H I J
O P Q
T U V
the first letter of the word from the list above to jump to appropriate section
of the glossary. If the term you are looking for starts with a digit or symbol,
choose the '#' link.
right of the mortgagee (lender) to demand the immediate repayment of the
mortgage loan balance upon the default of the mortgagor (borrower), or by using
the right vested in the Due-on-Sale Clause.
Adjustable Rate Mortgage (ARM)
A type of mortgage loan,
usually lasting 30 years, where the interest rate fluctuates and depends on a
particular preselected interest rate index. The advantage of this type of loan
is that lenders typically offer initial discounts (teaser rates) on the interest
rate index making the loans less expensive than a traditional fixed rate mortgage.
the loan payment
goes up and down depending on the actual financial conditions
of the economy which can
be an advantage if interest rates remain constant
or decline during the life of the loan. The disadvantage of this type of
loan is that your exact payment over time is unpredictable and can increase.
Also called variable rate mortgage.
On an adjustable rate mortgage, the time between changes in the interest rate
and/or monthly payment, typically one, three or five years depending on the
Literally to "kill off" (root: mort) the outstanding balance of a loan
by making equal payments on a regular schedule (usually monthly). The payments
are structured so that the borrower pays both interest and principal with each
Annual Percentage Rate (APR)
APR is a measurement of the full cost of a loan including interest and loan fees
expressed as a yearly percentage rate. Because all lenders apply the same rules
in calculating the annual percentage rate, it provides consumers with a good
basis for comparing the cost of loans.
The fee charged by the lender to the borrower for applying for a loan. Payment
of this fee does not guarantee that a loan will be approved. Some lenders may
apply the cost of the application fee to certain closing costs.
An estimate of the value of property based on recent sales information of
similar properties. The appraisal is made by a qualified professional called an
value that a taxing authority places on real or personal property for the
purpose of taxation.
charge against a property for purposes of taxation. This may take the form of a
levy for a special purpose or a tax in which the property owner pays a share of
the cost of community improvements according to the valuation of his or her
The agreement between buyer and seller where the buyer takes over the payments
on an existing mortgage from the seller. Assuming a loan can usually save the
buyer money since this is an existing mortgage debt, unlike a new mortgage where
closing cost and new, probably higher, market-rate interest charges will apply.
A type of mortgage loan that is exactly like a traditional fixed rate mortgage
except that it becomes 100% due after a specified amount of time has elapsed
(usually five or seven years).When the loan matures, you must pay the loan off
in cash (Balloon Payment) or refinance. The advantage of this type of loan is
that the initial rate is usually lower than a normal fixed rate loan. The
disadvantage of this type of loan is that you may have to refinance or pay off
the loan if you do not sell the home by the time the loan matures.
type of fixed-rate mortgage with payments for half the usual monthly amount
scheduled every two weeks. Because you make the equivalent of 13 months of
payments every year, the loan term is shortened from 30 years to 18 or 19 years,
and total interest cost are substantially lower.
One who applies for and receives a loan in the form of a mortgage with the
intention of repaying the loan in full.
An individual in the business of assisting in arranging funding or negotiating
contracts for a client but who does not loan the money himself. Brokers usually
charge a fee or receive a commission for their services.
The process of paying additional points on the loan to reduce the monthly
mortgage. There are typically two specific types: a Permanent Buydown, and a
Temporary Buydown. In a Permanent Buydown, a sufficient amount of interest is
prepaid to lower the rate permanently. In a Temporary Buydown, only a
sufficient interest is paid to lower the payment for the first three years. The
reason to Temporarily Buydown a loan is to lower the current payments thereby
more easily qualifying for the loan. This usually makes sense because income
will usually continue to increase as the interest rate does. The most common
Temporary Buydown is called 3-2-1, meaning three percent lower the first year,
two percent lower the second year, and one percent lower the third year.
A set percentage amount by which an adjustable rates mortgage may adjust each
adjustment period. For adjustable loans, caps are usually quoted as two numbers
as in 2/6. The first number indicates how much a loan may adjust at each
adjustment period while the second number indicates how much a loan may adjust
over its lifetime.
Loans like the 3/1 and 5/1 adjustable, which have an initial fixed period are
quoted with numbers as in 2/6/3 which would mean that the first adjustment
may be as much as 3%, subsequent adjustments are capped at 2% each, and the
lifetime cap is 6%. Two-Step loans are quoted with a single cap, which is the
amount by which the loan mayadjust at its single adjustment date.
loan transaction in which the borrower receives funds as the time of closing.
document issued by the federal government certifying a veteran’s eligibility
for a Veterans Administration (VA) mortgage guarantee.
written statement usually furnished by a title company or attorney which
presents the status of the title to a piece of property.
assets that are readily available to be used to pay the closing costs involved
in a closing of a mortgage transaction.
meeting between the buyer, seller and lender (or their agents) where the
property and funds legally change hands. Also called settlement.
Agent (Escrow/Title Company)
third party who oversees the closing of the loan transaction.
The meeting between the buyer, seller and lender or their agents where the
property and funds legally change hands, also called settlement. Closing costs
usually include an origination fee, discount points, appraisal fee, title search
and insurance, survey, taxes, deed recording fee, credit report charge and other
costs assessed at settlement. The cost of closing usually is about 3 percent to
6 percent of the mortgage amount.
documents which are signed at closing. These include the Deed of Trust or
Mortgage with attachments, Promissory Note, Truth-in-Lending Disclosure, and
other documents related to the transaction.
form used at closing that gives an account of the funds received and paid at the
closing, including the escrow deposits for taxes, hazard insurance, and mortgage
borrower(s) whose income contributes to qualifying for a loan and whose name(s)
appears on documents with equal legal obligations.
COFI - Cost of funds index
Adjustable-rate mortgage with rates that adjust based on a cost-of-funds index,
often the 11th District Cost of Funds.
pledged as security for a debt, such as the real estate pledged as security for
binding pledge made by the lender to the borrower to make a loan, usually at a
stated interest rate within a given period of time for a given purpose, subject
to the compliance of the borrower to stated conditions.
fee paid by a potential borrower to a lender for the lender's promise to lend
money at a specified rate and within a given time period.
lender's written offer to grant a mortgage loan outlining the terms, the amount
of the loan, the interest rate and any other conditions. It can also serve as a
communication of the lender's decision to the borrower's application.
abbreviation for comparable properties used for comparative purposes in the
appraisal process; facilities of reasonably the same size and location with
similar amenities; properties which have been recently sold, which have
characteristics similar to the property under consideration, thereby indicating
the approximate fair market value of the subject property.
A mortgage loan for $227,150 or lower.
type of adjustable rate mortgage that allows the borrower to change from an ARM
to a fixed rate loan according to the terms of the note and security instrument.
A short term loan for funding the cost of construction. The lender advances
funds to the builder as the work progresses.
A mortgage neither insured by the FHA nor guaranteed by the VA.
The right of a borrower to convert an adjustable or balloon loan into a fixed
Borrowers are rated by lenders according to the borrower's credit-worthiness or
risk profile. Credit ratings are expressed as letter grades such as A-, B, or
C+. These ratings are based on various factors such as a borrowers payment
history, foreclosures, bankruptcies and charge-offs. There is no exact science
to rating a borrowers credit, and different lenders may assign different grades
to the same borrower.
A report to a prospective lender on the credit standing of a prospective
borrower. Used to help determine creditworthiness. Information regarding late
payments, defaults, or bankruptcies will appear here.
One of several financial calculations performed by your lender to determine if
you can afford a particular monthly payment. The debt ratio (also known as the
obligations ratio) is the sum of all of your monthly debt payments including
your total monthly mortgage payment divided by your total monthly income.
Typically acceptable debt ratios for Conventional Loans are 36-38%, FHA Loans
are 41-43%, and VA Loans are 41%.
Deed of Trust
A legal document which affects the transfer of ownership of real estate from the
seller to the buyer.
Failure to meet legal obligations in a contract. Typically failure to make the
monthly payments on a mortgage.
Failure to make payments on time, which can lead to foreclosure.
PUD in which the common property has less than a 2% influence upon the value of
the premises. The 2% rule of thumb is calculated by dividing the dollar amount
of amenities by the total number of units. Also see PUD.
of Veterans Affairs
An independent agency of the federal government that guarantees long- term,
low-or no-down payment mortgages to eligible veterans.
sum of money given to bind a sale of real estate. Also known as earnest money.
loss of value in real property brought about by age, physical deterioration,
functional or economic obsolescence.
payable to the lending institution by the borrower or seller to increase the
lender's effective yield. One point is equal to one percent of the loan amount.
the note rate on a loan is less than the market rate, the lender requires
additional points to raise the yield on the loan to the market rate.
The amount of money the buyer puts down, normally anywhere from 5-25%.
A provision in a mortgage or deed of trust that allows the lender to demand
immediate payment of the balance of the mortgage if the mortgage holder sells
Money given by a buyer to a seller as part of the purchase price to bind a
transaction or assure payment.
Equal Credit Opportunity Act (ECOA)
Is a federal law that requires lenders and other creditors to make credit
equally available without discrimination based on race, color, religion,
national origin, age, sex, marital status or receipt of income from public
The difference between the amount owed on the loan and the current market value
of the home or property.
Documentation held impartially pertaining to the sale and transfer of real
Credit Reporting Act (FCRA)
Federal law which requires a lender who is rejecting a loan request because of
adverse credit information to inform the borrower of the source of such
Provide financing to farmers and other qualified borrowers who are unable to
obtain loans elsewhere.
Federal Home Loan Bank Board (FHLBB)
The former name for the regulatory and supervisory agency for federally
chartered savings institutions. Agency is now called the Office of Thrift
Federal Home Loan Mortgage Corporation (FHLMC)
A quasi-governmental agency that purchases conventional mortgages from insured
depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity
is the insuring of residential mortgage loans made by private lenders. FHA also
sets standards for underwriting mortgages.
A loan insured by the Federal Housing Administration open to all qualified home
purchasers. While there are limits to the size of FHA loans ($155,250 as of
1/1/96), they are generous enough to handle moderately-priced homes almost
anywhere in the country.
FHA mortgage insurance
Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure
the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of
up to 0.5 percent of the current loan amount, paid in monthly installments. The
lower the down payment, the more years the fee must be paid.
Federal Home Loan Mortgage Corporation (FHLMC)
The Federal Home Loan Mortgage Corporation provides a secondary market for
savings and loans by purchasing their conventional loans. Also known as
Federal National Mortgage Association (FNMA)
A tax-paying corporation created by Congress that purchases and sells
conventional residential mortgages as well as those insured by FHA or guaranteed
by VA. This institution, which provides funds for one in seven mortgages,
makes mortgage money more available and more affordable.
The total dollar amount your loan will cost you. It includes all interest
payments for the life of the loan, any interest paid at closing, your
origination fee and any other charges paid to the lender and/or broker.
Appraisal, credit report and title search fees are not included in the finance
A promise by the FHA to insure a mortgage loan for a specified property and
A type of mortgage loan, usually lasting 30 years, where the interest rate
remains constant throughout the life of the loan. An advantage of a fixed rate
loan is your own security that the interest rate will not increase. The
disadvantage of a fixed rate loan occurs when interest rates substantially
decline below the interest rate of your loan.
Between the time of application and closing, a borrower may choose to bet on
interest rates decreasing by electing to float. Floating is essentially choosing
not to lock the interest rate. Since it is the borrowers responsibility to lock
his or her rate before (or at) closing, choosing to float is considered risky
and may result in a higher interest rate.
A legal process by which the lender or the seller forces a sale of a mortgaged
property because the borrower has not met the terms of the mortgage. Also known
as a repossession of property.
written explanation signed by the individual giving the gift stating, "This
is a bona fide gift and there is no obligation expressed or implied to repay
this sum at any time."
One of two loan types called FHA or VA loan. These loans are partially backed by
the government and can help veterans and
low-to-moderate income families afford homes. The advantages of these types of
loans is that they often have a lower interest rate, are easier to qualify for,
have lower down-payment requirements, and can be assumed by someone else if the home
is sold. Many mortgage bankers can
obtain these types of loans for you.
Graduated Payment Mortgages
A type of mortgage where the monthly payments start low but increases by a fixed
amount each year for the first five years. The payment shortfall or negative
amortization is added to the principal balance due on the loan. The
advantages of this type of loan is a lower monthly payment at the
beginning of the loan term. The disadvantages are typically a slightly higher
rate than traditional fixed-rate mortgage loans and lenders usually
require a larger down payment. In addition, the negative
amortized amount increases the balance due on the total loan, which can be a
problem if the value of the home declines.
Gross Monthly Income
The total amount the borrower earns per month, not counting any taxes or
expenses. Often used in
calculations to determine whether a borrower qualifies for a particular loan.
Growing Equity Mortgage
Growing Equity Mortgage: A type of mortgage where the monthly payments start low
but increase by a fixed amount each year for the entire life of the loan as
compared to five years with a Graduate Payment Mortgage. The advantage of this
type of loan is that the loan can usually be paid off in a shorter duration than
a traditional fixed rate loan. The disadvantage of this loan is that the payment
continues to go up irrelevant of the income of the borrower.
A promise by one party to pay a debt or perform an obligation contracted by
another if the original party
fails to pay or perform according to a contract.
A form of insurance in which the insurance company protects the insured from
certain losses, such as fire,
vandalism, storms and certain other natural causes.
loans in excess of 80 percent of the loan amount divided by the lower of the
sales price or appraised value.
fees imposed by a condominium or homeowners' association for maintenance of
One of several financial calculations performed by your lender when applying for
a conventional loan to
determine if you can afford a particular monthly payment. The housing ratio
(also known as the income ratio) is your total monthly payment including taxes
and insurance divided by your total monthly income. Typically acceptable housing
ratios for Conventional Loans are 28-33% and FHA Loans are 29-31%.
The portion of a borrower's monthly payments held by the lender or servicer to
pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due. Also known as
A nationally published financial measure of economic conditions usually relative
to other financial
instruments such as bonds or Treasury Bills. The lender uses a particular index
(such as the 6 month Treasury Bill) to calculate your particular monthly payment
by adding a fixed margin to the index. The margin is the lenders profit and is
over and above the normal index because of the assumption of loan risk. Your
lender will adjust the interest on your ARM at regular time intervals also
called adjustment intervals (like 6 months), by adding their particular margin
to the particular index of the loan. The amount the loan is adjusted is also
controlled by a periodic cap (the maximum amount the loan can change during your
particular adjustment interval), the monthly cap (the maximum amount the monthly
payment can change from one adjustment interval to the next), and the lifetime
cap (the total amount the loan can change from their initial rate of the loan).
The sum of the published index plus the margin. For example if the index were 9%
and the margin 2.75%, the
indexed rate would be 11.75%. Often, lenders charge less than the indexed rate
the first year of an adjustable-rate mortgage.
loan insured by FHA or a private mortgage insurance company.
sum paid for borrowing money, which pays the lender's costs of doing business.
percentage of an amount of money which is paid for its use for a specified time.
Borrower Interest Rate
rate on which the borrower’s first payment is calculated. If the loan is
discounted or brought down, it may be lower than the Fully Indexed Accrual Rate.
Borrower Payment Rate
annual interest rate used to calculate the borrower's initial cash payment. If,
for example, the note specifies that a fully amortizing annual rate of 11% be
used to calculate the initial monthly payment, and that rate is "brought
down" 2%, the IBPR is 9%.
estate owned with the intent of supplementing income and not intended for owner
A loan above $227,150(as of 1/1/98). These limits are set by the Federal
National Mortgage Association and the Federal
Home Loan Mortgage Corporation. Because jumbo loans cannot be
funded by these two agencies, they usually carry a higher interest rate.
The bank, mortgage company, or mortgage broker offering the loan. Many
institutions only "originate"
loans and then resell the obligation to third parties.
convertible mortgage offering a discounted interest rate at the beginning of the
loan that gradually increases to an agreed-upon fixed-rate over the first few
years of the loan. It provides lower initial payments and a stable final monthly
rate, but the final rate may be somewhat higher than on a standard fixed-rate
legal claim or attachment against property as security for payment of an
Life of Loan Cap
The maximum interest rate that can be charged during the life of the loan. Also
called Lifetime Cap. This
value is often expressed as an increment above the initial loan rate. For
example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime
cap will never adjust above a rate of 13.25% (7.25+6.0).
fee charged by a lender to prepare all the documents associated with your
The relationship between the
amount of the mortgage loan and the appraised value of the property expressed as
a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the
value of the property and paying 10% as a down payment. For purchases, the value
of the property is assumed to be the purchase price, for refinances the value is
determined by an assessment.
The period, expressed in days, during which a lender will guarantee a rate. Some
lenders will lock rates at the time of application while others will allow the
borrower to lock the rate after the application is taken. Request information
from your lender regarding lock procedures.
The act of committing to a mortgage rate. This action, taken by a borrower some
time between the application and the closing
dates, is sometimes accompanied by a payment by the
borrower to the lender. Opposite of float.
highest price which a ready, willing and able buyer would pay and a willing
seller will accept, both being fully informed under no pressure to act. The
market value may be different from the price a property can actually be sold for
at a given time (market price).
The amount a lender adds to the index on an adjustable rate mortgage to
establish the adjusted
termination or due date on which final payment on a loan must be paid in full.
the amount of PITI (principal, interest, taxes, and insurance) paid each month
on a mortgage loan.
conveyance of an interest in real property given as security for the payment of
company that originates and funds, and services mortgages exclusively for resale
in the secondary market.
company that for a fee matches borrowers with Mortgage Bankers.
A type of insurance charged by most lenders to offset the risk of your loan when
your down payment is less than 20% of the value of the home.
written promise to pay a sum of money at a stated interest rate during a
specified term. The note contains a complete description of the conditions under
which the loan is to be repaid and when it is due.
Mortgage Reduction Programs
A type of accelerated payment program whereby payments are made more frequently
usually bi-weekly or weekly rather
than the traditional monthly payment. Making more frequent and accelerated
payments reduces the amount of principal more quickly which interest
accumulation is based on. The net effect can be savings on the total interest
Occurs when your monthly payments are not large enough to pay all the interest
due on the loan. This unpaid interest is added to the unpaid balance of the
loan. the danger of negative amortization is that the home buyer ends up owing
more than the original amount of the loan.
Net Effective Income
Gross income less federal income tax.
- No Income
Often grouped together despite their subtle differences, ``light
``no-income verification'' and ``quick qualifier,'' or ``QQ'' loans are a
solution for many buyers
who have income from sources that are hard to verify. Usually these loans are
used by self-employed borrowers
who have difficulty verifying all of their income, or
by borrowers with very
complex income structures. For example, a borrower who has income primarily
from rental properties and investments may be hesitant to verify all sources
of income due to the
volumes of paperwork this would require. With a no income documentation
loan, the borrower can simply state his income on the application, and
the lender will use this stated
income to qualify the loan. Why do lenders do this? Because they
recognize that by charging
a slightly higher rate of interest they can rely on this stated
income of the borrower and
cover the additional risk. Lenders do in fact rely on verifying
that the borrower has assets
that logically match the stated income, along with excellent
With a higher cash down payment, typically 25% or higher, along with good
credit, these loans allow borrowers to buy into purchase prices a lender
wouldn't ordinarily qualify them for. Because no-income
documentation loans carry a higher interest rate, they should only be
used when necessary, not
simply to avoid the paperwork requirements of a full documentation
mortgage loan that does not conform to regulatory limits such as loan-to-value
ratio, term and other characteristics.
home mortgages not eligible for sale and delivery to either FNMA or FHLMC
because of various reasons, including loan amount, loan characteristics or
use of a property as a full-time residence, either by the title holder
(owner-occupancy) or by another party through a formal agreement (rental).
Mortgage whose annual rate changes yearly. The rate is usually based on
movements of a published index plus a specified margin, chosen by the lender.
The fee imposed by a lender to cover the costs of preparing loan
documents, making credit checks, inspecting
and sometimes appraising property. It is usually computed as a percentage of the
face value of the loan. Refer to the Points definition to see how this fee is
reflected in the tables.
means that the property is the owner’s primary residence.
(Principal, Interest, Taxes and Insurance)
four components that (for most homeowners) are included in the monthly mortgage
payment. Principal and interest are the portions of the payment assigned to
repay the mortgage itself; taxes and insurance are paid by your lender into a
special escrow account to pay for homeowners insurance and property taxes.
( Loan Disclosure Points)
interest on a mortgage that is usually paid at the time of closing. Each point
is equal to one percent of the total amount of a mortgage (one point on an
$80,000 mortgage is $800, or 1 percent of 80,000). Most lenders offer mortgages
with several combinations of points and interest rates; generally, the lower the
interest rate, the more points you will pay at settlement.
results of a title search by a title company prior to issuing a title binder or
commitment to insure clear title.
The ability to pay off the remaining balance of a loan.
A fee charged by lenders for paying your mortgage off early.
The amount of debt, not counting interest, left on a loan.
preparation of a mortgage loan application and supporting documentation for
consideration by a lender or insurer.
Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment, lenders
will allow a smaller down payment - as low as
5 percent in some cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage insurance. Private
mortgage insurance will
usually require an initial premium payment and may require an additional monthly
fee depending on you loan's
(Planned Unit Development)
planned combination of diverse land uses, such as housing, recreation, and
shopping in one contained development or subdivision. A major feature of a PUD
includes areas of common land for use by the housing unit owners; the
association of unit owners generally owns, pays fees, and maintains the common
areas. Also see DeMinimus PUD.
agreement between a buyer and seller of real property, setting forth the price
and terms of the sale. Also known as a sales contract.
The ratio of the borrowers fixed monthly expenses to his gross monthly
income. Ratios are expressed as two numbers like 28/36 where 28 would be the
Front-End Ratio and 36 would be the Back-End Ratio.
The Front-End Ratio is the percentage of a borrowers gross monthly income
(before income taxes) that would cover the cost of PITI (Mortgage Principal
Payment + Mortgage Interest Payment + Property Taxes + Homeowners Insurance). In
the case of a 28% Front-End Ratio a borrower could qualify if the proposed
monthly PITI payments were 28% or less than the borrower's gross monthly income.
The Back-End Ratio is the percentage of a borrowers gross monthly income that
would cover the cost of PITI plus any other monthly debt payments like car or
personal loans and credit card debt.
Please note that qualifying ratios are only a rough guideline in determining a
potential borrower's credit-worthiness. Many factors such as excellent or poor
credit history, amount of down payment, and size of loan will influence the
decision to approve or disapprove a particular loan. We urge all borrowers to
discuss their particular situation with a qualified lender regardless of the
outcome of any self-qualification exercise.
agreement guaranteeing the home buyer a specified interest rate provided the
estate or real property owned by an individual or business.
Estate Owned (REO)
term frequently used by lending institutions as applied to ownership of real
property acquired for investment or as a result of a foreclosure.
Estate Settlement Procedures Act (RESPA)
RESPA is a federal law that allows consumers to review information on known or
estimated settlement cost once after application and
once prior to or at a settlement. The law requires lenders to furnish the
information after application only.
and that which is affixed to it.
Money paid to the lender for recording a home sale with the local authorities,
thereby making it part of the public records.
Obtaining a new mortgage loan that pays off your existing loan thus creating new
payment and interest rate terms.
The amount of money left over after you have paid all of your ordinary and
necessary debts including the
mortgage. This calculation is typically used with VA loans.
recordable instrument issued by the lender verifying full payment of a mortgage
residence other than the borrower's primary residence which the borrower intends
to occupy for a portion of each year. Must be suitable for year-round occupancy.
A second loan on the same property or home that the first mortgage loan is
market where existing mortgages are bought and sold. It contrasts with the
primary mortgage market where mortgages are originated.
lending, the collateral given, deposited, or pledged to secure the payment of a
See Closing Costs.
Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below-market interest rate in return
for which the lender (or another investor such as a family member or other
partner) receives a portion of the future appreciation in the value of the
property. May also apply to mortgage where the borrowers shares the monthly
principal and interest payments with another party in exchange for part of the
measurement and description of land by a registered surveyor.
A document that gives evidence of an individual's ownership of property.
A policy, usually issued by a title insurance company, which insures a homebuyer
against errors in the title search. The cost of the policy is usually a function
of the value of the property, and is often borne by the purchaser and/or seller.
Policies are also available to protect the lender's interests.
An examination of city, town, or county records to determine the legal ownership
of real estate.
Total Debt Ratio
Monthly debt and housing payments divided by gross monthly income. Also known
as Back-End Ratio.
in Lending Act
federal law requiring a disclosure of credit terms using a standard format. This
is intended to facilitate comparisons between the lending terms of financial
The decision whether to make a loan to a potential home buyer based on credit,
employment, assets, and other factors and the matching of this risk to an
appropriate rate and term or
Variable Rate Mortgage
See Adjustable Rate Mortgage.
of Deposit (VOD)
A document signed by the borrower's financial institution verifying the status
and balance of his/her financial accounts.
Verification of Employment (VOE)
A document signed by the borrower's employer verifying his/her position and
(Department of Veterans Affairs)
insured loans guaranteed by the Department of Veterans Affairs, requiring very
low or no down payments and with generous requirements for qualification. They
are available only to veterans of the armed services, those currently on active
duty or in the reserves, and their spouses.
Many mortgage firms must borrow funds on a short term basis in order to
originate loans which are to be sold later in
the secondary mortgage market (or to investors). When the prime
rate of interest is higher on short term loans than on mortgage loans, the
mortgage firm has an economic
loss which is offset by charging a warehouse fee.
option which allows the borrower to not pay the points associated with the loan
origination fee. This savings is offset by a slightly higher loan interest rate.
Copyright © 2006 by CaLoanBiz.com.