You will find
this Glossary useful in understanding words or terms used in
Real Estate transactions. However, there are some factors that
may affect the following definitions:
-
Terms are
defined as commonly understood in the mortgage and real
estate industry. The same terms may have different meanings
in other context.
-
The
definitions are intentionally short and non-technical. They
do not include all possible meanings that a term may acquire
in legal use.
-
State laws
may modify or change the meanings of certain terms defined.
If you have any
questions about the terms listed on this page or how they apply
to your situation, please don't hesitate to contact us, and one
of our qualified consultants will
be happy to assist you.
Num A
B C
D
E F G
H I
J
K L M
N O
P
Q R S
T U
V
W X Y
Z
Num
7/23 and
5/25 Mortgages -
Mortgages with a one time rate adjustment after seven years and
five years respectively.
3/1, 5/1,
7/1 and 10/1 ARMs - Adjustable rate mortgages in which rate is fixed for three year,
five year, seven year and 10-year periods, respectively, but may
adjust annually after that.
A
Acceleration
- The right of the mortgagee (lender) to demand the immediate
repayment of the mortgage loan balance upon the default of the
mortgagor (borrower), or by using the right vested in the Due on
Sale.
Adjustable
Rate Mortgage (ARM) - A
mortgage in which the interest rate is adjusted periodically
based on a pre-selected index. Also sometimes known as a
renegotiable rate mortgage, variable rate mortgage or Canadian
rollover mortgage.
Adjustment
Date - The date that the
interest rate changes on an adjustable rate mortgage (ARM).
Adjustment
Interval - On an
adjustable rate mortgage, the time between changes in the
interest rate and/or monthly payment, typically one, three or
five years depending on the index.
Adjustment
Period - The period
elapsing between adjustment dates for an adjustable rate
mortgage (ARM).
Amortization
- Loan payment divided into equal periodic payments calculated
to pay off the debt at the end of a fixed period, including
accrued interest on the outstanding balance.
Amortization
Term - The length of time
required to amortize the mortgage loan expressed as a number of
months. For example, 360 months is the amortization term for a
30-year fixed rate mortgage.
Annual
Percentage Rate (APR) -
The measurement of the full cost of a loan including interest
and loan fees expressed as a yearly percentage rate. Because all
lenders apply the same rules in calculating the annual
percentage rate, it provides consumers with a good basis for
comparing the cost of different loans.
Appraisal
- An estimate of the value of property made by a qualified
professional called an "appraiser.”
Appraised
Value - An opinion of a
property's fair market value, based on an appraiser's knowledge,
experience, and analysis of the property.
Assessment -
A local tax levied
against a property for a specific purpose, such as a sewer or
street lights.
Assignment -
The transfer of a
mortgage from one person to another.
Assumability
- An assumable mortgage can be transferred from the seller to
the new buyer. Generally requires a credit review of the new
borrower and lenders may charge a fee for the assumption. If a
mortgage contains a due on sale clause, it may not be assumed by
a new buyer.
Assumption
- The agreement between buyer and seller where the buyer takes
over the payments on an existing mortgage from the seller.
Assuming a loan can usually save the buyer money since this is
an existing mortgage debt, unlike a new mortgage where closing
cost and new, probably higher, market rate interest charges will
apply.
Assumption
Fee - The fee paid to a
lender (usually by the purchaser of real property) when an
assumption takes place.
B
Balloon
Mortgage - A loan which
is amortized for a longer period than the term of the loan.
Usually this refers to a thirty year amortization and a five or
seven year term. At the end of the term of the loan, the
remaining outstanding principal on the loan is due. This final
payment is known as a balloon payment.
Balloon
Payment - The final lump
sum paid at the maturity date of a balloon mortgage.
Biweekly
Payment Mortgage - A plan
to reduce the debt every two weeks (instead of the standard
monthly payment schedule). The 26 (or possibly 27) biweekly
payments are each equal to one half of the monthly payment
required if the loan were a standard 30-year fixed rate
mortgage. The result for the borrower is a substantial savings
in interest.
Borrower
(Mortgagor) - One who
applies for and receives a loan in the form of a mortgage with
the intention of repaying the loan in full.
Bridge Loan
- A second trust that is
collateralized by the borrower's present home allowing the
proceeds to be used to close on a new house before the present
home is sold. Also known as "swing loan."
Buy Down
- When the lender and/or
the home builder subsidized the mortgage by lowering the
interest rate during the first few years of the loan. While the
payments are initially low, they will increase when the subsidy
expires.
C
Cash Flow -
The amount of cash derived over a certain period of time from an
income producing property. The cash flow should be large enough
to pay the expenses of the income producing property (mortgage
payment, maintenance, utilities, etc...).
Caps
(interest) - Consumer
safeguards which limit the amount of change to the interest rate
for an adjustable rate mortgage.
Caps
(payment) - Consumer
safeguards which limit the amount of change to the monthly
payments for an adjustable rate mortgage.
Certificate
of Eligibility - The
document given to qualified veterans which entitles them to VA
guaranteed loans for homes, business and mobile homes.
Certificates of eligibility may be obtained by sending form DADA
(Separation Paper) to the local VA office with VA form 1880
(Request for Certificate of Eligibility).
Certificate
of Reasonable Value (CRV) -
An appraisal issued by the Veterans
Administration showing the property's current market value.
Certificate
of Veteran Status - The
document given to veterans or reservists who have served 90 days
of continuous active duty (including training time). It may be
obtained by sending DD 214 to the local VA office with form
26-8261a (Request for Certificate of Veteran Status). This
document enables veterans to obtain lower down payments on
certain FHA insured loans.
Change
Frequency - The frequency
(in months) of payment and/or interest rate changes in an
adjustable rate mortgage (ARM).
Closing
- The meeting between the buyer, seller and lender or their
agents where the property and funds legally change hands, also
called settlement. Closing costs usually include an origination
fee, discount points, appraisal fee, title search and insurance,
survey, taxes, deed recording fee, credit report charge and
other costs assessed at settlement. The cost of closing usually
are about 3 percent to 6 percent of the mortgage amount.
Closing
Costs - Expenses over and
above the price of the property that are incurred by buyers and
sellers when transferring ownership of a property. Closing costs
normally include an origination fee, property taxes, charges for
title insurance and escrow costs, appraisal fees, etc. Closing
costs will vary according to the area country and the lenders
used.
COFI -
An adjustable-rate mortgage with a rate that adjusts based on a
cost-of-funds index, often the 11th District Cost of Funds.
Construction
Loan - A short term
interim loan to pay for the construction of buildings or homes.
These are usually designed to provide periodic disbursements to
the builder as he or she progresses.
Consumer
Reporting Agency (or Bureau) -
An organization that handles the
preparation of reports used by lenders to determine a potential
borrower's credit history. The agency gets data for these
reports from a credit repository and other sources.
Contract For
Sale or Deed - A contract
between purchaser and a seller of real estate to convey title
after certain conditions have been met. It is a form of
installment sale.
Conventional
Loan - A mortgage not
insured by FHA or guaranteed by VA.
Conversion
Clause - A provision in
an ARM allowing the loan to be converted to a fixed-rate at some
point during the term. Usually conversion is allowed at the end
of the first adjustment period. The conversion feature may cost
extra.
Credit
Report - A report
documenting the credit history and current status of a
borrower's credit standing.
Credit Risk
Score - A credit risk
score is a statistical summary of the information contained in a
consumer's credit report. The most well known type of credit
risk score is the Fair Isaac or FICO score. This form of credit
scoring is a mathematical summary calculation that assigns
numerical values to various pieces of information in the credit
report. The overall credit risk score is highly relative in the
credit underwriting process for a mortgage loan.
D
Debt-to-Income Ratio -
The ratio, expressed as a percentage, which results when a
borrower's monthly payment obligation on long term debts is
divided by his or her gross monthly income. See housing
expenses-to-income ratio.
Deed of
Trust - In many states,
this document is used in place of a mortgage to secure the
payment of a note.
Default
- Failure to meet legal obligations in a contract, specifically,
failure to make the monthly payments on a mortgage.
Deferred
Interest - When a
mortgage is written with a monthly payment that is less than
required to satisfy the note rate, the unpaid interest is
deferred by adding it to the loan balance. See negative
amortization.
Delinquency
- Failure to make payments on time. This can lead to
foreclosure.
Department
of Veterans Affairs (VA) - An independent agency of the federal government which
guarantees long term, low-or-no-down payment mortgages to
eligible veterans.
Discount
Point - See point
Down Payment
- Money paid to make up
the difference between the purchase price and the mortgage
amount.
Due-on-Sale-Clause -
A provision in a mortgage or deed of
trust that allows the lender to demand immediate payment of the
balance of the mortgage if the mortgage holder sells the home.
E
Earnest
Money - Money given by a buyer to a seller as part of the
purchase price to bind a transaction or assure payment.
Entitlement
- The VA home loan benefit is called an entitlement (i.e.
entitlement for a VA guaranteed home loan). This is also known
as eligibility.
Equal Credit
Opportunity Act (ECOA) - A federal law that requires lenders
and other creditors to make credit equally available without
discrimination based on race, color, religion, national origin,
age, sex, marital status or receipt of income from public
assistance programs.
Equity -
The difference between the fair market value and current
indebtedness, also referred to as the owner's interest. The
value an owner has in real estate over and above the obligation
against the property.
Escrow -
An account held by the lender into which the home buyer pays
money for tax or insurance payments. Also earnest deposits held
pending loan closing.
Escrow
Disbursements - The use of escrow funds to pay real
estate taxes, hazard insurance, mortgage insurance, and other
property expenses as they become due.
Escrow
Payment - The part of a mortgagor’s monthly payment that
is held by the servicer to pay for taxes, hazard insurance,
mortgage insurance, lease payments, and other items as they
become due.
F
Fannie
Mae - See Federal National Mortgage Association.
Farmers Home
Administration (FmHA) - Provides financing to farmers and
other qualified borrowers who are unable to obtain loans
elsewhere.
Federal Home
Loan Bank Board (FHLBB) - The former name for the regulatory
and supervisory agency for federally chartered savings
institutions. The agency is now called the Office of Thrift
Supervision
Federal Home
Loan Mortgage Corporation (FHLMC) also called "Freddie Mac" -
A government sponsored
entity that purchases conventional mortgage from insured
depository institutions and HUD-approved mortgage bankers.
Federal
Housing Administration (FHA) - A division of the
Department of Housing and Urban Development. Its main activity
is the insuring of residential mortgage loans made by private
lenders. FHA also sets standards for underwriting mortgages.
Federal
National Mortgage Association (FNMA) also know as "Fannie Mae"
- A government sponsored entity that purchases and sells
conventional residential mortgages as well as those insured by
FHA or guaranteed by VA.
FHA Loan
- A loan insured by the Federal Housing Administration open to
all qualified home purchasers. While there are limits to the
size of FHA loans, they are generous enough to handle moderately
priced homes almost anywhere in the country.
FHA Mortgage
Insurance - Requires a fee (up to 2.25 percent of the loan
amount) paid at closing to insure the loan with FHA. In
addition, FHA mortgage insurance requires an annual fee of up to
0.5 percent of the current loan amount, paid in monthly
installments. The lower the down payment, the more years the fee
must be paid.
FHLMC - The Federal
Home Loan Mortgage Corporation provides a secondary market for
savings and loans by purchasing their conventional loans. Also
known as "Freddie Mac."
First Mortgage
- The primary lien against a property.
Fixed
Installment - The monthly
payment due on a mortgage loan including payment of both
principal and interest.
Fixed Rate
Mortgage - The mortgage
interest rate will remain the same on these mortgages throughout
the term of the mortgage for the original borrower.
Fully Amortized
ARM - An adjustable
rate mortgage (ARM) with a monthly payment that is sufficient to
amortize the remaining balance, at the interest accrual rate,
over the amortization term.
FNMA - The Federal
National Mortgage Association is a secondary mortgage
institution. FNMA buys VA, FHA, and conventional mortgages from
primary lenders. Also known as "Fannie Mae."
Foreclosure
- A legal process
by which the lender or the seller forces a sale of a mortgaged
property because the borrower has not met the terms of the
mortgage. Also known as a repossession of property.
Freddie Mac
- See Federal
Home Loan Mortgage Corporation
G
Ginnie Mae
- See Government
National Mortgage Association.
Government
National Mortgage Association (GNMA) - Also known as
"Ginnie Mae." Provides sources of funds for residential
mortgages, insured or guaranteed by FHA or VA.
Graduated
Payment Mortgage (GPM) - A type of
flexible payment mortgage where the payments increase for a
specified period of time and then level off. This type of
mortgage has negative amortization built into it.
Guaranty
- A promise by
one party to pay a debt or perform an obligation contracted by
another if the original party fails to pay or perform according
to a contract.
Guarantee
Mortgage - A mortgage that
is guaranteed by a third party.
H
Hazard
Insurance - A form of
insurance in which the insurance company protects the insured
from specified losses, such as fire, windstorm and the like.
Housing
Expenses-to-Income Ratio - The ratio,
expressed as a percentage, which results when a borrower's
housing expenses are divided by his/her gross monthly income.
See debt-to-income ratio.
HUD-1 Statement
- A document that
provides an itemized listing of the funds that are payable at
closing. Items that appear on the statement include real estate
commissions, loan fees, points and initial escrow amounts. Each
item on the statement is represented by a separate number within
a standardized numbering system. The totals at the bottom of the
HUD-1 statement define the seller's net proceeds and the buyer's
net payment at closing.
I
Impound
- The portion of
a borrower's monthly payments held by the lender or servicer to
pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as
reserves.
Index - A published
interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate mortgage
and that earned by other investments (such as one, three, and
five year U.S. Treasury security yields, the monthly average
interest rate on loans closed by savings and loan institutions,
and the monthly average costs-of-funds incurred by savings and
loans), which is then used to adjust the interest rate on an
adjustable mortgage up or down.
Indexed Rate
- The sum of the
published index plus the margin. For example if the index is 4%
and the margin is 2.75%, the indexed rate would be 6.75%. Often,
lenders charge less than the indexed rate the first year of an
adjustable rate mortgage.
Initial
Interest Rate - This refers to
the original interest rate of the mortgage at the time of
closing. This rate changes for an adjustable rate mortgage
(ARM). It's also known as "start rate" or "teaser."
Installment
- The regular
periodic payment that a borrower agrees to make to a lender.
Insured
Mortgage - A mortgage that
is protected by the Federal Housing Administration (FHA) or by
private mortgage insurance (MI).
Interest
- The fee charged
for borrowing money.
Interest
Accrual Rate - The percentage
rate at which interest accrues on the mortgage. In most cases,
it is also the rate used to calculate the monthly payments.
Interest Rate
Buydown Plan - An arrangement
that allows the property seller to deposit money to an account.
That money is then released each month to reduce the mortgagor's
monthly payments during the early years of a mortgage.
Interest Rate
Ceiling - For an
adjustable rate mortgage (ARM), the maximum interest rate, as
specified in the mortgage note.
Interest Rate
Floor - For an
adjustable rate mortgage (ARM), the minimum interest rate, as
specified in the mortgage note.
Interim
Financing - A construction loan made during completion of a
building or a project. A permanent loan usually replaces this
loan after completion.
Investor
- A money source
for a lender.
J
Jumbo Loan
- A loan which is
larger than the limits set by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation.
Because jumbo loans cannot be funded by these two agencies, they
usually carry a higher interest rate.
K
L
Late Charge
- The penalty a
borrower must pay when a payment is made a stated number of days
after the due date.
Lease-Purchase
Mortgage Loan - An alternative
financing option that allows low and moderate income home buyers
to lease a home with an option to buy. Each month's rent payment
consists of principal, interest, taxes and insurance (PITI)
payments on the first mortgage plus an extra amount that
accumulates in a savings account for a down payment.
Liabilities
- A person's
financial obligations. Liabilities include long term and short
term debt.
Lien - A claim upon a
piece of property for the payment or satisfaction of a debt or
obligation.
Lifetime
Payment Cap - For an
adjustable rate mortgage (ARM), a limit on the amount that
payments can increase or decrease over the life of the mortgage.
Lifetime Rate
Cap - For an
adjustable rate mortgage (ARM), a limit on the amount that the
interest rate can increase or decrease over the life of the
loan. See cap.
Loan - A sum of
borrowed money (principal) that is generally repaid with
interest.
Loan to Value
Ratio - The
relationship between the amount of the mortgage loan and the
appraised value of the property expressed as a percentage.
Lock - A lender's
guarantee that the mortgage rate quoted will be good for a
specific number of days from the day of application.
M
M\argin
- The amount a
lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
Market Value
- The highest
price that a buyer would pay and the lowest price a seller would
accept on a property. Market value may be different from the
price a property could actually be sold for at a given time.
Maturity
- The date on
which the principal balance of a loan becomes due and payable.
MIP (Mortgage
Insurance Premium) - Insurance from
FHA to the lender against incurring a loss on account of the
borrower's default.
Monthly Fixed
Installment - The portion of
the total monthly payment that is applied toward principal and
interest. When a mortgage negatively amortizes, the monthly
fixed installment does not include any amount for principal
reduction and doesn't cover all of the interest. The loan
balance therefore increases instead of decreasing.
Mortgage
- A legal
document that pledges a property to the lender as security for
payment of a debt.
Mortgagee
- The lender.
Mortgage
Insurance - Money paid to
insure the mortgage when the down payment is less than 20
percent. See private mortgage insurance, FHA mortgage insurance.
Mortgage Life
Insurance - A type of term
life insurance. In the event that the borrower dies while the
policy is in force, the mortgage debt is automatically paid by
insurance proceeds.
Mortgagor
- The borrower or
homeowner.
N
Negative
Amortization - When your
monthly payments are not large enough to pay all the interest
due on the loan. This unpaid interest is added to the unpaid
balance of the loan. The home buyer ends up owing more than the
original amount of the loan.
Net Effective
Income - The borrower's
gross income minus federal income tax.
Non Assumption
Clause - A statement in
a mortgage contract forbidding the assumption of the mortgage
without the prior approval of the lender.
Note - A legal
document that obligates a borrower to repay a mortgage loan at a
stated interest rate during a specified period of time.
O
Office of
Thrift Supervision (OTS) - The regulatory
and supervisory agency for federally chartered savings
institutions. Formally known as Federal Home Loan Bank Board
One Year
Adjustable Rate Mortgage - Mortgage where
the annual rate changes yearly. The rate is usually based on
movements of a published index plus a specified margin, chosen
by the lender.
Origination Fee
- The fee charged
by a lender to prepare loan documents, make credit checks,
inspect and sometimes appraise a property; usually computed as a
percentage of the face value of the loan.
Owner Financing
- A property
purchase transaction in which the party selling the property
provides all or part of the financing.
P
Payment Change
Date - The date when a
new monthly payment amount takes effect on an adjustable rate
mortgage (ARM) or a graduated-payment mortgage (GPM). Generally,
the payment change date occurs in the month immediately after
the adjustment date.
Periodic
Payment Cap - A limit on the
amount that payments can increase or decrease during any one
adjustment period.
Periodic Rate
Cap - A limit on the
amount that the interest rate can increase or decrease during
any one adjustment period, regardless of how high or low the
index might be.
Permanent Loan
- A long term
mortgage, usually ten years or more. Also called an "end loan."
PITI
- Principal,
Interest, Taxes and Insurance. Also called monthly housing
expense.
Points (Loan
Discount Points) - Prepaid
interest assessed at closing by the lender. Each point is equal
to 1 percent of the loan amount (e.g., two points on a $100,000
mortgage would cost $2,000).
Power of
Attorney - A legal
document authorizing one person to act on behalf of another.
Preapproval
- The process of
determining how much money you will be eligible to borrow before
you apply for a loan.
Prepaid
Expenses - Necessary to
create an escrow account or to adjust the seller's existing
escrow account. Can include taxes, hazard insurance, private
mortgage insurance and special assessments.
Prepayment
- A privilege in
a mortgage permitting the borrower to make payments in advance
of their due date.
Prepayment
Penalty - Money charged
for an early repayment of debt. Prepayment penalties are allowed
in some form (but not necessarily imposed) in many states.
Primary
Mortgage Market - Lenders, such
as savings and loan associations, commercial banks, and mortgage
companies, who make mortgage loans directly to borrowers. These
lenders sometimes sell their mortgages to the secondary mortgage
markets such as FNMA or GNMA, etc…
Principal
- The amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance of a
mortgage.
Principal
Balance - The outstanding
balance of principal on a mortgage not including interest or any
other charges.
Principal,
Interest, Taxes, and Insurance (PITI) - The four
components of a monthly mortgage payment. Principal refers to
the part of the monthly payment that reduces the remaining
balance of the mortgage. Interest is the fee charged for
borrowing money. Taxes and insurance refer to the monthly cost
of property taxes and homeowners insurance, whether these
amounts are paid into an escrow account each month or not.
Private
Mortgage Insurance (PMI) - In the event
that you do not have a 20 percent down payment, lenders will
allow a smaller down payment - as low as 3 percent in some
cases. With the smaller down payment loans, however, borrowers
are usually required to carry private mortgage insurance.
Private mortgage insurance will usually require an initial
premium payment and may require an additional monthly fee
depending on your loan's structure.
Q
Qualifying
Ratios - Calculations
used to determine if a borrower can qualify for a mortgage. They
consist of two separate calculations: a housing expense as a
percent of income ratio and total debt obligations as a percent
of income ratio.
R
Rate Lock
- A commitment
issued by a lender to a borrower or another mortgage originator
guaranteeing a specified interest rate and lender costs for a
specified period of time.
Realtor®
- A real estate
broker or an associate holding active membership in a local real
estate board affiliated with the National Association of
Realtors.
Real Estate
Agent - A person
licensed to negotiate and transact the sale of real estate on
behalf of the property owner.
Real Estate
Settlement Procedures Act (RESPA) - A consumer
protection law that requires lenders to give borrowers advance
notice of closing costs.
Recission
- The
cancellation of a contract. With respect to mortgage
refinancing, the law that gives the homeowner three days to
cancel a contract in some cases once it is signed if the
transaction uses equity in the home as security.
Recording Fees
- Money paid to
the lender for recording a home sale with the local authorities,
thereby making it part of the public records.
Refinance
- Obtaining a new
mortgage loan on a property already owned often to replace
existing loans on the property.
RESPA
- Short for the
Real Estate Settlement Procedures Act. RESPA is a federal law
that allows consumers to review information on known or
estimated settlement costs once after application and once prior
to or at settlement. The law requires lenders to furnish the
information after application only.
Reverse Annuity
Mortgage (RAM) - A form of
mortgage in which the lender makes periodic payments to the
borrower using the borrower's equity in the home as collateral
for and repayment of the loan.
Revolving
Liability - A credit
arrangement, such as a credit card, that allows a customer to
borrow against a pre-approved line of credit when purchasing
goods and services.
S
Satisfaction of
Mortgage - The document
issued by the mortgagee when the mortgage loan is paid in full.
Also called a "release of mortgage."
Second Mortgage
- A mortgage made
subsequent to another mortgage and subordinate to the first one.
Secondary
Mortgage Market - The place where
primary mortgage lenders sell the mortgages they make to obtain
more funds to originate more new loans. It provides liquidity
for the lenders.
Security
- The property
that will be pledged as collateral for a loan.
Seller Carry
Back - An agreement in
which the owner of a property provides financing, often in
combination with an assumable mortgage. See owner financing.
Servicer
- An organization
that collects principal and interest payments from borrowers and
manages borrower escrow accounts. The servicer often services
mortgages that have been purchased by an investor in the
secondary mortgage market.
Servicing
- All the steps
and operations a lender performs to keep a loan in good
standing, such as collection of payments, payment of taxes,
insurance, property inspections and the like.
Settlement/Settlement Costs - See
closing/closing costs
Simple Interest
- Interest which
is computed only on the principle balance.
Standard
Payment Calculation - The method used
to determine the monthly payment required to repay the remaining
balance of a mortgage in substantially equal installments over
the remaining term of the mortgage at the current interest rate.
Survey - A measurement
of land, prepared by a registered land surveyor, showing the
location of the land with reference to known points, its
dimensions, and the location and dimensions of any buildings.
T
Title
-
A document that
gives evidence of an individual's ownership of property.
Title Insurance
- A policy,
usually issued by a title insurance company, which insures a
home buyer against errors in the title search. The cost of the
policy is usually a function of the value of the property, and
is often borne by the purchaser and/or seller. Policies are also
available to protect the lender's interests.
Title Search
- An examination
of municipal records to determine the legal ownership of
property. Usually is performed by a title company.
Total Expense
Ratio - Total
obligations as a percentage of gross monthly income including
monthly housing expenses plus other monthly debts.
Truth in
Lending - A federal law
requiring disclosure of the Annual Percentage Rate to home
buyers shortly after they apply for the loan. Also known as
Regulation Z.
U
Underwriting
- The decision
whether to make a loan to a potential home buyer based on
credit, employment, assets, and other factors and the matching
of this risk to an appropriate rate and term or loan amount.
Usury - Interest
charged in excess of the legal rate established by law.
V
VA Loan
- A long term,
low-or-no down payment loan guaranteed by the Department of
Veterans Affairs. Restricted to individuals qualified by
military service or other entitlements.
VA Mortgage
Funding Fee - A premium of up
to 1-7/8 percent (depending on the size of the down payment)
paid on a fixed rate loan. On a $75,000 fixed-rate mortgage with
no down payment, this would amount to $1,406 either paid at
closing or added to the amount financed.
Variable Rate
Mortgage (VRM) - See adjustable
rate mortgage
Verification of
Deposit (VOD) - A document
signed by the borrower's financial institution verifying the
status and balance of his/her financial accounts.
Verification of
Employment (VOE) - A document
signed by the borrower's employer verifying his/her position and
salary.
W
X
Y
Z
