Listed below are some terms and definitions commonly used during the loan processing period.
A mortgage loan which bears interest at a rate subject to change during the term of the loan, based on a specific index.
The paying off of a financial obligation on an installment basis,over a period of time.
Typically, the value placed on property for the purpose of taxation.
A document showing the transfer of ownership of a mortgage from one person to another.
A mortgage that is not completely paid off over the loan term (such as five, or ten years), leaving a balance at the end. The borrower must either pay off the remaining mortgage or refinance the loan.
In the case of a mortgage, the collateral would be the house and real property. The borrower risks losing the property if the loan is not repaid according to the terms of the loan.
A short-term loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
A mortgage loan that is not insured or guaranteed by the federal government.
An adjustable rate mortgage that allows the borrower to change the ARM to a fixed rate mortgage under specific terms.
A company that gathers information on consumers who use credit.
A numerical value that assesses a borrower’s credit risk based on a statistical analysis of information in the person’s credit history that has been proven to be predictive of future loan repayment.
Failure to fulfill an obligation; make payment or comply with specific terms of a mortgage.
Failure to make mortgage payments by the due date.
A percentage of the purchase price of the property not financed by a mortgage.
A legal process that ends all ownership rights in a home when the homebuyer fails to make the mortgage payments or is in default under the terms of the mortgage. This usually results in a forced sale of the property to settle outstanding mortgage debt.
Fees paid to a mortgage broker for processing the mortgage application.
The percentage of a property’s value that a lender may loan to a borrower.
A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.
The date on which a mortgage loan is scheduled to be paid in full.
A loan using the home as collateral. A legal document by which property is pledged to secure the payment, and terms of a loan.
The limit on the amount that payments can increase or decrease during any one adjustment period for an adjustable rate mortgage ARM.
One percent of the amount of the mortgage.
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.
Amount/s paid to reduce the principal balance of a loan before the due date.
The fee payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity.
The amount of money loaned. This does not include the interest charged for borrowing said money.
Insurance for conventional mortgage loans that protects the lender from loss in the event of default by the borrower.
A written promise to repay a specific amount over a specified period of time.
A limit on the amount the interest rate can increase or decrease on an adjustable rate mortgage (ARM).
Obtaining a new mortgage with all or some portion of the proceeds used to pay off the prior mortgage.
An arrangement between the lender and borrower in which the borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.
A mortgage that has a subordinate lien position to that of the first mortgage.
A market in which mortgage loans and mortgage-backed securities are traded.
A document listing all closing costs on a mortgage transaction.
The sale of a home for less than the loan balance, subject to bank/lender’s approval.
State or local tax payable when title to property passes from one owner to another.
Underwriting is the process used to determine loan approval. It involves evaluating the property and the borrower’s ability to pay the mortgage.