Definitions
What is a Loan?
A loan is a sum of money that one or more individuals or companies borrow from banks or other financial institutions so as to financially manage planned or unplanned events.
What is a Mortgage?
A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you don't repay the money you've borrowed plus interest
What is a Refinance?
Replaces an existing mortgage or places an agreement between a lender and homeowner to provide access to equity.
What is a HELOC?
A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards.
The amount of cash you pay toward the purchase of your home to make up the difference between the purchase price and your mortgage loan.
What is a Down Payment?
What is APR?
APR stands for Annual Percentage Rate and it represents the yearly cost of borrowing money.
Note Rate + Closing Costs = APR
A home loan with a predetermined fixed interest rate for the entire term of the loan.
What is a Fixed-rate?
What is a Lien?
The legal claim of a creditor on a borrower’s property, to be used as security for a debt.
What is Equity?
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balances and other liens.
What is a Conventional Loan?
A home loan that is not insured or guaranteed by the federal government. A conventional loan can be for conforming or non-conforming loan amounts.
What are Closing Costs?
Closing costs, also known as settlement costs, are the fees you pay when obtaining your loan.
A mortgage in which your interest rate and monthly payments may change periodically during the life of the loan, based on the fluctuation of an index. Lenders may charge a lower interest rate for the initial period of the loan.
What is an Adjustable Rate Mortgage (ARM)?
A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement or any other purpose.
What is a Cash-out Refinance?
The ratio between the unpaid principal amount of your first mortgage, PLUS your credit limit if you have a home equity line of credit, and the appraised value of your home. Expressed as a percentage.
What is Combined-Loan-to-Value (CLTV)?
What is a Debt-to-Income Ratio (DTI)?
Your total monthly debt payments (for example: loans, credit cards and court-ordered payments) divided by your gross monthly income before taxes and expressed as a percentage.
What is a Term?
The length of time a loan must be paid in full by.
An informed estimate of the value of a property. When made in connection with an application for a loan secured by a home, a professional appraiser usually performs the appraisal.
What is an Appraisal or appraisal value?
What is PITI?
An acronym for principal, interest, taxes and insurance. Also referred to as the monthly housing expense.
What is a Fixed-rate option (Fixed-Rate Loan Option)?
An option available on certain home equity lines of credit allowing borrowers to fix the payments and interest rate on a portion of their outstanding principal balance for a specific term.
A deposit made toward a down payment as a sign of good faith. The deposit is typically made when a purchase agreement is signed.
What is Earnest Money?
The gradual reduction in the principal amount owed on a debt. During the earlier years of the loan, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.
What is Amortization?
A type of mortgage loan refinancing that results in a lower interest rate or loan term—or a combination of both.
What is a Rate and Term Refinance?
An interest rate that may fluctuate or change periodically, often in relation to an index such as the prime rate or other criteria. Payments may increase or decrease accordingly.
What is a Variable Rate?
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government loan. FHA mortgage insurance protects the lender (not the borrower) if a borrower defaults on the FHA loan. This insurance enables a lender to provide loan options and benefits often not available through conventional financing.
What is an FHA loan?