Adjustable-Rate Mortgage (ARM) – A loan with an interest rate that changes with market conditions on predetermined dates.
Annual Percentage Rate (APR) – A term used to represent the percentage relationship of the total finance charge to the amount of the loan, over the term of the loan. Do not confuse the APR with your quoted interest rate, which is used to determine your monthly principal and interest payment. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes (in addition to the interest rate) loan discount points, fees and mortgage insurance. See Note.
Appraisal – A report written by a qualified expert that states an opinion on the value of a property based on its characteristics and the selling prices of similar properties or comparable properties in the area.
Appreciation/Depreciation – “Appreciation” refers to the increase in a property’s value, except for inflation. When a property decreases in value it is called “depreciation.”
Assessed Value – The value that a taxing authority places on real or personal property for the purpose of taxation.
Capital Gains – Used for tax purposes, this is the capital gain you make when you sell your home. For example if you purchase a property for $100,000 and sell it some years later for $150,000 your capital gain is $50,000.
Closing – The final step after a lender approves an application. The homebuyer and lender sign the required loan documents, including the security-agreement note for the mortgage loan, which states all the terms and conditions of the loan, and the funds for the loan are turned over to the homebuyer’s closing agent.
Closing Agent – Usually an attorney or title agency representative who oversees the closing and witnesses the signing of the closing documents.
Closing Costs – The costs paid by the mortgage borrower (and sometimes the seller) in addition to the purchase price of the property. These include the lender’s fees, title fees and appraisal costs.
Commission – Compensation for negotiating a real estate or loan transaction, often expressed as a percentage of the selling price or loan amount.
Commitment Letter – A binding, written pledge, by the lender to a mortgage applicant, to make a loan, usually under certain stated conditions.
Comparable Market Analysis (CMA) – A written analysis of houses having similar characteristics currently being presented for sale as well as comparable houses sold in the past six months. This enables you to determine if you are paying market value for a home and to identify whether market prices are rising or falling.
Conventional Loan – A mortgage that is not insured or guaranteed by a government agency such as FHA, VA or Farmers Home Administration.
Credit Report – A report issued by an independent agency which contains certain information concerning a mortgage applicant’s credit history and current credit standing.
Credit Score – A numerical rating developed and maintained by Fair Issac and Company that indicates a borrower’s creditworthiness based on a number of criteria.
Debt-to-Income Ratio – A formula that compares a mortgage applicant's gross income to his/her total debt. The lender uses this to help determine the loan amount for which you may qualify. Also known as the “back-end ratio.” Guidelines may vary, depending on the loan program.
Down Payment – A portion of the sales price paid to the seller by the homebuyer to close the sales transaction. Also, the difference between the sales price and the home mortgage amount.
Down Payment Assistance Programs (DAPs) – Gift funds presented to qualified homebuyers to be used toward down payments and closing costs. These programs are often administered by local non-profit foundations.
Equity – Your ownership interest, or that portion of the value of the property that exceeds the current amount of your home loan. For example, if the property is worth $100,000 and the loan is for $75,000, then you have $25,000, or 25%, equity in your home.
Escrow Account – A holding account for the amount a mortgage borrower pays each month and which the lender uses to pay for the borrower’s taxes, other periodic debts against the property, homeowner’s insurance and, if applicable, mortgage insurance.
Fixed-Rate Mortgage – A loan with an interest rate that remains the same for the entire repayment term.
Float the Rate – This term is used when a mortgage applicant chooses not to secure a rate lock, but instead allows the interest rate to fluctuate until the applicant decides to lock in, usually no later than five days prior to closing.
Foreclosure – A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting
Front-end Ratio – Also known as the housing expense-to-income ratio, it compares your proposed monthly house payment (PITI) to your total household gross monthly income.
Funding Fee – The amount charged on VA mortgages to cover administrative costs.
Good Faith Estimate – A document that tells mortgage borrowers the approximate costs they will pay at or before closing, based on common practice in the locality.
Government Loan – A mortgage available through a government agency, such as FHA, VA, Farmers Home Administration or a state bond program. The loans are generally made by private lenders.
Homeowner’s Insurance (also called Hazard Insurance) – A real estate insurance policy required of the buyer protecting the property against loss caused by fire, some natural causes, vandalism, etc. May also include added coverage such as personal liability and theft away from the home.
House Inspection – A thorough evaluation and written report of a home’s condition both inside and out. The inspection is valuable in locating any problems in a property and helps you determine the extent of renovation needed. You can use the report to have the seller make repairs or reduce the purchase price. Always use your own inspector, and do not rely solely on the seller’s inspection reports.
HUD-1 Settlement Statement – A standard form used to disclose costs at closing.
Index – Interest rate adjustments on adjustable-rate mortgage (ARM) loans are based on a specific “index” or treasury issue (bond) which is selected because it is a reliable, familiar financial indicator. Your monthly interest rate payment will be adjusted up or down in relation to this market indicator, plus the margin as specified in your note. See Margin and Note.
Interest Rate – A percentage of the mortgage amount that is paid to the lender for the use of the money and is used to calculate the monthly principal and interest payment.
Interim Interest – The interest that accrues, on a per-diem basis, from the day of closing until the end of the month.
Loan Conditions – These are terms under which the lender agrees to make the loan. They include the interest rate, length of loan agreement and any requirements the borrower must meet prior to closing.
Loan Payment Reserves – A requirement of many loan programs that, in addition to funds for the down payment and other purchase-related costs, you have saved enough money to cover one or two months of mortgage payments after your closing.
Loan-to-Value (LTV) – The ratio of the amount borrowed to the appraised value or sales price of real property expressed as a percentage.
Margin – The number of percentage points added to the index to calculate the interest rate for an adjustable-rate mortgage (ARM) at each adjustment period.
Mortgagee – The conveyance of an interest in real property given as security for the payment of a loan.
Mortgage Insurance (MI) – An insurance policy which will repay a portion of the loan if the borrower does not make payments as agreed upon in the note. Mortgage insurance may be required in cases where the borrower makes less than a 20% down payment on the home's purchase price.
Mortgagor – The borrower.
Note – The agreement which states the home mortgage amount to be borrowed and the terms and conditions of the loan. It also includes a complete description of how the loan should be repaid and the time frame for the repayment.
Origination Fee – The amount collected by the lender for making a loan. It is generally equal to a percentage of the principal amount borrowed.
Points – One point equals 1% of the loan amount. Total points on a loan include origination points, used to offset the cost of making a loan, and discount points, which can be paid to reduce the loan’s interest rate.
Preapproval – A written letter from a lender, subject to a property appraisal and other stated conditions, that lets you know exactly how much home you can purchase.
Prepaids – That portion of your loan closing costs which must be collected at closing to cover taxes, interest and insurance.
Principal – The amount of a loan, excluding interest; or the remaining balance of a loan, excluding interest.
Private Mortgage Insurance (PMI) – A mortgage insurance policy on a conventional mortgage loan issued by a private insurance company.
Processing – The completion of a mortgage loan application and supporting documents.
Rate Cap – The limit of how much the interest rate may change on an ARM at each interest rate adjustment and over the life of the loan.
Rate Lock – The borrower and the lender agree to protect the interest rate, points and term of the loan while it is
Title Insurance – An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner’s coverage) against any loss resulting from a title error or dispute.
Truth-in-Lending Statement – Required by federal regulations, this statement tells purchasers the interest rate on the loan, the costs of financing their loan expressed as the annual percentage rate (APR), and payment amount, etc.
Underwriting – The process of a lender reviewing the application, documentation and property prior to rendering a loan decision.
Acceptance: The seller agrees to the terms of the offer made by the buyer.
Capacity: An applicant's ability to earn enough income to make mortgage loan payments and still pay all other living expenses. One of the "4 C's of credit."
Capital: The funds a potential homebuyer has available for the upfront costs of home ownership, such as the down payment and closing costs. One of the "4 C's of credit."
Collateral: Property accepted as security for a loan; one of the "4 C's of credit" that measures the value and condition of the house to make sure it is worth at least as much as the loan.
Contingencies/Contingent: Conditions included in an offer to buy a home. A clause in a contract that outlines an event, which may or may not occur, but that must occur before the contract becomes binding.
Credit Report: A record of how a consumer has repaid credit in the past, used as a guide to determine a potential homebuyer's creditworthiness.
Credit Reporting Agency: A company that gathers, files and sells information to creditors and
others with a legitimate business purpose. Also called "credit bureau."
Credit Score: A numerical value based on the analysis of a credit report that is used by creditors to predict how likely an individual is to repay a loan.
Escrow: The period between the date the purchase contract is signed and the date of the loan closing.
Loan Rates: Determines the amount of interest a borrower has to pay off during a loan.
Loan Terms: The amount of time a borrower has to pay off a loan.
Senior Loan Officer
phone: (502) 905-3708