TERMS TO KNOW
The mortgage industry is full of terms that are foreign to many people. The
following glossary of terms should help you translate the mortgage language
into English and help you make sense of the mortgage process.
An expert opinion on the value of a property
This is not the note rate applied for, but rather is a government mandated
formula that shows the cost of the loan in a yearly rate by using the note
rate plus certain other upfront costs
Adjustable Rate Mortgage. Mortgage characterized by an interest rate that
can adjust up or down at certain intervals based on a current index (commonly
the 1 year T-Bill) plus a preset margin.
Mortgage characterized by level fixed payments for a predetermined time frame
followed by either a refinance or adjustment in interest rate
The tax paid upon certain types of real estate transactions. Contact accountant
for specifics (see links for details)
The amount needed from the borrower at closing. Consists of down payment,
closing costs and prepaid items. This amount needs to be in the form of a
cashier check made payable to the buyer.
Date stated on the purchase agreement that buyer and seller agree to finalize
or close the transaction
Various costs of setting up and funding the transaction - including closing
fee, title insurance, appraisal fees, underwriting fee, mortgage registration
Property types that usually have the following
characteristics: they are attached, have a homeowners association and dues,
the outside maintenance is taken care of by the association, and common areas
and amenities available to all owners in the association.
Standard, non-government financing.
Agencies that provide compilations of your credit history. The three main
credit bureaus are Experian, Trans Union, and Equifax
Report provided by the credit bureaus which shows the history, current status,
and profile of an individual
The number generated by the credit bureaus which is a numerical representation
of the subjects credit profile, range is from 450 on the low side to 900
being the highest score possible.
Ratio of debt to pretax income, often expressed as a front (housing payment
only) or back (all debt) ratios. Ex- $5000 monthly income, $1400 housing
payment, $1700 total debt would equal ratios of 28%/34%.
One point equals one percent of the loan amount. Points are used to lower
the interest rate. One point does not equate into lowering the interest rate
one percent. Generally lowering the interest rate 1/8 will cost about 1/2
point, although this can vary based on daily pricing. Typically is tax
deductible. (see Links for accountant advice)
Difference between loan amount and purchase price.