Home Mortgage Definitions
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A | B | C | D |
E | F | H | I |
J | L | M | N |
P | R | S | T |
U | V
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Adjustable Rate Mortgage (ARM)-
The adjustable rate mortgage or ARM is a mortgage in which the interest rate is adjusted periodically based on a
pre-selected index. For example, the One Year Treasury, MTA Index or even Cost of Funds Index.
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Alternative (ALT-A) -
A loan that does not fit conforming guidelines because of various reasons that may include adverse credit.
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Amortization -
Equal periodic payments calculated to pay off a mortgage at the end of a fixed period including accrued
interest on the outstanding mortgage balance.
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"A" Paper -
A loan is within the lending guidelines excellent credit often allows the borrower to only state their
income and assets.
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Annual percentage rate (A. P. R.) -
Is the interest rate reflecting the cost of a mortgage as a yearly rate? This measurement of
rate is likely to be a little higher than the actual mortgage note rate. It factors in the closing costs and
represents your interest for the first year only. You can find the A.P.R. on the
mortgage disclosure document referred to as the Truth-In-Lending Statement.
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Appraisal -
A professional estimate of value. This is based on the most recent comparable properties like yours in the area,
sold in the last 6 months. This is performed by a qualified professional Appraiser.
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Borrowers Authorization -
A written authorization from the borrower in favor of the lender to gather the necessary information
to process their loan request.
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Caps (interest) -
Consumer safeguards put in place to limit the amount the interest rate on an adjustable rate mortgage may
change per adjustment period. It is in effect for the life of the loan.
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Caps (payment) -
Consumer safeguards limiting the amount monthly payments on an adjustable rate mortgage may change during
the life on the mortgage.
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Closing -
Occurs when all documents are fully executed and funds are transferred.
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Commitment -
A written promise made by a mortgage lender based on specific terms and conditions to the borrower.
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Compensating Factor(s) -
Included but are not limited to: number of years in residence, length of time on the job,
timely mortgage payments, cash reserves and low loan to value (LTV).
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Credit scoring -
Information about you and your credit experiences, such as your bill paying history, the number and type of
accounts you have open, derogatory credit, outstanding debt and the age of your accountsis rated by the
credit bureau(s).
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Debt to Income Ratio (referred to as qualifying ratios) -
The ratio is expressed as a percentage which results when a borrower's payment
obligation on debt divided by the borrowers gross income.
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Default -
Failure to live up the contractual obligation of a mortgage to make timely payments. Over 90 days
delinquent may result in foreclosure on the subject property.
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Equity -
The difference between the fair market value of real-estate owned and current indebtedness (including
liens other than a mortgage).
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Equal Credit Opportunity Act (ECOA) -
A Federal Law that requires lenders and other creditors to offer available credit without discrimination
based on color, race, religion, country of origin, age, sex, marital status or of income received from a
public assistance program.
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FICO -
FICO (see Credit scoring)
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Fixed Rate Mortgage -
A mortgage rate is fixed to remain constant throughout the life of the mortgage.
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Hazard Insurance (called homeowners insurance) -
Insurance protects the named insured from specified losses. Mortgage Lenders require to be named as
"additional named insured or loss payee" to insure the mortgage is paid off in case of total loss.
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Index -
A published rate that Lenders use to determine the interest rate for the next adjustment period.
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Investor -
The source of money for a Lender.
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Jumbo Loan -
This amount changes periodically. All loan amounts under this amount are considered conforming
loan amounts.
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Lien -
A claim of debt against a piece of property held in place until the obligation is paid in full. Most mortgage loans
are in the form of a first lien.
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Loan to Value -
The relationship between the appraised value of the property and the amount of the mortgage against it
calculated as a percentage.
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Margin -
The amount a mortgage lender applies to the index on an adjustable rate mortgage to establish the adjusted rate
of interest. This adjustment occurs periodically as agreed in the mortgage contract.
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Market Value -
The highest amount a buyer is willing to pay and the lowest price a seller is willing to accept.
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Mortgage Insurance -
Monies paid to insure the mortgage when the loan to value is over 80%.
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Mortgagee -
The Lender
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Mortgagor -
The borrower(s) or homeowner.
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Negative Amortization (called "Neg-Am") -
Occurs when your monthly mortgage payments submitted are not sufficient to pay all interest and principal due on
the loan. The unpaid interest is added to the unpaid balance of the mortgage. It could be considered borrowing
equity from yourself. The period of time the neg-am is applicable is usually limited on each mortgage.
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Non-Conforming -
A loan with many different possible disqualifying charactaristics. These may include larger loan amounts,
property type (such as number of units or zoning), or credit problems, etc.
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PITI -
Principal, Interest, Taxes and Insurance.
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Power of Attorney -
A legal document authorizing one person to act on behalf of another. The most common type is a
"specific" power of attorney delegated when one spouse can not be present at the document signing.
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Prepayment penalty -
Money charged by the mortgage lender for early prepayment of the mortgage. Most loans do not have a
prepayment penalty and would be disclosed up front and in the loan documents at closing.
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Principal -
The amount of debt, NOT including interest, remaining on a mortgage.
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RESPA (Real Estate Settlement Procedures Act) -
A Federal law that allows consumers to review information as to actual or estimated settlement costs of the mortgage.
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Second Mortgage -
A mortgage made after an existing mortgage and subordinate to the first one.
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Secondary Market -
Allows primary mortgage lenders to sell mortgages they have funded and closed. It is not unusual for a mortgage to
be sold several time during the term.
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Simple Interest -
Interest computed on the principal balance of a mortgage.
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Title -
A document which supplies evidence of ownership of property.
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Title Insurance -
A policy, usually issued by a title insurance company insuring the home buyer against errors in the title
search and guaranteeing clear title at closing.
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Underwriting -
A decision process used by mortgage lenders to determine the qualifications of a potential borrower. The process
takes into consideration credit, employment, assets and other factors.
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Variable Rate Mortgage -
Please see adjustable rate mortgage.
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Verification of Deposit (VOD) -
Mortgage Lenders require proof that funds are in the account as stated by the Borrower. This is accomplished
by sending a written request for verification. A copy of your most recent statement of the
account will suffice.
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Verification of Mortgage (VOM) -
Most mortgages are rated on the credit report. Some Lenders do not report to the credit bureaus. In that case
the Lender will send a VOM to the existing Mortgagor requesting the payment history.
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Verification of Rent (VOR) -
If the borrower has not owned a home and has instead been renting, the payment history may be requested from
the Landlord.
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