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Good Faith Estimate: An estimate of charges which a borrower is likely to incur in connection with a settlement.
Hazard Insurance: It is an insurance protecting against loss to real estate caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy.
Housing Ratio: This is the ratio of the monthly housing payment (PITI) to total gross monthly income. It is also called Payment-to-Income Ratio or Front-End-Ratio.
HUD: The U.S. Department of Housing and Urban Development.
Index: A published interest rate not controlled by the lender to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. The index and the interest rate linked to it may increase or decrease.
Interest: A share or right in some property. Also, money charged for the use of money (principal).
Lien: An encumbrance against property for money due, either voluntary or involuntary.
Life of Loan Cap: The maximum interest rate that can be charged during the life of the loan. It is also called Life Cap of Life Rate.
Lifetime Cap: A provision of an ARM that limits the highest rate that can occur over the life of the loan.
Loan-to-Value (LTV): The ratio of the amount of your loan to the value of the home.
Lock-in: A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.
Margin: The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Disability Insurance: A disability insurance policy which will pay the monthly mortgage payment in the event of a covered disability of an insured borrower for a specified period of time.
Mortgage Insurance: Insurance written by an independent mortgage insurance company (MIC) protecting the mortgage lender against loss incurred by a mortgage default.
Mortgage Life Insurance: A term life insurance policy that covers the declining balance of a loan secured by a mortgage, and is payable upon death of a covered borrower.
Mortgagee: The person or company who receives the mortgage as a pledge for repayment of the loan. Basically, it is the mortgage lender.
Mortgagor: The mortgage borrower who gives the mortgage as a pledge to repay.
Non-Conforming 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. Non-conforming loans usually incur a rate and origination fee premium.
Note: A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand.
Origination Fee: A fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. Usually a percentage of the amount loaned, such as one percent.
Owner financing: A property purchase transaction in which the property seller provides all or part of the financing.
Planned Unit Developments (PUD): A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.
PITI: Principal, interest, taxes and insurance-the components of a monthly mortgage payment.
Points: Charges levied by the mortgage lender and usually payable at closing. One point represents 1 per cent of the face value of the mortgage loan.
Prepaids: Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.
Prepayment Penalty: 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.
Principal: Amount of debt, not including interest. It is the face value of a note or mortgage.
Private mortgage insurance (PMI): Insurance provided by non-government insures that protects lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%.
Qualifying Ratios: The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow.
Rate Cap: A limit on how much the interest rate can change, either at each adjustment period or over the life of the loan.
Rate Lock-in: A written agreement, in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.
Refinancing: It is the process of paying off one loan with the proceeds from a new loan using the same property as security.
Residential Mortgage Credit Report: A report requested by your lender that utilizes information from at least two of the three national credit bureaus and information provided on your loan application.
Seller-take-back: An agreement in which the owner of a property provides financing, often in combination with an assumed mortgage.
Survey: A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.
Tenants-by-Entirety: A form of ownership in which husband and wife are co-owners with rights of survivorship.
Tenants-in-Common: An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
Title: The evidence one has of right to possession of land.
Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property.
Title Search: An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.
Total Debt Ratio: Monthly debt and housing payments divided by gross monthly income. It is also known as Obligations-to-Income Ratio or Back-End Ratio.
Truth-in-Lending Act: A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
Veterans Administration (VA): A government agency guaranteeing mortgage loans with no down payment to qualified veterans.
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