House Refinance Center
Mortgage Glossary & Rates
| Glossary |
Government Mortgage: A mortgage loan that is insured or guaranteed by a federal
government entity such as the FHA, VA or RHS (Rural Housing Service).
Growing-Equity Mortgage: A fixed-rate mortgage in which the monthly payments
increase according to an agreed-upon schedule, with the extra funds applied to
reduce the loan balance and loan term.
H
Hazard Insurance: Insurance coverage that compensates for physical damage to a
property from fire, wind, vandalism, or other covered hazards or natural disasters.
Home Equity Line of Credit (HELOC): A type of revolving loan, that enables a home
owner to obtain multiple advances of the loan proceeds at his or her own discretion,
up to an amount that represents a specific percentage of the borrower's equity in the
house.
Housing Expense Ratio: The percentage of your gross monthly income that goes
toward paying for your housing expenses.
Hybrid Loan: An adjustable rate mortgage (ARM) that offers a fixed rate for an initial
period, typically 3 to 10 years, and then adjusts every 6 months, annually or at
another specified period, for the remainder of the term.
I
Initial Interest Rate: The original interest rate for an adjustable rate mortgage
(ARM). Sometimes known as the start date.
Installment: The regular periodic payment that a borrower agrees to make to a
lender.
Interest: The cost you pay to borrow money. Interest is usually expressed as a
percentage of the amount borrowed.
J
Judgment Lien: A lien on the property of a debtor resulting from the decree of a court.
Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by
Fannie Mae or Freddie Mac. Also called a "non-conforming loan".
Junior Mortgage: A loan that is subordinate to the primary loan or first-lien
mortgage loan, such as a second or third mortgage.
L
Lease-Purchase Options: An option sometimes used by sellers to rent a property to
a consumer, who has the option to buy the property within a specified period of time.
Typically, part of each rental payment is put aside for the purpose of accumulating
funds to pay the down payment and closing costs.
Loan Origination: The process by which a loan is made which may include taking a
loan application, processing and underwriting the application, and closing the loan.
Loan-To-Value (LTV) Ratio: The relationship between the loan amount and the
value of the property (the lower of the appraised value or sales price) expressed as
a percentage of the property's value. For example, a $200,000 home with a
$160,000 mortgage has an LTV of 80%.
Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for
a certain amount of time.
M
Maturity Date: The date on which a mortgage loan is scheduled to be paid in full as
stated in the note.
Mortgage: A loan using your home as collateral. In some states the term mortgage
is also used to describe the document you sign (to grant the lender a lien on your
home). It also may be used to indicate the amount of money you borrow, with
interest, to purchase your house. The amount of your mortgage often is the
purchase price of the home minus your down payment.
Mortgage Broker: An individual or firm that brings borrowers and lenders together
for the purpose of loan origination.
N
Negative Amortization: An increase in the balance of a loan caused by adding
unpaid interest to the loan balance. This occurs when the payment does not cover
the interest due.
Note: A written promise to pay a specified amount under the agreed upon conditions.
O
Origination Fee: A fee paid to a lender or broker to cover the administrative costs of
processing a loan application. This fee is typically stated in the form of points. One
point is one percent of the mortgage amount.
Owner Financing: A transaction in which the property seller provides all or part of the
financing for the buyer's purchase of the property.
P
PITI: An acronym for the four primary components of a monthly mortgage payment.
Principle. Interest, Taxes, Insurance.
Pre-Approval: A process by which a lender provides a prospective borrower with an
indication of how much money he or she will be eligible to borrow when applying for
a mortgage loan. This process typically includes a review of the applicant's credit
history and may involve the review and verification of income and assets to close.
Predatory Lending: Abusive lending practices that include making mortgage loans
to people who do not have the income to repay them or repeatedly refinancing
loans, charging high points and fees each time and packing credit insurance onto a
loan.
Prepayment Penalty: A fee that a borrower may be required to pay to the lender, in
the early years of a mortgage loan, for repaying the loan in full or prepaying a
substantial amount to reduce the unpaid principle balance.
Private Mortgage Insurance: Insurance for conventional mortgage loans that
protects the lender from loss in the event of default by the borrower.
R
Real Property: Land and anything permanently affixed thereto - including buildings,
fences, trees, and minerals.
Refinance: Getting a new mortgage with all or some portion of the proceeds used to
pay off the prior mortgage.
Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing,
improving and sometimes acquiring an existing property.
Rescission: The cancellation or annulment of a transaction or contract by operation
of law or by mutual consent. Borrowers have a right to cancel certain mortgage
refinance and home equity transactions within 3 business days after signing the
contract.
S
Second Mortgage: A mortgage that has a lien position subordinate to the first
mortgage
Security: The property that will be given or pledged as collateral for a loan.
Settlement: The process of completing a loan transaction at which time the
mortgage documents are signed and then recorded, funds are disbursed and the
property is transferred to the buyer. Also called closing or escrow.
Soft Second Loan: A second mortgage whose payment is forgiven or is deferred
until resale of the property.
Subordinate Financing: Any mortgage or other lien with lower priority than the first
mortgage.
T
Trade Equity: Real estate or assets given to the seller as part of the down payment
for the property.
Transfer Tax: State or local tax payable when title to property passes from one
owner to another.
Truth-In-Lending Act (TILA): A federal law that requires disclosure of a
truth-in-lending statement for consumer credit. The statement includes a summary
of the total cost of credit, such as the annual percentage rate (APR) and other
specifics of the credit.
U
Uniform Residential Loan Application: A standard mortgage application you will
have to complete. The form requests your income, assets, liabilities, and a
description of the property you plan to buy, among other things.
government entity such as the FHA, VA or RHS (Rural Housing Service).
Growing-Equity Mortgage: A fixed-rate mortgage in which the monthly payments
increase according to an agreed-upon schedule, with the extra funds applied to
reduce the loan balance and loan term.
H
Hazard Insurance: Insurance coverage that compensates for physical damage to a
property from fire, wind, vandalism, or other covered hazards or natural disasters.
Home Equity Line of Credit (HELOC): A type of revolving loan, that enables a home
owner to obtain multiple advances of the loan proceeds at his or her own discretion,
up to an amount that represents a specific percentage of the borrower's equity in the
house.
Housing Expense Ratio: The percentage of your gross monthly income that goes
toward paying for your housing expenses.
Hybrid Loan: An adjustable rate mortgage (ARM) that offers a fixed rate for an initial
period, typically 3 to 10 years, and then adjusts every 6 months, annually or at
another specified period, for the remainder of the term.
I
Initial Interest Rate: The original interest rate for an adjustable rate mortgage
(ARM). Sometimes known as the start date.
Installment: The regular periodic payment that a borrower agrees to make to a
lender.
Interest: The cost you pay to borrow money. Interest is usually expressed as a
percentage of the amount borrowed.
J
Judgment Lien: A lien on the property of a debtor resulting from the decree of a court.
Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by
Fannie Mae or Freddie Mac. Also called a "non-conforming loan".
Junior Mortgage: A loan that is subordinate to the primary loan or first-lien
mortgage loan, such as a second or third mortgage.
L
Lease-Purchase Options: An option sometimes used by sellers to rent a property to
a consumer, who has the option to buy the property within a specified period of time.
Typically, part of each rental payment is put aside for the purpose of accumulating
funds to pay the down payment and closing costs.
Loan Origination: The process by which a loan is made which may include taking a
loan application, processing and underwriting the application, and closing the loan.
Loan-To-Value (LTV) Ratio: The relationship between the loan amount and the
value of the property (the lower of the appraised value or sales price) expressed as
a percentage of the property's value. For example, a $200,000 home with a
$160,000 mortgage has an LTV of 80%.
Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for
a certain amount of time.
M
Maturity Date: The date on which a mortgage loan is scheduled to be paid in full as
stated in the note.
Mortgage: A loan using your home as collateral. In some states the term mortgage
is also used to describe the document you sign (to grant the lender a lien on your
home). It also may be used to indicate the amount of money you borrow, with
interest, to purchase your house. The amount of your mortgage often is the
purchase price of the home minus your down payment.
Mortgage Broker: An individual or firm that brings borrowers and lenders together
for the purpose of loan origination.
N
Negative Amortization: An increase in the balance of a loan caused by adding
unpaid interest to the loan balance. This occurs when the payment does not cover
the interest due.
Note: A written promise to pay a specified amount under the agreed upon conditions.
O
Origination Fee: A fee paid to a lender or broker to cover the administrative costs of
processing a loan application. This fee is typically stated in the form of points. One
point is one percent of the mortgage amount.
Owner Financing: A transaction in which the property seller provides all or part of the
financing for the buyer's purchase of the property.
P
PITI: An acronym for the four primary components of a monthly mortgage payment.
Principle. Interest, Taxes, Insurance.
Pre-Approval: A process by which a lender provides a prospective borrower with an
indication of how much money he or she will be eligible to borrow when applying for
a mortgage loan. This process typically includes a review of the applicant's credit
history and may involve the review and verification of income and assets to close.
Predatory Lending: Abusive lending practices that include making mortgage loans
to people who do not have the income to repay them or repeatedly refinancing
loans, charging high points and fees each time and packing credit insurance onto a
loan.
Prepayment Penalty: A fee that a borrower may be required to pay to the lender, in
the early years of a mortgage loan, for repaying the loan in full or prepaying a
substantial amount to reduce the unpaid principle balance.
Private Mortgage Insurance: Insurance for conventional mortgage loans that
protects the lender from loss in the event of default by the borrower.
R
Real Property: Land and anything permanently affixed thereto - including buildings,
fences, trees, and minerals.
Refinance: Getting a new mortgage with all or some portion of the proceeds used to
pay off the prior mortgage.
Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing,
improving and sometimes acquiring an existing property.
Rescission: The cancellation or annulment of a transaction or contract by operation
of law or by mutual consent. Borrowers have a right to cancel certain mortgage
refinance and home equity transactions within 3 business days after signing the
contract.
S
Second Mortgage: A mortgage that has a lien position subordinate to the first
mortgage
Security: The property that will be given or pledged as collateral for a loan.
Settlement: The process of completing a loan transaction at which time the
mortgage documents are signed and then recorded, funds are disbursed and the
property is transferred to the buyer. Also called closing or escrow.
Soft Second Loan: A second mortgage whose payment is forgiven or is deferred
until resale of the property.
Subordinate Financing: Any mortgage or other lien with lower priority than the first
mortgage.
T
Trade Equity: Real estate or assets given to the seller as part of the down payment
for the property.
Transfer Tax: State or local tax payable when title to property passes from one
owner to another.
Truth-In-Lending Act (TILA): A federal law that requires disclosure of a
truth-in-lending statement for consumer credit. The statement includes a summary
of the total cost of credit, such as the annual percentage rate (APR) and other
specifics of the credit.
U
Uniform Residential Loan Application: A standard mortgage application you will
have to complete. The form requests your income, assets, liabilities, and a
description of the property you plan to buy, among other things.
| Mortgage Tips Don't Refinance if you are planning on moving or if you will be selling the house in under 2 years. The fees and closing costs associated with a refinance might be too high. Don't Refinance if you are having trouble making the monthly mortgage payments. Talk to your lender about a loan modification plan. You might be able to qualify for HAMP. |
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