Kentucky Mortgage Forbearance Guidelines

Kentucky First Time Home Buyer Programs For Home Mortgage Loans: Kentucky Mortgage Forbearance Guidelines for Fanni...: 

Conventional Mortgage Loans by Fannie Mae

Mortgage credit history for any mortgage which the borrower is obligated as borrower, co-borrower, or co-signer may be

considered acceptable if it meets one of the following:

 The borrower has made all payments due on time, prior to subject loan Note date, even though the loan was in

forbearance, or

 The borrower has not made one or more payments due, and the late payments or forbearance has been resolved

per one of these acceptable resolution plans:

Resolution Plans* Eligibility Requirements

Reinstatement ▪ Any missed payments must be made

▪ Funds to reinstate after application must be documented from eligible source

▪ Funds from the current transaction may not be used to reinstate mortgage

Repayment Plan ▪ Must have made 3 timely** payments under the repayment plan, or

▪ Repayment plan has been completed

▪ Funds from the current transaction may satisfy the existing mortgage in full

Payment Deferral ▪ Must have made 3 timely** payments after executing the deferral agreement

▪ Funds from the current transaction may satisfy the existing mortgage in full

Modification ▪ Must have made 3 timely** payments under trial modification

▪ Funds from the current transaction may satisfy the existing mortgage in full

Any Other Loss Mitigation Option ▪ Must have completed successfully or made a minimum of 3 timely payments

▪ Funds from the current transaction may satisfy the existing mortgage in full

*If loan was in forbearance, provide documentation from servicer showing the exit from forbearance into one of the

acceptable resolution plans.

** Payments cannot be made in advance to meet the 3 required payments.

 For purposes of determining acceptable mortgage payment history, missed payments under a COVID-19 forbearance

are not considered late payments.

 The above guidance does not apply to Freddie Mac Enhanced Refinance or Fannie Mae High LTV Refinance

transactions.

Fannie Mae FAQs: https://singlefamily.fanniemae.com/media/22326/display

Freddie Mac Bulletin 2020-17: https://guide.freddiemac.com/app/guide/bulletin/2020-17

Freddie Mac FAQs: https://sf.freddiemac.com/general/covid-19-selling-faq

VA ELIGIBILITY

 Borrowers must provide a Letter of Explanation (LOE) stating the circumstances behind the forbearance.

Documentation will be required to verify the items listed in the LOE have been resolved.

 If the forbearance was on a non-subject property, the forbearance must be resolved, and new payment (if

applicable) must be included in the DTI.

 A Veteran who was granted a forbearance and continues to make payments as agreed under the terms of original

note is not considered delinquent or late and will be treated as if not in forbearance status, provided that the

forbearance plan is terminated prior to closing.

Cash-Out Refinances

 Refinance of mortgages that are in a current forbearance status, where mortgage payments are not being made,

including mortgages under the CARES Act forbearance protection program, are not eligible. The forbearance plan

must be completed/terminated prior to closing.

 Borrower in forbearance with missed payments- Borrower must have made 6 consecutive months’ timely payments

post-forbearance, regardless of method of resolution of the forbearance.

 Missed payments due to COVID-19 forbearance cannot count toward seasoning. Borrower must have made six

consecutive monthly payments prior to the CARES Act forbearance or six consecutive payments will be required post

forbearance. In addition, loans that have been modified must meet seasoning requirements based on the modified

note first payment date. The new note date must be on or after the later of: The date that is 210 days after the date

on which the first modified monthly payment was due on the mortgage being refinanced, and the date on which 6

modified payments have been made on the mortgage being refinanced.

IRRRL Refinances

 Borrowers must be current at time of application (any skipped payments under a COVID-19 forbearance have since

been made).

 Borrower in forbearance with no missed payments- standard underwriting applies.

 Borrower in forbearance with missed payments- Borrower must have made 6 consecutive months’ timely payments

post-forbearance.

 Loans must still meet loan seasoning, fee recoupment, discount points, and net tangible benefit requirements.

 Missed payments due to COVID-19 forbearance cannot count toward seasoning. Borrower must have made six

consecutive monthly payments prior to the CARES Act forbearance or will need to make six consecutive payments

post forbearance. In addition, loans that have been modified must meet seasoning requirements based on the

modified note first payment date. The new note date must be on or after the later of: The date that is 210 days after

the date on which the first modified monthly payment was due on the mortgage being refinanced, and the date on

which 6 modified payments have been made on the mortgage being refinanced.

References VA Circular 26-20-25: https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-20-25.pdf

FHA ELIGIBILITY

*NOTE: FHA Guidance is permanent, not temporary, and applies where a Forbearance Plan was granted due to COVID-19, Presidentially Declared major

disaster or other hardship. This new guidance has been included in the updated 4000.1 Handbook.

Payment

History

Documentation

When any mortgage reflects payments under a Modification or Forbearance Plan within 12 months prior to case number

assignment, obtain:

 Copy of Modification or Forbearance Plan* and

 Evidence the payment amount and the date of payments during the agreement

* A copy of Forbearance Plan due to the COVID-19 National Emergency is not required. Must be able to determine the reason for

forbearance.

Borrowers that are or were in Forbearance

Maximum base loan amount for a Streamline of an owner-occupied primary residence and HUD-approved second home is

the lesser of:

 The outstanding principal balance of the existing mortgage (including suspended payments from forbearance) as of

the month prior to mortgage disbursement; plus:

o Interest due on the existing mortgage

o Late charges and escrow shortages

o MIP due on existing mortgage; or

 The original principal balance of the existing mortgage (including financed UFMIP)

 Less any refund of UFMIP

New FHA Insured Mortgage Eligibility

 Any active forbearance plan must be terminated.

 Borrowers granted forbearance but who continued to make all payments as agreed under the terms of original Note

are not considered delinquent. No additional payment seasoning post forbearance required.

 Borrowers granted forbearance but who did not continue to make payments require additional mortgage payment

seasoning post-forbearance that document satisfactory, consecutive monthly payments. See chart below for details:

Transaction Additional Requirements

Purchase Must make three consecutive payments* post-forbearance or

▪ If home sold prior to making three payments, must be manually underwritten

Cash-Out Refinance Must make 12 consecutive payments* post-forbearance

GNMA Seasoning: Loans that have been modified must meet seasoning

requirements based on the modified note first payment date.

No Cash Out Refinance Must make three consecutive payments* post-forbearance (six payments if

mortgage was modified after forbearance)

Simple Refinance Must make three consecutive payments* post-forbearance

*NOTE: The consecutive payments must be documented on the credit report and read by AUS to follow AUS approval.

Streamline Refinance  Missed payments under forbearance do not count toward mortgage

seasoning requirements

 If mortgage modified after forbearance, six payments under

modification required.

Non-Credit Qualifying

 At time of case number assignment, borrower has made three post

forbearance payments.

Credit Qualifying

 At time of case number assignment, borrower is still in mortgage

payment forbearance or has made less than three monthly payments,

and

 Has made all mortgage payments due within the month due for the six

months prior to forbearance

***ALL Streamlines: GNMA Seasoning: Loans that have been modified must

meet seasoning requirements based on the modified note first payment date.

References FHA Mortgagee Letter 2020-30:

  https://www.hud.gov/sites/dfiles/OCHCO/documents/2020-30hsgml.pdf

USDA ELIGIBILITY

 For each open mortgage, confirm the forbearance status and payment history.

 Borrowers who have a current mortgage that was placed in COVID-19 forbearance, but continued to make all

payments as scheduled, are not subject to additional seasoning.

 Purchases: Borrowers who missed any payments as allowed under the forbearance plan must have resumed

repayment of their mortgage loan for a period of at least 3 months prior to applying for a new loan.

 Refinances: the loan must have closed at least 12 months prior to the request to refinance, borrower must have

resumed making payments for a period of at least 3 months and have a total 180-day period of satisfactory

payments, excluding the time the loan was in forbearance.

References SFHGLP FAQs: https://www.rd.usda.gov/sites/default/files/RD-GRH-OriginationServicingFAQs.pdf

LOANS MADE TO BORROWERS POST-FORBEARANCE

The guidance herein is based on Agency and Investor eligibility. The below is a summary and not all-inclusive of Agency announcements. For full

Agency guidance see the Resources section under each program section below.

IN ALL CASES THE FOLLOWING REQUIREMENTS APPLY:

 BORROWER MAY NOT BE IN FORBEARANCE ON THE SUBJECT PROPERTY MORTGAGE OR ANY OTHER NON-SUBJECT PROPERTY

MORTGAGES AT THE TIME OF LOAN CLOSING.

 Explanation from Borrower(s) for forbearance reason and how any hardship has been overcome is required. If borrower faced hardship,

documentation supporting resolution is required. (e.g. borrower was furloughed for a time and is now back to work and employer

documentation supports).

 Payment history required for most recent 12-months to see payment made dates to determine if borrower skipped any payments.

 Documentation from servicer that forbearance has ended.

 Asset sourcing to document funds for any lump-sum payments made to reinstate/bring mortgage current- 2 months consecutive

statements required.

 If borrower entered into modification/work out plan rather than reinstating the forbearance, a copy of plan must be obtained. See

applicable Agency guidance for eligibility in this case.

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

 

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Inspecting and Testing Requirements for a Kentucky FHA, VA, Conventional and USDA Mortgage loan.

 

Inspection & Testing Requirements for a Kentucky Mortgage 

Each Kentucky Home loan program for Conventional, FHA, VA and USDA government mortgage loans  has slightly different guidelines when it comes to water tests, septic inspections, and pest/termite inspections. Here's a quick comparison of the general guidelines for each program.

FHA vs. Conventional Loans – What is the Difference?

FHA vs. Conventional Loans – What is the Difference?: pOne of the most common questions from first-time buyers pertains to the difference between an FHA and a conventional loan, and which one is best for them. We'll clearly define each one and go into further detail about which one might be best for you in your pursuit of purchasing a home./p

What is the difference between Conventional, FHA and VA Mortgage loans in Kentucky?

 

Conventional vs. FHA vs. VA loans in Kentucky

 I will outline below the credit score, loan limits, down payment and mortgage insurance requirements for FHA, VA and Conventional Mortgage Loans in Kentucky!

			Upfront funding fee of 1.4% to 3.6%

Thank you!- Joel Lobb Licensed Loan Officer (NMLS# 57916) American Mortgage Solutions, Inc. (NMLS# 1364) Email: joel@loansolutionsnow.com Text or call: 502-905-3708

https://twitter.com/i/status/1184873239249592326

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: What is the difference between Conventional, FHA a...

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: What is the difference between Conventional, FHA a...:   Conventional vs. FHA vs. VA loans in Kentucky  I will outline below the credit score, loan limits, down payment and mortgage insurance req...

Effective on 9/18/21, Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying

 

Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying

Do you and your partner have very different credit scores? Great news! You may have access to more loan program options than you thought!

Here's the deal... All lenders pull FICO scores from each of the three credit bureaus to qualify a borrower. In situations with co-applicants, we will use the lower of the two middle scores for qualifying purposes. Historically, to do a Conventional Loan, both mid-scores would have to be above 620.

Effective on 9/18/21, Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying. This critical change may help many borrowers qualify and have increased advantages when putting an offer in on a home.

Long story short - we can help you now more than ever. Curious if this will help you? Reach out to me today, and we can investigate.

PS: These changes are effective September 18th, 2021 and there are still a lot of other variables to consider and guidelines are always subject to change. Let's start a conversation today! Message me for more details or to get started.

Mortgage Application Checklist of Documents Needed below  👇

W-2 forms (previous 2 years)
Paycheck stubs (last 30 days - most current)
Employer name and address (2 year history including any gaps)
Bank accounts statement (recent 2 months – all pages
Statements for 401(k)s, stocks and other investments (most recent)
federal tax returns (previous 2 years)
Residency history (2 year history)
Photo identification for applicant and co-applicant (valid Driver’s License







Joel Lobb (NMLS#57916)

Senior Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223

Company ID #1364 | MB73346

Text/call 502-905-3708

kentuckyloan@gmail.com


If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.


Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/

NMLS Consumer Access for Joel Lobb 

Accessibility for Website 

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Joel Lobb, American Mortgage Solutions (Statewide)

Joel has worked with KHC for 12 of his 20 years in the mortgage lending business. Joel said, “A lot of my clients would not have been able to purchase a home of their own or possibly delayed their purchase due to lack of down payment but with the $6,000 DAP loan program, this gets them into a house sooner and starts their path to homeownership while building equity instead of throwing their money away.”

When you’re ready to purchase a home in Joel's area, contact him at:
Phone: 502-905-3708
Email: Kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com

Kentucky First Time Home Buyer Programs For Home Mortgage Loans: 5 Sneaky Ways to Improve Your Credit Score - Clark...

Kentucky First Time Home Buyer Programs For Home Mortgage Loans: 5 Sneaky Ways to Improve Your Credit Score - Clark...: 

5 Sneaky Ways to Improve Your Credit Score

.

How to Raise Your Credit Score Fast

1. Find Out When Your Issuer Reports Payment History

Call your credit card issuer and ask when your balance gets reported to the credit bureaus. That day is often the closing date (or the last day of the billing cycle) on your account. Note that this is different from the “due date” on your statement.

There’s something called a “credit utilization ratio.” It’s the amount of credit you’ve used compared to the amount of credit you have available. You have a ratio for your overall credit card use as well as for each credit card.

It’s best to have a ratio — overall and on individual cards — of less than 30%. But here’s an insider tip: To boost your score more quickly, keep your credit utilization ratio under 10%.

Here’s an example of how the utilization ratio is calculated:

Let’s say you have two credit cards. Card A has a $6,000 credit limit and a $2,500 balance. Card B has a $10,000 limit and you have a $1,000 balance on it.

This is your utilization ratio per card:

Card A = 42% (2,500/6,000 = .416, or 42%), which is too high.

Card B = 10% (1,000/10,000 = .100, or 10%), which is awesome.

This is your overall credit utilization ratio: 22% (3,500/16,000 = 0.218), which is very good.

But here’s the problem: Even if you pay your balance off every month (and you should), if your payment is received after the reporting date, your reported balance could be high — and that negatively impacts your score because your ratio appears inflated.

So pay your bill just before the closing date. That way, your reported balance will be low or even zero. The FICO method will then use the lower balance to calculate your score. This lowers your utilization ratio and boosts your score.

2. Pay Down Debt Strategically

Okay, let’s build on what you just learned about utilization ratios.

In the above example, you have balances on more than one card. Note that Card A has a 42% ratio, which is high, and Card B has a wonderfully low 10% ratio.

Since the FICO score also looks at each card’s ratio, you can bump up your score by paying down the card with the higher balance. In the example above, pay down the balance on Card A to about $1,500 and your new ratio for Card A is 25% (1,500/6,000 = .25). Much better!

3. Pay Twice a Month

Let’s say you’ve had a rough couple of months with your finances. Maybe you needed to rebuild your deck (raising my hand) or get a new fridge. If you put big items on a credit card to get the rewards, it can temporarily throw your utilization ratio (and your credit score) out of whack.

You know that call you made to get the closing date? Make a payment two weeks before the closing date and then make another payment just before the closing date. This, of course, assumes you have the money to pay off your big expense by the end of the month.

Take care not to use a credit card for a big bill if you plan to carry a balance. The compound interest will create an ugly pile of debt pretty quickly. Credit cards should never be used for long-term loans unless you have a card with a zero percent introductory APR on purchases. Even then, you have to be mindful of the balance on the card and make sure you can pay the bill off before the intro period ends.

4. Raise Your Credit Limits

If you tend to have problems with overspending, don’t try this.

The goal is to raise your credit limit on one or more cards so that your utilization ratio goes down. But again, this only works out in your favor if you don’t feel compelled to use the newly available credit.

I also don’t recommend trying this if you have missed payments with the issuer or have a downward-trending score. The issuer could see your request for a credit limit increase as a sign that you’re about to have a financial crisis and need the extra credit. I’ve actually seen this result in a decrease in credit limits. So be sure your situation looks stable before you ask for an increase.

That said, as long as you’ve been a great customer and your score is reasonably healthy, this is a good strategy to try.

All you have to do is call your credit card company and ask for an increase to your credit limit. Have an amount in mind before you call. Make that amount a little higher than what you want in case they feel the need to negotiate.

Remember the example in #1? Card A has a $6,000 limit and you have a $2,500 balance on it. That’s a 42% utilization ratio (2,500/6,000 = .416, or 42%).

If your limit goes up to $8,500, then your new ratio is a more pleasing 29% (2,500/8,500 = .294, or 29%). The higher the limit, the lower your ratio will be and this helps your score.

5. Mix It Up

A few years back, I realized I didn’t have much of a mix of credit. I have credit cards with low utilization ratios and a mortgage, but I hadn’t paid off an installment loan for a couple of decades.

I wanted to raise my score a nudge, so I decided to get a car loan at a very low rate. I spent a year paying it off just to get a mix in my credit. At first, my score went down a little, but after about six months, my score started increasing. Your credit mix is only 10% of your FICO score, but sometimes that little bit can bump you up from good credit to excellent credit.

A 3D pie chart calculating the 5 categories that make up a credit score including 35% for payment history, 30% for amounts owed, 10% for credit mix, 10% for new credit and 15% for credit history

5 categories that make up your credit score

I wasn’t planning on applying for credit within the next six months, so my approach was fine. But if you’re refinancing your mortgage (or planning something else really big) and you want a quick boost, don’t use this strategy. This is a good one for a long-term approach.

Bottom Line

When you want to boost your credit score, there are two basic rules you have to follow:

First, keep your credit card balances low.

Second, pay your bills on time (and in full). Do these two things and then toss in one or more of the sneaky ways above to give your score a kickstart.

And remember — you do not have to carry a balance to build a good score. If you do that, you’re on a slippery slope to debt.

Kentucky Mortgage Terms You Should Know About.

 Annual Percentage Rate (APR)

The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Application

An initial statement of personal and financial information which is required to approve your loan.

Application Fee

Fees that are paid upon application. An application fee may frequently include charges for property appraisal ($200-$400) and a credit report ($30-50).

Appraisal

A fee charged by an appraiser to render an opinion of market value as of a specific date. Required by most lenders to obtain a loan.

Assumption of Mortgage

The agreement of a purchaser to become primarily liable for the payments on a mortgage loan. Unless otherwise specified by the lender, the seller may remain secondarily liable for payments.

Balloon Payment

A lump sum payment for the unpaid balance of the loan.

Cap

The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Cash Out

Receiving money back when refinancing your present mortgage.

Ceiling

The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Closing Costs

Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney’s fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurance escrow payments.

Closing Disclosure

A document signed three days prior to a home sale that includes important details of a mortgage loan, including the loan’s interest rate, monthly mortgage payment, mortgage closing costs and applicable fees. A closing disclosure states the total of all payments and finance charges.

Comparable Sale

Homes that have recently sold and are alike in terms of location, zip code, neighborhood, home size, lot size, condition, features and home type. A comparable sale house is used to determine a home’s fair market value.

Conforming Loan

Generally, a mortgage loan under $203,150. Qualifying ratios and underwriting methods are standardized to a large degree.

Contract of Sale

The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Credit Limit

The maximum amount that you can borrow under a home equity plan.

Debt Service

The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Deed of Trust

Used in many western states, the agreement used to pledge your home or other real estate as security for a loan. Similar to a mortgage.

Discount Points (or Points)

The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Down Payment

The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer’s own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.

Due on Sale

A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in full.

Earnest Money Deposit

A deposit that is typically 1-5 percent of the purchase price of a home paid from the buyer to the seller as “good faith” money. The earnest money deposit is applied to the buyer’s costs when finalizing the home sale.

eClose

An easy to use virtual closing experience that allows homebuyers and sellers to sign mortgage documents at their convenience, from anywhere. An eclosing saves lenders, borrowers and sellers time and money.

Effective Interest Rate

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

Encumbrance

A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Equity

The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

FHA Loan

More appropriately termed “FHA Insured Loan.” A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.

First Mortgage

A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Rate

An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

Gift Letter

A letter that states a voluntary transfer of money from one individual to another. In terms of lending, a gift letter for a mortgage states a borrower received money from a donor as a gift and does not have to pay back the money at any time.

Good Faith Estimate

A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Grace Period

A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report.

Gross Income

For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Hazard Insurance

A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.

Home Equity Line of Credit

A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan

A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

HUD I Settlement Statement

A form utilized at loan closing to itemize the costs associated with purchasing the home. Used universally by mandate of HUD, the Department of Housing and Urban Development.

Index

A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based. Common indexes include the Cost of Funds for the Eleventh Federal District of banks or the average rate of a one year Government Treasury Security.

Interest Rate

The periodic charge, expressed as a percentage, for use of credit.

Jumbo Loan

Mortgage loans over $203,150. Terms and underwriting requirements may vary from conforming loans.

Loan to Value Ratio (LTV)

A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%. Loans with an LTV over 80% may require Private Mortgage Insurance, defined below.

Lock or Lock In

A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

Margin

An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Minimum Payment

The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be “interest only,” (simple interest). In other plans, the minimum payment may include principal and interest (amortized).

Mortgage Banker

Originates mortgage loans, loaning you their funds and closing the loan in their name.

Mortgage Broker

As do mortgage bankers, takes loan application and processes the necessary paperwork. Unlike a mortgage banker, brokers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, S and L’s, banks, or investment bankers.

Mortgage Insurance (MIP or PMI)

Insurance purchased by the borrower to insure the lender or the government against loss should you default. MIP, or Mortgage Insurance Premium, is paid on government-insured loans (FHA or VA loans) regardless of your LTV (loan-to-value). Should you pay off a government-insured loan in advance of maturity, you may be entitled to a small refund of MIP. PMI, or Private Mortgage Insurance, is paid on those loans which are not government-insured and whose LTV is greater than 80%. When you have accumulated 20% of your home’s value as equity, your lender may waive PMI at your request. Please note that such insurance does not constitute a form of life insurance which pays off the loan in case of death.

Mortgage Loan

A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

Mortgagee

The lender in a mortgage loan transaction.

Mortgagor

The borrower in a mortgage loan transaction.

Negative Amortization

Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.

PITI

Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Points

The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Prepayment Penalty

A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.

Qualifying Ratios

Comparisons of a borrower’s debts and gross monthly income.

Right to Rescission

The legal right to void or cancel your mortgage contract in such a way as to treat the contract as if it never existed. Right of rescission is not applicable to mortgages made to purchase a home, but may be applicable to other mortgages, such as home equity loans.

Security Interest

An interest that a lender takes in the borrower’s property to assure repayment of a debt.

Servicing a Loan

The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

Title

The written evidence that proves the right of ownership of a specific piece of property.

Title Insurance

Protection for lenders or homeowners against financial loss resulting from legal defects in the title.

Transaction Fee

A fee which may be charged each time you draw on a home equity credit line.

Underwriting

The process of verifying data and approving a loan.

VA Loan

More appropriately termed “VA Insured Loan.” A loan for which the Veteran’s Administration insures the lender against losses the lender may incur due to your default. Available only to veterans possessing a Certificate of Eligibility.

Variable Rate

An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.