Additional
Borrowers
Borrowers
who contribute income and credit history to the qualification
process of a loan and whose names appear on all closing documents.
Each additional borrower is equally liable for the debt and
condition of the property.
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Adjustment
Date
The
date the interest rate changes for an adjustable rate mortgage
(ARM).
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Adjustment
Period
The
interval of months between the interest rate adjustment dates for an
adjustable rate mortgage (ARM).
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Adjustable
Rate Mortgage (ARM)
A
mortgage loan in which the interest rate is adjusted periodically
according to a pre-determined adjustment criteria.
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Amount
Financed
The
Amount Financed is not the amount of the loan. It is the requested
loan amount minus the prepaid finance charge. The Amount Financed is
the amount on which the APR is based. For example, if the borrower
requests $100,000 and the Prepaid Finance Charge totals $4,000, the
Amount Financed would be $96,000.
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Annual
Percentage Rate (APR)
The
actual cost of a mortgage loan expressed as a yearly rate. The APR
will be higher than the interest rate stated on the application and
note if it includes fees which are categorized as pre-paid finance
charges such as: interest, discount points, origination fee,
required mortgage insurance and other related fees. The Truth in
Lending Act requires lenders to disclose an APR to assist the
borrower in measuring the actual cost of a loan on an annualized
basis.
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Application
A
form used by mortgage lenders to document necessary information
concerning the mortgage loan applicant(s).
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Appraisal
An
official report created by a qualified appraiser that establishes an
opinion or estimate of property value. The estimate of value is
generally obtained by comparing homes similar to the
"subject" home within the same location or neighborhood.
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Appraised
Value
An
opinion or estimate of property value provided by a certified
property appraiser. The estimate of value is generally obtained by
comparing homes similar to the "subject" home that are
within the same location or neighborhood.
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Available
Cash
The
amount of liquid assets (i.e. checking, savings, mutual funds, etc.)
immediately available to pay closing costs and down payment.
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Average
Interest Rate
The
actual average interest rate for a combination of debts based upon a
total weighted interest rate calculation. Utilizing each loan
balance and interest rate, the calculator determines an average
interest rate for multiple debts.
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Borrower
An
individual (also known as mortgagor) who receives funds in the form
of a loan with an obligation to repay the principal with interest.
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CAPS
Safeguards
on ARM loans that limit the amount a monthly payment or interest
rate may increase. An interest rate cap limits the percent the rate
can increase or decrease for the initial and additional adjustment
periods. The payment cap limits the amount the payment can increase
or decrease for each adjustment period. An ARM loan must also have a
"life of loan" cap limiting the maximum percent the rate
can increase or decrease for the life of the loan.
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Cash
Needed
The
total dollar amount required for payment of closing costs and down
payment.
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Cash
Out Refinance
A
mortgage loan that allows the borrower to pay off an existing debt
and obtain excess money from the equity of their home for payment of
closing costs and additional funds for personal needs (i.e., college
tuition, home improvement, remodel home, purchase automobile and
etc).
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Closing
The
final meeting where the sale and transfer of property and/or loan
settlement is fully executed. This meeting generally requires the
borrower(s), seller(s), lender (or their agent) to be present. The
closing includes the delivery of a deed, signing of notes, and the
collection and disbursement of funds necessary to complete the sale
and loan transaction. Also known as Settlement.
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Closing
Costs
The
costs associated with purchasing a new home (or transfer of home)
and obtaining a mortgage loan. Fees are generally assessed at
closing and may include: insurance, loan fees, title fees, transfer
fees, taxes, settlement or closing fee, survey fee, title insurance,
appraisal fees, etc. The total closing costs are approximately 5% of
the mortgage loan amount.
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Co-borrower
Borrower(s)
who contribute income and credit history to the qualification
process of a loan and whose name(s) appear(s) on all closing
documents. The co-borrower is also liable for the debt and condition
of property.
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Collateral
An
item of value pledged as security for a debt. The real estate is
pledged as collateral for a mortgage loan and is bound by signing
and recording a mortgage or deed of trust.
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Condominium
A
structure of two or more units where the interior space is
individually owned, and the balance of the land (structure and land)
are commonly owned by the owners of each individual unit.
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Cooperative
A
structure of two or more units in which the right to occupy a unit
is obtained by the purchase of stock in the corporation that owns
the building or units.
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Cost
to Refinance a Loan
The
fees and total cost associated with obtaining a new mortgage loan
and refinancing an existing mortgage loan. Generally fees are
assessed at closing and may include: insurance, title fees, transfer
fees, taxes, settlement or closing fee, survey fee, title insurance,
appraisal fees, etc. The total closing cost is typically 5% of the
mortgage loan amount.
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Credit
Report
A
report obtained from a credit bureau agency or company that
discloses a borrower's credit history and current credit status.
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Debt
Consolidation Loan
A
type of loan that allows the borrower to payoff all or a portion of
existing debt (including the existing mortgage loan) from loan
proceeds.
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Deed
of Trust
An
instrument used in many states in place of a mortgage. The property
is transferred to a trustee by the borrower (trustor), in favor of
the lender (beneficiary) and reconveyed upon payment in full.
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Deposit
A
sum of money given to the seller, real estate broker or escrow agent
with an offer to purchase real estate as evidence of good faith.
Also known as earnest money.
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Discount
Points
An
amount payable to the lender paid by the borrower or seller to
increase the lender's effective yield and reduce the interest rate.
One point is equal to one percent of the loan amount. Also known as
discount fee.
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Down
Payment
A
percent of the purchase price that is paid in cash to the seller.
The down payment is the difference between the sales price and
mortgage loan amount. Typically, the down payment is 5-20% of the
purchase price.
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Earnest
Money
A
sum of money given to the seller, real estate broker or escrow agent
with an offer to purchase real estate as evidence of good faith.
Also known as deposit.
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Estimated
Property Value
The
Purchase Price or Current Market value of a specific property.
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Equifax
Credit Services
A
credit reporting agency that provides a detailed report itemizing an
individual's credit history and current credit status.
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Equity
The
portion of a property's value over and above the loans (liens)
against it (i.e., value of property minus loans against property).
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Finance
Charge
The
total amount of interest, prepaid finance charge and specific
required insurance premiums (if applicable) that the borrower is
expected to pay over the life of the loan.
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First
Mortgage
A
real estate loan with a lien (i.e., mortgage or deed of trust) on
the subject property that has priority over any subsequently lien.
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Fixed
Interest Rate
An
interest rate that does not change during the entire term or life of
the loan.
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Fixed
Monthly Debt
The
amount of monthly payment required to be paid each month. Sometimes
referred to as "minimum monthly payment" for credit card
or revolving accounts.
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Gift
Funds
Transfer
of funds to assist with payment of closing costs and/or down
payment. Investors typically require that gift funds may only be
received from the borrower's parents and/or grandparents with no
intent for repayment.
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Gross
Monthly Income
The
total monthly income earned before taxes and any other deductions.
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Hazard
Insurance
Insurance
for a specific property that protects the insured for loss caused by
natural causes (i.e., fire, disasters and vandalism, depending on
the terms of the policy also known as Homeowner's Insurance).
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Home
Equity Loan
A
type of loan that allows homeowners to acquire a loan in addition to
their original mortgage/lien using a portion or all of the equity in
their home (primary residence). A home equity loan is a generally a
second mortgage on the subject property and may be used for any
personal needs (i.e., college education, debt consolidation, home
improvement, etc).
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Homeowner's
Insurance
Insurance
for a specific property that protects the insured for loss caused by
natural causes (i.e., fire, disasters and vandalism, depending on
the terms of the policy also known as Hazard Insurance).
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Installment
Loans
A
loan that has a fixed (or closed-end) term (i.e., 36 months) and
fixed unchanging monthly payments. When the loan is paid in full the
borrower cannot advance additional money unlike a revolving loan.
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Interest
Rate
The
percentage of an amount of money that is borrowed and is paid for
during a specific period specified in the terms of the loan.
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Investment
Property
A
property designated solely as a "rental" or
"leased" property.
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Lender
Name
The
name of the mortgage lender that has been assigned to review and
process the loan application.
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Lien
A
legal claim against a specific property as security for payment of a
debt. The mortgagor (borrower) still holds legal title to the
property, however, a lien is pledged as collateral.
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Line
of Credit (Revolving Line of Credit)
A
loan with a maximum credit limit that allows the borrower(s) to
disburse funds up to the maximum credit line as needed. Funds may be
disbursed repeatedly as the principal balance is paid down up to the
maximum credit limit available. A line of credit functions similar
to a credit card and may be accessed by writing a check or a using a
debit card.
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Loan
Amount
The
total amount requested by the borrower to be financed. This amount
is the basis of many loan fee calculations. For refinance loans, the
loan amount will include the balance of all loans the borrower
requests to be paid off, including the original mortgage, other
personal debt and/or cash out amount.
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Loan
Balance
The
outstanding balance of a loan not paid in full, excluding any
accrued interest.
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Loan
Product
The
loan program that dictates the finance type, amortization term and
other pertinent loan functions (i.e., fixed or adjustable rate and
360 or 180 months).
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Loan
Term
The
total number of payments required to pay the loan in full. This is
also known as amortization term.
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Loan-To-Value
Ratio (LTV)
The
ratio between the amount of a given mortgage loan and the lower of
sales price or appraised value. To determine a loan-to-value ratio,
divide the loan amount by the sales price or appraised value.
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Manufactured
Home
A
type of house that is constructed in a factory, delivered to a
property location and set on a foundation. In the past, manufactured
homes were called "mobile homes". However,
"mobile" is no longer an accurate name because fewer than
five percent of such homes are ever moved off the owner's original
site.
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Maturity
The
termination or due date on which final payment of a loan must be
paid in full.
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Maximum
Monthly Payment
The
maximum payment a borrower may qualify for based on their income and
debt. The maximum payment is calculated by using a debt-to-income
ratio.
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Mobile
Home
A
type of home that is 100% constructed in a factory, delivered to a
property location and set on a lot or foundation. A mobile home can
generally be moved off of the owner's original site.
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Monthly
Housing Payment
Typically
the total amount of principal, interest, taxes, and insurance (PITI)
paid each month on a mortgage loan. Many lenders and investors limit
the monthly housing payment to 28% of the gross monthly income.
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Monthly
Payment
The
amount of principal and interest paid each month on a loan. The
monthly payment on a mortgage loan may also include an escrow
payment for taxes and insurance.
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Monthly
Payment Savings
The
total monthly payment reduction a borrower may gain by refinancing
their mortgage loan.
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Mortgage
An
instrument used in some states as a claim in real estate pledging
the subject property as collateral for a mortgage loan and
terminating once the loan is paid in full.
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Mortgage
Insurance (MI)
Insurance
required by investors to protect the lender in case the borrower
defaults on the loan. Mortgage Insurance is typically required for
conventional loans that have a down payment less than 20% of the
purchase price. FHA and VA loans have different insurance and
guidelines. Also known as Private Mortgage Insurance.
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Mortgagee
The
lender on a mortgage loan transaction.
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Mortgagor
The
borrower on a mortgage loan transaction.
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Multi
Family
A
term generally to distinguish a house designed for use by more than
one family.
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Note
A
written agreement and promise from the borrower(s) to pay a definite
sum of money at a stated interest rate during a specified date and
term. The note contains a description of the collateral and
conditions under which the loan is to be repaid.
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Number
of People Applying for Loan
The
total number of individuals who will be contributing income and
credit to the approval process. Investors may limit the number of
individuals applying for a loan.
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Number
of Years at this Address
The
total number of years the borrower has lived at the current
residence. Many loan programs may contain specific criteria allowing
higher Loan-to-Value or Debt-to-Income ratios based upon years at
current residence.
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Number
of Years with Employer
The
total number of years the borrower has been employed with the
current employer. Many loan programs may contain specific criteria
allowing higher Loan-to-Value or Debt-to-Income ratios based upon
years with current employer.
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Origination
Fee
The
fee charged by a lender to originate a mortgage loan. Typically the
fee is a percentage of the loan amount, such as one percent.
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Outstanding
Debt to Consolidate
The
total amount of all debt the borrower desires to payoff and
consolidate into one loan and monthly payment.
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Payment
Schedule
A
schedule detailing the amount and due date of payments required to
be paid over the life of the loan. The dollar figures represent
principal, interest and private mortgage insurance (if applicable).
This schedule does not reflect payment for taxes and insurance.
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Points
An
amount payable to the lender paid by the borrower or seller to
increase the lender's effective yield and reduce the interest rate.
One point is equal to one percent of the loan amount.
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Preferred
Communication Method
A
process of communication used to respond to a borrowers loan
request.
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Pre-qualification
A
request by a prospective loan applicant for a preliminary
determination of whether the prospective applicant would likely
qualify for credit under a lender's standards, or of the amount of
credit for which the prospective applicant likely would qualify.
Some lenders evaluate pre-qualification requests through a procedure
that is separate from the lender's normal loan application process;
others use the same process. Pre-qualification is generally not
a commitment to lend.
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Prepaid
Finance Charge
Certain
charges made in connection with the loan that must be paid upon the
loan closing. These charges are defined in Regulation Z of Federal
Register and entail, but not inclusive to: Loan Origination Fee,
Discount Points, Private Mortgage Insurance and Tax Service Fee.
Some loan fees are excluded from the Prepaid Finance Charge such as
appraisal and credit report fees.
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Primary
Borrower
An
individual who is listed first on the mortgage loan application and
is considered to be the primary borrower. Some lenders allow a
non-occupying co-borrower or co-signor to be on the application. In
this case, the borrower occupying the property will need to be the
primary borrower.
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Primary
Home
A
property that the owner intends to occupy and will be their primary
residence.
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Primary
Residence
A
home which the borrower intends to occupy as the principal
residence.
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Principal
and Interest (PI)
A
portion of the monthly payment that is applied toward the loan
balance and accrued interest. Payment for property taxes and
insurance is considered PITI (principal, interest, taxes and
insurance).
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Principal,
Interest, Taxes and Insurance (PITI)
The
monthly payment that is applied toward the loan balance, accrued
interest and escrow account. Principal, interest, taxes and
insurance are the four major components of a regular monthly
mortgage payment. Payment for principal and interest is considered
PI (principal and interest).
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Principal
Balance
The
outstanding balance due on a debt, excluding any accrued interest or
other fees.
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Private
Mortgage Insurance (PMI)
Insurance
required by investors to protect the lender in case the borrower
defaults on the loan. Mortgage Insurance is typically required for
conventional loans that have a down payment less than 20% of the
purchase price. FHA and VA loans have different insurance and
guidelines. Also known as Mortgage Insurance.
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Proceeds
from Sale of Current Home
The
total funds remaining from the sale and transfer of a current home.
The proceeds are calculated by subtracting all settlement fees and
lien payoffs from the sales price (purchase price). Many borrowers
use the proceeds from the sale of the current home as down payment
and/or payment of closing costs for the purchase of a new home.
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Product
Type
The
loan type typically details the purpose of the loan (i.e., purchase
new home, refinance existing home, home equity, debt consolidation
and second mortgage). Many loan programs may contain specific
criteria allowing only certain loan types.
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Property
Class
A
description of the structure of the property determining whether it
is uses as a Single (one) Family Home, Multi Family Home (2-4),
Condominium, Town Home, Manufactured or Mobile Home and Cooperative
Housing.
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Property
Taxes
A
tax collected on real estate property by local, state and/or federal
government. The amount of tax is determined by the value of the
property.
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Property
Type
A
description of the property that determines whether the property
will be used as a Primary Residence Home, Investment Property or
Second Home.
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Property
Use
A
description of the property that determines whether the property
will be used as a Primary Residence Home, Investment Property or
Second Home.
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Purchase
Price
The
amount of money paid for a specific property and is based upon a
written agreement (purchase agreement) between the seller and buyer.
Also known as sales price.
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Qualify
A
process of preparing a borrower for a mortgage loan by analyzing
their financial data and comparing to loan program criteria to
determine the best-fit program based upon loan-to-value ratio,
debt-to-income ratio and credit information (if applicable).
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Rate
Type
A
factor that determines the payment structure and whether the rate
may adjust during the life of the loan. Generally fixed or
adjustable (ARM).
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Refinance
The
process of obtaining a new mortgage loan to pay off the existing
debt from loan proceeds using the same property as collateral. This
type of loan is generally requested to obtain a lower interest rate
and/or reduce payment or term.
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Revolving
Loan
A
loan with a maximum credit limit that provides the borrower with the
ability to disburse funds up to the maximum credit line as needed.
The line of credit can be accessed repeatedly as the balance is paid
down. A revolving loan functions similar to a credit card and may be
accessed by writing a check or a using a debit card.
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Sales
Price
The
amount of money paid for a specific property, the sales price is
based upon a written agreement between the seller and buyer (also
known as purchase price).
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Second
Home
A
property designated as a second residence or vacation home and is
livable year round. The property owner generally resides at
different property referred to as "Primary Home."
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Security
Real
estate property pledged as collateral to secure the payment of a
debt, most commonly used in mortgage loan transactions.
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Settlement
The
final meeting where the sale and transfer of property and/or loan
closing is fully executed. This meeting generally requires the
borrower(s), seller(s), lender (or their agent) to be present. The
closing includes the delivery of a deed, signing of notes, and the
collection and disbursement of funds necessary to complete the sale
and loan transaction (also known as closing).
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Single
Family
A
term generally to distinguish a house designed for use by one
family.
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Specific
Monthly Payment
A
desired monthly payment or pre-determined monthly payment.
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State
Property is Located
The
actual state of which the property is located.
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Student
Loans
A
government affirmed loan obtained to finance the cost of tuition for
approved colleges and universities.
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Survey
The
measurement of the boundaries of a parcel of land documented by a
registered surveyor.
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Term
A
period of time (usually months) that a loan must be repaid.
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Title
The
evidence of ownership and rights an individual has to a specific
property/real estate.
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Title
Insurance
Insurance
obtained from a title insurance company that insures the purchaser,
lender (mortgagee), or other agent from any loss caused by defects
of title on the subject property/real estate.
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Total
of Payments
The
Total of Payments represents the sum of all payments made toward
principal, interest and mortgage insurance (if applicable) for the
life of the loan.
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Total
Fixed Monthly Debt
The
total monthly sum of all monthly loan payments for all borrowers.
This total should only include the minimum required payment and not
the actual payment made (if excess payment is made).
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Transfer
Tax
State
or local tax on the transfer of title (ownership) when the title
passes from one owner to another.
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Type
of Property
A
description of the structure of the property determining whether it
is uses as a Single (one) Family Home, Multi Family Home (2-4),
Condominium, Town Home, Manufactured or Mobile Home and Cooperative
Housing.
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User
Name
A
specific name used to access or input data from or to the database.
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