Click on a term to view its definition.
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
The gradual repayment of a mortgage loan, both principle and interest, by installments.
The Annual Percentage Rate (APR) includes the prepaid interest rate, discount points, fees, and other credit charges that the borrower is required to pay, and is therefore a more complete measure of a loan’s cost than the interest rate alone.
A written analysis prepared by a qualified appraiser and estimating the value of a property.
A mortgage with level monthly payments that amortizes over a stated term but also requires that a lump sum payment be paid at the end of an earlier specified term.
The meeting at which you sign the official mortgage documents and pay for closing costs. At closing, the home officially becomes yours.
These are expenses - over and above the price of the property- that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.
A credit report contains information dating back five to seven years, including personal and employment information, payment history, inquiries into your credit history and any bankruptcies, lawsuits or liens.
Based on your history of on-time payments and how responsibly you’ve managed credit in the past, a credit rating is a measure of your credit worthiness. Credit bureaus use your financial history to determine your credit score, which is a major factor in qualifying for a loan. A good credit rating means you’re a safe credit risk, shows you manage your debts responsibly and are likely to pay back what you’ve borrowed. Many factors contribute to a good credit rating, including:
- A clean credit report
- Limited utilization of your existing credit lines, including credit cards
- Limited (but not nonexistent) credit activity
Debt-to-income ratio (DTI) is a ratio used in qualifying for a home loan. It reflects the percentage of your monthly gross income that goes toward paying debts.
Part of the purchase price of a property that is paid in cash and not financed with a mortgage.
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit of funds or documents into an escrow account to be disbursed upon the closing of a sale of real estate.
A mortgage interest that are fixed throughout the entire term of the loan.
A visual inspection of the structure and components of a home to find items that are not performing correctly or items that are unsafe. If a problem or a symptom of a problem is found the home inspector will include a description of the problem in a written report and may recommend further evaluation.
When you take out a loan, you’re charged an interest rate to pay for the privilege of borrowing money. Interest rates are based on many things including current market conditions, your credit history, your down payment and the type of mortgage you choose.
Loan to value, or LTV, is the ratio of the amount of a potential mortgage to the value of the property it is intended to finance, expressed as a percentage. Lenders consider this a key risk factor when assessing mortgage loan applications.
The process of locking in an interest rate for a set period of time before loan closing. Locks can be extended beyond the set lock date but generally involve additional fees.
Applies to FHA loans only.
All charges and fees (other than points) incurred as part of originating the loan. These charges may include fees for document preparation, underwriting and other expenses. You will typically be required to pay these fees at closing.
The process of determining how much money you will be eligible to borrow before you apply for a loan.
The base amount of the loan to be repaid.
Private Mortgage Insurance (PMI) is insurance payable to a lender that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.
An acronym for “Principal, Interest, Taxes and Insurance.” These four components are included in each mortgage loan payment you make.
Depending on your loan program and available down payment funds, you may be able to lower your interest rate by “buying points.” One point equals one percent. Sometimes called “discount points.”
Paying off one loan with the proceeds from a new loan using the same property as security.
An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
The duration of time in which you will pay off the loan balance. Shorter loan terms will typically offer lower interest rates.
Indemnity against loss resulting from defects in or liens upon a title.
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
The VA Funding Fee is a one-time fee paid directly to the Department of Veterans Affairs (VA) for every VA purchase or refinance loan. The money received from the VA Funding Fee is used to offset the few loans that go into default, and further reduces the cost to taxpayers, ensuring the VA Home Loan program continues for future generations. Borrowers have the option to pay the fee upfront, or can include the fee into their monthly mortgage payment.