Adjustable
Rate Mortgage (ARM) Annual
Percentage Rate (APR) Assumable
Mortgage Balloon
Mortgage Bridge
Loan Cap Cash-Out
Refinance Closing
Costs Comparables Construction
Loan Conventional
Mortgage Equity Escrow
Account Fannie
Mae Federal
Housing Administration (FHA) FHA
Mortgage First
Mortgage Fixed-rate
Mortgage Good
Faith Estimate Home
Equity Line of Credit (HELOC) Hybrid
ARM &endash; (Convertible ARM) Impounds Index Lifetime
Cap Loan
to Value Ratio (LTV) Margin Mortgage
Insurance (MI) Non-Conforming
Loan No
Documentation Loans Origination
Fee PITI Points Prepaids Prepayment
Penalty Principal Rate
Lock-In Second
Trust Deed Stated
Income Loans Swing
Loan
A mortgage in which the interest rate is adjusted
periodically based on a preselected time table and
index.
The cost of a mortgage stated as a yearly rate;
includes such items as interest, mortgage
insurance, and loan origination fee
(points).
A mortgage that can be taken over ("assumed") by
the buyer when a home is sold.
A mortgage that has level monthly payments that
will amortize it over a stated term but that
provides for a lump sum payment to be due at the
end of an earlier specified term.
A form of second trust that is collateralized by
the borrower's present home (which is usually for
sale) in a manner that allows the proceeds to be
used for closing on a new house before the present
home is sold. Also known as "swing
loan."
A provision for an adjustable-rate mortgage (ARM)
that limits how much the interest rate or mortgage
payment may increase or decrease, either at each
adjustment period or over the life of the
loan.
A refinance transaction in which the amount of
money received from the new loan exceeds the total
of the money needed to repay the existing first
mortgage, closing costs, points, and the amount
required to satisfy any outstanding subordinate
mortgage liens. In other words, a refinance
transaction in which the borrower receives
additional cash that can be used for any
purpose.
Expenses (over and above the price of the property)
incurred by buyers and sellers in transferring
ownership of a property. Closing costs normally
include an origination fee, escrow fees, taxes, and
charges for obtaining title insurance and a survey.
Closing costs percentage will vary according to the
area of the country.
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.
A short-term, interim loan for financing the cost
of construction. The lender makes payments to the
builder at periodic intervals as the work
progresses.
A mortgage that is not insured or guaranteed by the
federal government. This is the most common type of
loan.
A homeowner's financial interest in a property.
Equity is the difference between the fair market
value of the property and the amount still owed on
its mortgage.
The account in which a mortgage servicer holds the
borrower's escrow payments prior to paying property
expenses. Also known as an impound
account.
A congressionally chartered, shareholder-owned
company that is the nation's largest supplier of
home mortgage funds.
An agency of the U.S. Department of Housing and
Urban Development (HUD). Its main activity is the
insuring of residential mortgage loans made by
private lenders. The FHA sets standards for
construction and underwriting but does not lend
money or plan or construct housing.
A mortgage that is insured by the Federal Housing
Administration (FHA). Also known as a government
mortgage.
A mortgage that is the primary lien against a
property.
A mortgage in which the interest rate does not
change during the entire term of the
loan.
An estimate of charges which a borrower is likely
to incur in connection with a
settlement.
A line of credit against the equity in your home
that requires interest only payments on the
outstanding balance which can be charged up or paid
down throughout the first ten years. Usually, after
the tenth year the current balance is frozen and
the loan is amortized as a twenty year fixed
loan.
An adjustable-rate mortgage (ARM) that is fixed for
a period of time, which can be converted to a
fixed-rate mortgage under specified
conditions.
The portion of a mortgagor's monthly payment that
is held by the servicer to pay for taxes, hazard
insurance, mortgage insurance, and other items as
they become due. Known as "escrow payment" or
"reserves" in some states.
A published interest rate to which the interest
rate on an Adjustable Rate Mortgage (ARM) is tied.
Some commonly used indices include the 1 Year
Treasury Bill, 6 Month LIBOR, and the 11th District
Cost of Funds (COFI).
A provision for an ARM that limits the highest rate
that can occur over the life of the
loan.
The ratio of the amount of your loan to the
appraised value of the home. The LTV will affect
programs available to the borrower and generally,
the lower the LTV the more favorable the terms of
the programs offered by lenders.
The number of percentage points a lender adds to
the index value to calculate the ARM interest rate
at each adjustment period. A representative margin
would be 2.75%.
Insurance written by an independent mortgage
insurance company protecting the mortgage lender
against loss incurred by a mortgage default.
Usually required for loans with an LTV of 80.01% or
higher.
Also called a "jumbo loan." Conventional home
mortgages not eligible for sale and delivery to
either Fannie Mae (FNMA) or Freddie Mac (FHLMC)
because of various reasons, including loan amount,
loan characteristics or underwriting guidelines.
The current non-conforming loan limit is $359,651
and above.
A no-documentation or "stated income" loan is
generally a wise choice for self-employed people,
those who do not wish to verify their income or
want a shorter application process. The approval
process is streamlined through the lender because
you are not required to provide income or asset
documentation. However, no doc mortgages will
usually come at slightly higher interest rates and
are offered by fewer lenders.
A fee imposed by a lender to cover certain
processing expenses in connection with originating
a real estate loan. Usually a percentage of the
amount loaned, such as one percent, also called one
point.
Principal, interest, taxes and insurance - the
components of a monthly mortgage payment with
impounds.
Charges levied by the mortgage lender to cover
certain processing expenses in connection with
originating a real estate loan. One point
represents 1% of the loan amount. Also known as the
loan origination fee.
Those expenses which are paid in advance of their
due date and will usually be prorated upon sale,
such as taxes, insurance, interest, etc.
A charge imposed by a mortgage lender on a borrower
who wants to pay off part or all of a mortgage loan
in advance of schedule.
Amount of debt, not including interest. The face
value of a note or mortgage.
A written agreement in which the lender guarantees
the borrower a specified interest rate, provided
the loan closes within a set period of
time.
Any loan following a first mortgage, such as an
equity line of credit or a fixed rate second loan.
Can be useful in avoiding mortgage insurance if you
obtain a first loan for 80% of the value of the
property, then follow it with a second loan to
cover the remaining amount to be
financed.
A stated income or "no documentation" loan is
generally a wise choice for self-employed people,
those who do not wish to verify their income or
want a shorter application process. The approval
process is streamlined through the lender because
you are not required to provide income or asset
documentation. However, no doc mortgages will
usually come at slightly higher interest rates and
are offered by fewer lenders.
A form of second trust that is collateralized by
the borrower's present home (which is usually for
sale) in a manner that allows the proceeds to be
used for closing on a new house before the present
home is sold. Also known as "bridge
loan."
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