Mortgage Glossary
Amortization
The repayment of a loan in a specified number of equal payments that includes principal and accrued interest.
Annual Percentage Rate (APR)
The annual cost of a loan, including interest, loan fees, and other costs.
Appraisal
An estimate of the market value of a piece of real estate made by a competent professional who knows local real estate prices and markets.
Assessed Value
The value of a property for tax purposes set by a tax assessor according to a formula.
Bridge Loan
A second mortgage that holds as collateral other property owned by the applicant and currently offered for sale. The agreement allows the proceeds to be used for closing on the new purchase before the property is sold.
Closing Costs
The miscellaneous expenses, over and above the purchase price, involved in closing a real estate transaction. Some of the closing costs include title insurance, appraisal fee, and credit report.
Closing Statement
The final statement of costs incurred to close a loan or to purchase a home. Also referred to as the ”HUD-1.”
Credit Report
A report on a loan applicant’s willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.
Debt-to-Income Ratio
The ratio of a borrower’s monthly debt payments to his or her monthly gross income. Lenders use this ratio to assist them in determining how much to lend.
Earnest Money
A sum of money given as evidence of one’s good faith, used to bind a real estate sale. Also known as a “Binder.”
Eighty-ten-ten (80/10/10)
Also known as a “Combination Loan.” A loan in which you receive a first mortgage for 80 percent of the loan amount and a second mortgage at the same time for the remainder of the balance. If the borrower is trying to avoid PMI (private mortgage insurance) it is important to consider a combination loan or the Advantage 90 loan.
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Good Faith Estimate (GFE)
A disclosure that must be given to all mortgage loan applicants within three business days of an application. It is an estimate of all settlement charges likely to be incurred at closing.
HELOC (Home Equity Line of Credit)
A credit line secured by a second deed of trust on a house. Equity lines of credit are revolving accounts that work like a credit card; they can be paid down or charged up for the term of the loan. The minimum payment due each month is interest only.
Loan-to-Value
The ratio of the principal amount of the loan to the lesser of the purchase price of the p
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