on your loan (sometimes referred to as the "note rate"),
and is the rate used to calculate your monthly payments. The amount of
interest you pay, as determined by your Actual Rate, is only one of the
costs associated with your loan; there may be others. The Annual Percentage
Rate (APR) includes both your interest and any additional costs or prepaid
finance charges you might pay such as prepaid interest, private mortgage
insurance, closing fees, points, etc. Your APR represents the total cost
of credit on a yearly basis after all charges are taken into consideration.
It will usually be slightly higher than your Actual Rate because it includes
these additional items and assumes you will keep the loan to maturity.
Application
An initial statement of personal and financial information required to
apply for a loan.
Application Fee
Fee charged by a lender to cover the initial costs of processing a loan
application. The fee may include the cost of obtaining a property appraisal,
a credit report, and a lock-in fee or other closing costs incurred during
the process or the fee may be in addition to these charges.
Appraisal
An appraisal is a written analysis of the estimated value of your property.
A qualified appraiser who has knowledge, experience and insight into the
marketplace prepares the document. It demonstrates approximate fair market
value based on recent sales in your neighborhood and is required to purchase
or refinance your new home or property.
Appraisal Fee
A fee charged by a licensed, certified appraiser to render an opinion
of market value as of a specific date.This fee is paid to the outside
appraisal company we engage to objectively determine the fair market value
of your property. This fee varies based on the location and type of your
property.
APR
See Annual Percentage Rate.
ARM
See Adjustable Rate Mortgage Loans.
Assignment
The transfer of ownership, rights, or interests in property by one person,
the assignor, to another, the
assignee.
Assignment Recording Fee
In many instances, after closing the lender transfers your loan to a specialized
loan "servicer" who handles the collection of your monthly payments.
The Assignment Fee covers the cost of recording this transfer at the local
recording office.
Assumption
A method of selling real estate where the buyer of the property agrees
to become responsible for the repayment of an existing loan on the property.
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B
Balloon Mortgage
Balloon mortgage loans are short-term fixed-rate loans with fixed monthly
payments for a set number of years followed by one large final balloon
payment for all of the remainder of the principal. Typically, the balloon
payment may be due at the end of five, seven, or ten years. Borrowers
with balloon loans may have the right to refinance the loan when the balloon
payment is due, but the right to refinance is not guaranteed.
Bankruptcy
A proceeding in a federal court to relieve certain debts of a person or
a business unable to pay its debts.
Bequest
A gift of personal property by will.
Blanket Mortgage
A mortgage that covers more than one parcel of real estate.
Bona Fide
In good faith.
Borrower (Mortgagor)
An individual who applies for and receives funds in the form of a loan
and is obligated to repay the loan in full under the terms of the loan.
Broker
An individual who brings buyers and sellers together and assists in negotiating
contracts for a client.
Buy-Down Mortgage
A mortgage loan with a below-market rate for a period of time.
Buyer's Market
Market conditions that favor buyers. With more sellers than buyers in
the market, sellers may be forced to make substantial price concessions.
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C
Call Option
A provision of a note that allows the lender to require repayment of the
loan in full before the end of the loan term. The option may be exercised
due to breach of the terms of the loan or at the discretion of the lender.
Caps (interest)
Consumer safeguards that limit the amount the interest rate on an adjustable
rate mortgage can change in an adjustment interval and/or over the life
of the loan. For example, if your per-period cap is 1% and your current
rate is 7%, then your newly adjusted rate must fall between 6% and 8%
regardless of actual changes in the index.
Caps (payment)
Consumer safeguards that limit the amount monthly payments on an adjustable
rate mortgage may change. Since they do not limit the amount of interest
the lender is earning, these consumer safeguards may cause negative amortization.
Cash Out
Any cash received when you get a new loan that is larger than the remaining
balance of your current mortgage, based upon the equity you have already
built up in the house. The cash out amount is calculated by subtracting
the sum of the old loan and fees from the new mortgage loan.
For example, if your existing loan is $100,000, you might refinance it
with a loan of $120,000. After you pay off your current loan ($100,000)
and any loan-origination costs for the new loan (for example $2,000 in
points), you would be left with $18,000 cash out.
Cash-out loans may not be available for all types of property.
Cashier's Check (or Bank Check)
A check whose payment is guaranteed because it was paid for in advance
and is drawn on the bank's account instead of the customer's.
Ceiling
The maximum allowable interest rate of an adjustable rate mortgage.
Certificate of Eligibility
Document issued by the Veterans Administration to qualified veterans and
that verifies a veteran's eligibility for a VA guaranteed loan. Obtainable
through local VA office by submitting form DD-214 (Separation Paper) and
VA form 1880 (request for Certificate of Eligibility).
Certificate of Title
Written opinion of the status of title to a property, given by an attorney
or title company. This certificate does not offer the protection given
by title insurance.
Certificate of Veteran Status
FHA form filled out by the VA to establish a borrower's eligibility for
an FHA Vet loan. Obtainable through local VA office by submitting form
DD 214 (Separation Paper) with form26-8261a (request for certificate of
veteran status).
Chain of Title
The chronological order of conveyance of a property from the original
owner to the present owner.
Closing (or Settlement)
The settlement or closing is the conclusion of your real estate transaction.
It includes the delivery of your security instrument, signing of your
legal documents and the disbursement of the funds necessary to the sale
of your home or loan transaction (refinance).
Closing Costs
Also known as settlement costs, these costs are for services that must
be performed to process and close your loan application. Examples include
title fees, recording fees, appraisal fee, credit report fee, pest inspection,
attorney's fees, taxes, and surveying fees.
COFI
See Cost of Funds Index.
Collateral
Assets (such as your home) pledged as security for a debt.
Commission
Money paid to a real estate agent or broker for negotiating a real estate
or loan transaction.
Commitment
A promise to lend and a statement by the lender of the terms and conditions
under which a loan is made.
Comparables
An abbreviation for "comparable properties"; used for comparative
purposes in the appraisal process.
Comparables are properties like the property under consideration; they
have reasonably the same size, location, and amenities and have recently
been sold. Comparables help the appraiser determine the approximate fair
market value of the subject property.
Compound Interest
Interest which is calculated not only on the initial principal but also
the accumulated interest of prior periods.
Comparative Market Analysis
An informal estimate of market value that a real estate agent or broker
calculates based on sales of comparable properties. An appraisal or a
comparative market analysis are the most accurate ways to determine what
your home is worth.
Condominium
A real estate project in which each unit owner holds title to a unit in
a building, an undivided interest in the common areas of the project,
and sometimes the exclusive use of certain limited common areas. The condominium
may be attached or detached. The homeowners association dues are included
in the total monthly mortgage payment for qualifying purposes.
Conforming Loan
A mortgage loan that meets all requirements to be eligible for purchase
by federal agencies such as Fannie Mae and Freddie Mac. The maximum conforming
loan amount is $300,700 for a one-unit property ($451,050 in Alaska, Hawaii
and the Virgin Islands).
Consumer Reporting Agency
A company that regularly gathers, files and sells information to creditors
to facilitate their decisions to extend credit.
Contingency
A condition that must be satisfied before a contract is legally binding.
Contract of Sale
The agreement between the buyer and seller on the purchase price, terms
and conditions of a sale.
Conventional Loan
Loans that are not made under any government housing program; they are
not subject to the restrictions of government housing programs, such as
loan size limits.
Conversion Clause
A provision in some ARMs that allows you to change an ARM to a fixed-rate
loan, usually after the first adjustment period. The new fixed rate will
be set at current rates, and there may be a charge for the conversion
feature.
Convertible ARMs
A type of ARM loan with the option to convert to a fixed-rate loan during
a given time period.
Conveyance
The document used to affect a transfer, such as a deed, or mortgage.
Cost of Funds Index (COFI)
An index of the weighted-average interest rate paid by savings institutions
for sources of funds, usually by members of the 11th Federal Home Loan
Bank District.
Credit Bureau
A credit bureau is a clearinghouse for credit history information. Credit
grantors provide the bureau with factual information on how their credit
customers pay their bills. The bureau regularly assembles this information,
along with public record information obtained from courthouses around
the country, into a "file" on each consumer.
Credit Report
A report detailing the credit history of a prospective borrower that's
used to help determine borrower creditworthiness.
Credit Score
A statistical method of assessing your creditworthiness. Your credit card
history; amount of outstanding debt; the type of credit you use; negative
information such as bankruptcies or late payments; collection accounts
and judgments; too little credit history and too many credit lines with
the maximum amount borrowed are all included in credit-scoring models
to determine your credit score.
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D
Deed
Legal document with which title to real property is transferred from one
owner to another. The deed contains a description of the property, and
is signed, witnessed, and delivered to the buyer at closing.
Deed of Trust
A legal document that conveys title to real property to a third party.
The third party holds title until the owner of the property has repaid
the debt in full.
Default
Failure to meet legal obligations in a contract, including failure to
make payments on a loan.
Delinquency
Failure to make payments as agreed in the loan agreement.
Discount Points (or Points)
Points are an up-front fee paid to the lender at the time that you get
your loan. Each point equals one percent of your total loan amount. Points
and interest rates are inherently connected: in general, the more points
you pay, the lower your interest rate. However, the more points you pay,
the more cash you need up front since points are paid in cash at closing.
Document Preparation Fee
Occasionally we use outside companies to prepare the loan closing documents.
This fee covers the cost of this service.
Down Payment
The amount of your home's purchase price you need to supply up front in
cash to get your loan. For conventional loans, you should strive for a
down payment that's at least 20% of your home's value, since lenders generally
do not require private mortgage insurance with a down payment of at least
20% of your home's purchase price. (Note, however, that FHA and VA loans
have different policies regarding insurance.)
Due-on-Sale Clause
Provision in a mortgage or deed of trust allowing the lender to demand
immediate payment of the loan balance upon sale of the property.
Duplex
Owner occupied property for more than one family
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E
Earnest Money
Deposit made by a buyer towards the down payment in evidence of good faith
when the purchase agreement is signed.
ECOA
See Equal Credit Opportunity Act.
Encryption
This is a procedure used in order to prevent anyone but the intended recipient
from reading the data. There are many types of data encryption, and they
are basis of network security. Common types include (Data Encryption Standard)
and public-key encryption.
Equifax
One of the three largest credit bureaus in the United States.
Equal Credit Opportunity Act (ECOA)
Federal law requiring creditors to make credit equally available without
discrimination based on race, color, religion, national origin, age, sex,
marital status or receipt of income from public assistance programs.
Equity
The difference between the current market value of a property and the
total debt obligations against the property. On a new mortgage loan, the
down payment represents the equity in the property.
Escrow
A transaction in which a third party acts as the agent for seller and
buyer, or for borrower and lender, in handling legal documents and disbursement
of funds.
Escrow Account
An account held by the lender to which the borrower pays monthly installments,
collected as part of the monthly mortgage payment, for annual expenses
such as taxes and insurance. The lender disburses escrow account funds
on behalf of the borrower when they become due. Also known as Impound
Account.
Escrow Agent
A person with fiduciary responsibility to the buyer and seller, or the
borrower and lender, to ensure that the terms of the purchase/sale or
loan are carried out.
Estimated Closing Fees
An estimate of the fees that must be paid on or before the closing date
by the buyer and/or seller for services, taxes and items necessary to
obtain mortgage. These fees will average between 2% and 5% of the loan
amount and vary by lender, property location, and type of mortgage.
Experian
One of the three largest credit bureaus in the United States.
Express/Courier Fee
On refinance transactions, we typically use an overnight courier to expedite
the payoff of your existing loan. This fee covers the cost of the courier.
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F
Fair, Isaac and Co.
The company that invented credit-scoring software.
Fannie Mae
This agency buys loans that are underwritten to its specific guidelines.
These guidelines are an industry standard for residential conventional
lending.
FDIC
See Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (FDIC)
Independent deposit insurance agency created by Congress to maintain stability
and public confidence in the nation's banking system.
Federal Housing Administration (FHA)
A federal agency within the Department of Housing and Urban Development
(HUD), which insures residential mortgage loans made by private lenders
and sets standards for underwriting mortgage loans.
Fee Simple
Absolute ownership of real property.
Federal Reserve Board
The 7-member Board of Governors that oversees Federal Reserve Banks, establishes
monetary policy (interest rates, credit, etc.), and monitors the economic
health of the country. Its members are appointed by the President subject
to Senate confirmation, and serve 14-year terms. also called the Fed.
FHA
See Federal Housing Administration.
FHA Loans
Fixed- or adjustable-rate loans insured by the U.S. Department of Housing
and Urban Development. FHA loans are designed to make housing more affordable,
particularly for first-time homebuyers. FHA loans typically permit borrowers
to buy a home with a lower down payment than conventional loans. With
FHA insurance, eligible buyers can purchase a home with a down payment
of as little as 3% of the appraised value or the purchase price-whichever
is lower. FHA borrowers typically are required to participate in a face-to-face
meeting with their lender or a government approved mortgage counselor
prior to closing on a new mortgage loan. The current FHA loan limits vary
depending on home type and home location. To find the most recent limits
for your home, consult the FHA Maximum Mortgage Limits web page.
FICO
The most common credit-scoring model used by lenders, it is also known
as a Fair, Isaac score. Your FICO can range from 200 to 900. According
to this model, the higher your score, the less likely you are to default
on your loan.
Filing Fees
The amount charged by public officials in your area for recording your
mortgage and other documents.
Finance Charge
Your finance charge is the total of all the interest you would pay over
the entire life of the loan, assuming you kept the loan to maturity, as
well as all prepaid finance charges. If you pre-pay any principal during
your loan, your monthly payments remain the same, but your total finance
charge will be reduced.
First Mortgage
A mortgage that is in first lien position, taking priority over all other
liens. In the case of a foreclosure, the first mortgage will be repaid
before any other mortgages.
Fixed Rate
An interest rate that is fixed for the term of the loan.
Fixed-Rate Loans
Fixed-rate loans have interest rates that do not change over the life
of the loan. As a result, monthly payments for principal and interest
are also fixed for the life of the loan. Fixed-rate loans typically have
15-year or 30-year terms. With a fixed-rate loan, you will have predictable
monthly mortgage payments for as long as you have the loan.
Float
Until you request to secure a lender's quoted interest rate, the interest
rate will continue to change, or float, due to market fluctuations. Locking
or securing a rate protects you from these potential fluctuations from
the time your lock is confirmed to the day your lock period expires. You
may choose to float your rate up until the time your lender contacts you
to schedule your closing. At this time, an interest rate must be secured
in order to prepare your closing documents.
Flood Certification Fee
Federal law requires that you obtain flood hazard insurance if your property
lies in a flood zone. As part of our evaluation of your property, we engage
a flood determination company to tell us whether or not your house is
located in a flood zone. The flood certification fee covers the cost.
If your house is located in a flood zone, you will be required to purchase
Flood Insurance.
Flood Insurance
Insurance that compensates for physical damage to a property by flood.
Typically not covered under standard hazard insurance.
Flood Life of Loan Coverage
Flood zone determinations may change from time to time. The "Life
of Loan Coverage" fee allows us to track any changes in your property's
flood zone status over the life of your loan.
Forbearance
The act by the lender of refraining from taking legal action on a mortgage
loan that is delinquent.
Foreclosure (or Repossession)
Legal process by which a mortgaged property may be sold to pay off a mortgage
loan that is in default.
Freddie Mac
This agency buys loans that are underwritten to its specific guidelines.
These guidelines are an industry standard for residential conventional
lending.
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G
Good Faith Estimate
Written estimate of the settlement costs the borrower will likely have
to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA),
the lender is required to provide this disclosure to the borrower within
three days of receiving a loan application.
Government Recording Fee
We pay this fee to your local county recording office for recording our
mortgage lien, and in the event of a purchase transaction, the deed that
transfers title. Fees for recording vary by county and are set by state
and local governments.
Grace Period
Period of time during which a loan payment may be made after its due date
without incurring a late penalty. The grace period is specified as part
of the terms of the loan in the Note.
Gross Income
Total income before taxes or expenses are deducted.
Guideline Ratios
There are two guideline ratios used to qualify you for a mortgage. The
first is called the front-end ratio, or top ratio, and is calculated by
dividing your new total monthly mortgage payment by your gross monthly
income. Typically, this ratio should not exceed 28%. The second is called
the back-end, or bottom ratio, and is equal to your new total monthly
mortgage payment plus your total monthly debt divided by your gross monthly
income. Typically, this ratio should not exceed 36%.
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H
Hazard Insurance
Protects the insured against loss due to fire or other natural disaster
in exchange for a premium paid to the insurer.
Home Equity Line of Credit
A home equity line of credit is a credit line that is kept open and restored
as you pay off what is owed. An equity line of credit also has a high
credit limit similar to a credit card that you are allowed to draw upon
as needed.
Homeowners Insurance
Just as you insure your automobile to protect against theft and damage,
you insure your home.
Homeowners insurance is required by all lenders to protect their investment,
and must be obtained before closing. In most cases, coverage must be equal
to the loan balance, or the value of the home.
Housing and Urban Development (HUD)
Housing and Urban Development, the U.S. government agency established
to implement federal housing and community development programs; oversees
the Federal Housing Administration.
HUD-1 Uniform Settlement Statement
A standard form that itemizes the closing costs associated with purchasing
a home or refinancing a loan.
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I
Impound Account
Also known as an Escrow Account it is an account held by the lender to
which the borrower pays monthly installments, collected as part of the
monthly mortgage payment, for annual expenses such as taxes and insurance.
The lender disburses impound account funds on behalf of the borrower when
they become due.
Index
Most lenders generally tie adjustable rate mortgage loan (ARM) interest
rate changes to an "index." An index is a widely published rate
such as LIBOR, T-Bill, or 11th District Cost of Funds (COFI). Lenders
use these indices to establish the interest rates charged on mortgage
loans. For ARMs, a predetermined margin is added to the index to compute
the interest rate adjustment.
Initial Cap
Consumer safeguard that limits the amount the interest rate on an adjustable
rate mortgage can change during the first adjustment period. See Caps.
Initial Rate
The rate charged during the first interval of an ARM loan.
Insurance
The type of insurance(s) required for your loan. Private mortgage insurance
may also be required in addition to what is indicated.
Interest
Charge paid for borrowing money.
Interest Rate
The annual rate of interest on the loan, expressed as a percentage of
100.
Interest Rate Cap
Consumer safeguards that limit the amount the interest rate on an ARM
loan can change in an adjustment interval and/or over the life of the
loan. For example, if your per-period cap is 1% and your current rate
is 7%, then your newly adjusted rate must fall between 6% and 8% regardless
of actual changes in the index.
Interest Rate Disclosure
A description of the conditions applicable to the processing of your loan
as well as the terms of your interest rate agreement with Quicken Loans
.
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J
Joint Liability
Liability shared among two or more people, each of whom is liable for
the full debt.
Joint Tenancy
A form of ownership of property giving each person equal interest in the
property, including rights of survivorship.
Jumbo Loan
A mortgage larger than the limits set by Fannie Mae and Freddie Mac as
shown below:
Lower 48 States
1 unit $322,700
2 unit $413,100
3 unit $499,300
4 unit $620,500 Alaska and Hawaii
1 unit $484,050
2 unit $619,650
3 unit $748,950
4 unit $930,750
Junior Mortgage
A mortgage subordinate to the claim of a prior lien or mortgage. In the
case of a foreclosure, a senior mortgage or lien will be paid first.
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K
No K terms.
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L
Late Charge
Penalty paid by a borrower when a payment is made after the due date.
Lender
The bank, mortgage company, or mortgage broker offering the loan.
Lender Fees
Lender Fees are fees paid to the lender.
Lender Processing Fee
The lender processing fee covers the cost of analyzing your loan application
and compiling and packaging the necessary supporting documentation to
close your loan.
LIBOR (London Interbank Offered Rate)
The interest rate charged among banks in the foreign market for short-term
loans to one another-a common index for ARM loans.
Lien
A legal claim by one person on the property of another for security for
payment of a debt.
Lifetime (or Overall) Cap
Consumer safeguard that limits the amount the interest rate on an adjustable
rate mortgage loan (ARM) can change over the life of the loan. See Caps.
Loan Application
An initial statement of personal and financial information required to
apply for a loan.
Loan Application Fee
Fee charged by a lender to cover the initial costs of processing a loan
application. The fee may include the cost of obtaining a property appraisal,
a credit report, and a lock-in fee or other closing costs incurred during
the process or the fee may be in addition to these charges.
Loan Origination Fee
Fee charged by a lender to cover administrative costs of processing a
loan.
Loan Term
The period of time between the closing date and the date of your last
payment is paid.
Loan-to-Value Ratio (LTV)
The percentage of the loan amount to the appraised value (or the sales
price, whichever is less) of the property.
Lock or Lock-In
A lender's guarantee of an interest rate for a set period of time-usually
between loan application approval and loan closing. The lock-in protects
you against rate increases during that time.
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M
Manufactured Home
A factory assembled residence built in units or sections that are transported
to a permanent site and erected on a foundation.
Margin
The percentage difference between the index for a particular loan and
the interest rate charged. This is a number predetermined by the lender.
Maximum Cash Out
The maximum amount of money you are allowed to get back from your mortgage
transaction based on the loan information provided and the amount of equity
you have in your home.
Maximum Monthly Payment
As part of your Mortgage 1st® approval, you are given a maximum monthly
payment for which you qualify based on the information you provided. This
maximum payment is inclusive of the four major components of a typical
mortgage payment: taxes, insurance, loan principal and interest.
Monthly Mortgage Payment
A monthly mortgage payment typically contains four parts called the PITI
(principal, interest, taxes, and insurance). If you pay your taxes and
insurance on your own, you pay only principal and interest to your lender.
Monthly Principal and Interest (P&I) Payment
Principal and interest is the dollar portion to repay the loan. All interest
that occurs is calculated on the current balance owing. The principal
reduces the remaining balance of a mortgage.
Mortgage
A legal document by which real property is pledged as security for the
repayment of a loan.
Mortgage Banker
An individual or company that originates and/or services mortgage loans.
Mortgage Broker
An individual or company that arranges financing for borrowers.
Mortgage Insurance
Insurance to protect the lender in case you default on your loan. With
conventional loans, mortgage insurance is generally not required if you
make a down payment of at least 20% of the home's appraised value. (Note,
however, that FHA and VA loans have different insurance guidelines.)
Mortgage Loan
A loan for which real estate serves as collateral to provide for repayment
in case of default.
Mortgage Note
Legal document obligating a borrower to repay a loan at a stated interest
rate during a specified period of time. The agreement is secured by a
mortgage or deed of trust or other security instrument.
Mortgage Term
The length of time given to repay the loan.
Mortgagee
The lender in a mortgage loan transaction.
Mortgagor
The borrower in a mortgage loan transaction.
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N
Negative Amortization
A loan payment schedule in which the outstanding principal balance of
a loan goes up rather than down because the payments do not cover the
full amount of interest due. The monthly shortfall in payment is added
to the unpaid principal balance of the loan.
Non-Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage
by another borrower without the prior approval of the lender.
Note
Legal document obligating a borrower to repay a loan at a stated interest
rate during a specified period of time. The agreement is secured by a
mortgage or deed of trust or other security instrument.
Notice of Default
Written notice to a borrower that a default has occurred and that legal
action may be taken.
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O
Origination Fee
Fee charged by a lender to cover administrative costs of processing a
loan.
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P
Password
A password is a special code made up of letters and numbers that will
allow you, and only you, to gain access to your personal account information.
The best passwords combine letters (both upper and lower case) and numbers.
It is best not to use your address, names of friends or family members,
or other easily accessed or guessed words.
Payment Cap
Consumer safeguards that limit the amount monthly payments on an adjustable-rate
mortgage may change. Since they do not limit the amount of interest the
lender is earning, they may cause negative amortization.
Payment Schedule
The method for disclosing your payment schedule varies by loan type. For
fixed-rate loans, the payment schedule indicates what your required monthly
payment will be throughout the life of your loan. The payment schedule
for VA, FHA, one-time MIP and uninsured conventional loans should also
indicate a fixed monthly payment. The payment schedule for fixed-rate
insured loans may gradually decrease over time due to a declining insurance
premium. For adjustable rate loans, the payment schedules will vary by
loan type and are based on conservative assumptions of future interest
rates.
Per Diem Interest
Interest calculated per day. (Depending on the day of the month on which
closing takes place, you will have to pay interest from the date of closing
to the end of the month. Your first mortgage payment will probably be
due the first day of the following month.)
Periodic Cap
Consumer safeguard that limits the amount the interest rate on an adjustable
rate mortgage (ARM) can change in an adjustment interval. Caps.
PITI
Abbreviation for Principal, Interest, Taxes and Insurance, the components
of a monthly mortgage payment.
Planned Unit Development (PUD)
A planned unit development (PUD) is a project or subdivision that consists
of common property and improvements that are owned and maintained by an
owner's association for the benefit and use of the individual units within
the project. For a project to qualify as a PUD, the owners' association
must require automatic, non-severable membership for each individual unit
owner, and provide for mandatory assessments.
Points (or Discount Points)
Points are an up-front fee paid to the lender at the time that
you get your loan. Each point equals one percent of your total loan amount.
Points and interest rates are inherently connected: in general, the more
points you pay, the lower the interest rate you get. However, the more
points you pay, the more cash you need up front since points are paid
in cash at closing.
Power of Attorney
Legal document that authorizes one person to act on behalf of another.
Pre-approval
The process of determining how much money a prospective homebuyer or refinancer
will be eligible to borrow prior to application for a loan. A pre-approval
includes a preliminary screening of a borrower's credit history. Information
submitted during pre-approval is subject to verification at application.
Prepaid Expenses
Taxes, insurance and assessments paid in advance of their due dates. These
expenses are included at closing.
Prepaid Interest
Interest that is paid in advance of when it is due. Typically charged
to a borrower at closing to cover interest on the loan between the closing
date and the first payment date.
Prepayment
Full or partial repayment of the principal before the contractual due
date.
Prepayment Penalty
A prepayment penalty is a fee that is charged if the loan is paid off
earlier than the specified term of the loan. Depending on your loan program
and applicable state law, you may or may not incur a prepayment penalty.
Contact your loan officer for specific information.
Pre-qualification
The process of determining how much money a prospective homebuyer will
be eligible to borrow prior to application for a loan. Information submitted
during pre-qualification is subject to verification at application.
Principal
The amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)
Insurance to protect the lender in case you default on your loan. With
conventional loans, mortgage insurance is generally not required if you
make a down payment of at least 20% of the home's purchase price. (Note,
however, that FHA and VA loans have different insurance guidelines.)
Property
Taxes
The taxes assessed on the property by the local government (e.g. city,
county, village or township) for the various services provided to the
property owner. Such services may include police and fire department services,
garbage pick up and snow removal.
Purchase Agreement
Contract signed by buyer and seller stating the terms and conditions under
which a property will be sold.
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Q
No Q terms.
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R
Real Financing Cost
The real financing cost is a consumer-oriented rate that takes into account
specific costs, fees, potential rate changes and the projected amount
of time you will have the loan. The fees and costs are distributed over
the time you plan to be in the house, allowing you to do an apples-to-apples
comparison of a variety of loan types. The real financing cost is not
the APR. The APR assumes that you keep your loan for the entire term (e.g.
30 years for a 30-year fixed loan) and includes only some of your loan
fees. The total financing cost takes into account all of your closing
costs associated with your loan and also how long you plan to be in your
house.
Real Property
Land and any improvements permanently affixed to it, such as buildings.
Recording
The act of entering documents concerning title to a property into the
public records.
Recording Fee
Money paid to a government agent for entering the sale of a property into
the public records.
Refinancing
The process of paying off one loan with the proceeds from a new loan secured
by the same property.
Rent Free
If you are living with a relative or friend without paying rent, this
is considered "rent free."
Requested Cash Out
The amount of money you requested to get back from your mortgage transaction.
Remember, your closing costs and escrows will be subtracted from this
amount.
RESPA
The Real Estate Settlement Procedures Act (RESPA) is a federal law that
gives consumers the right to review information about loan settlement
costs after you apply for a loan and again at loan settlement. The law
obliges lenders to provide these settlement costs only after application.
Right to Rescission
Under the provisions of the Truth-in-Lending Act, the borrower's right,
on certain kinds of loans, to cancel the loan within three days of signing
a mortgage.
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S
Sales Agreement
Contract signed by buyer and seller stating the terms and conditions under
which a property will be sold.
Second Mortgage
An additional mortgage placed on a property that has rights that are subordinate
to the first mortgage. A second mortgage is a lien in which you are given
a lump sum amount that you pay off in installments over a specified period
of time. Home improvement and debt consolidation loans are considered
second mortgages.
Security
This refers to the address of the property being pledged as security for
your loan.
Settlement (or Closing)
The settlement or closing is the conclusion of your real estate transaction.
It includes the delivery of your security instrument, signing of your
legal documents and the disbursement of the funds necessary to the sale
of your home or loan transaction (refinance).
Settlement Costs
Also known as closing costs, these costs are for services that must be
performed to process and close your loan application. Examples include
title fees, recording fees, appraisal fee, credit report fee, pest inspection,
attorney's fees, taxes, and surveying fees.
Settlement Cost (HUD guide)
HUD - published booklet that provides an overview of the lending process,
and that is given to consumers after completing a loan application.
Simple Interest
The interest calculated on a principal sum, not compounded on earned interest.
Single Family
It is a residence that houses one family.
Site Condominium
A detached single-family dwelling characterized as a site condominium
by the way it is platted by the builder, however it is still considered
a condominium.
Structural Improvements
A "Structural Improvement" is any permanent improvement made
to your property that is not strictly for decorating purposes. Examples
include: additions, new flooring, kitchen or bathroom upgrades, new windows
and central air. Swimming pools are considered structural improvements
only if they are in ground and your property is in a year round warm weather
climate.
Subject Property
The home that you intend to obtain the mortgage on is called the subject
property.
Survey
A mortgage survey is a bird's eye sketch of your property that shows the
boundary lines of your lot, and details any encroachments between you
and your neighbors.
Survey Fee
The survey fee covers the cost of the survey.
Sweat Equity
Value added to a property in the form of labor or services by the owner
rather than by cash.
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Tax Impound
Money paid to and held by a lender for annual tax payments.
Tax Lien
Claim against a property for unpaid taxes.
Tax Sale
Public sale of property by a government authority as a result of non-payment
of taxes.
Tax
Service Fee
In some cases, we engage a third party to monitor and/or handle the payment
of your property tax bills.
The Tax Service Fee covers the cost of this service.
Term
The period of time which covers the life of the loan. For example, a 30
year fixed loan has a term of 30 years.
Third Party Fees
Fees paid to a third party for services requested by the lender on your
behalf.
Title
Document that gives evidence of ownership of a property. Also indicates
the rights of ownership and possession of the property. Individuals who
will have legal ownership in the property are considered "on title"
and will sign the mortgage and other documentation.
Title Company
A company that insures title to property.
Title Company Closing Fee
This fee is paid to the title insurance company that conducts your closing
and handles the transfer of funds among the parties.
Title Insurance
Title insurance protects a lender against any title dispute that may arise
over a particular property. It is required to close on your home. You
may also purchase owner's title insurance which protects you as the homeowners.
Title Insurance Premium
In order to determine that the property is properly owned and not subject
to any unacceptable liens, we require a search of the local real estate
records, and a title insurance policy insuring the lender that there are
no defects in title. The Title Insurance Premium covers the cost of the
search and the insurance. The cost of title insurance varies both by state
and by county.
Title Search
Examination of local real estate records to ensure that the seller is
the legal owner of a property and that there are no liens or other claims
against the property.
Total Payments
This is the total amount you will have paid over the life of the loan
for principal, interest and prepaid finance charges, assuming you keep
the loan to maturity and made only the required monthly payments.
Trade Lines
Trade lines are your different credit accounts listed on your credit report.
Trans Union
One of the three largest credit bureaus in the United States.
Transfer Tax
Tax paid when title passes from one owner to another.
Truth-in-Lending Act
Federal law requiring written disclosure of the terms of a mortgage (including
the APR and other charges) by a lender to a borrower after application.
Also requires the right of rescission period.
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Underwriting
In mortgage lending, the process of determining the risks involved in
a particular loan and establishing suitable terms and conditions for the
loan.
Underwriting Fee
The underwriting fee covers the cost of evaluating your entire loan package,
including your credit report and appraisal, to determine whether we can
approve your loan request.
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VA Loans
Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs.
They are designed to make housing affordable for eligible U.S. veterans.
VA loans are available to veterans, reservists, active-duty personnel,
and surviving spouses of veterans with 100% entitlement. Eligible veterans
may be able to purchase a home with no down payment, no cash reserve,
no application fee, and lower closing costs than other financing options.
The maximum VA loan amount is currently $203,000.
Variable Rate Mortgage
See Adjustable Rate Mortgage.
Variable Rate
Interest rate that changes periodically in relation to an index.
Verification of Deposit (VOD)
Document signed by the borrower's bank or other financial institution
verifying the borrower's account balance and history.
Verification of Employment (VOE)
Document signed by the borrower's employer verifying the borrower's position
and salary.
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Waiver
Voluntary relinquishment or surrender of some right or privilege.
Walk-through
A final inspection of a home to check for problems that may need to be
corrected before closing.
Wire Transfer Fee
On occasion, we will transmit funds via the inter-bank wire transfer system
to you, your prior lender, and/or the title insurance company conducting
your closing. This fee covers the cost of such transfer.
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Z
Zoning Ordinances (or Zoning Regulations)
Local law establishing building codes and usage regulations for properties
in a specified area.
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