| Adjustable
Rate Mortgage |
| A mortgage loan in which the interest varies in
accordance with changes in a specified index, and
may result in changed monthly payments. |
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| Adverse
Action |
| A denial of a loan in an amount and on terms acceptable
to the borrower. |
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| Annual
Percentage Rate (APR) |
| The actual cost of credit to the borrower, including
interest and certain other charges, expressed as
a yearly rate and calculated over the life of the
loan. |
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| Application |
| An oral or written request for an extension of
credit. Usually a printed form on which the lender
collects credit, income and debt information about
a prospective borrower, plus facts about the property
being used to secure the loan. A fee may be charged
at the time of application. |
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| Appraisal |
| An inspection of the property to assure that its
market value exceeds the amount of the loan. A fee
may be charged for the appraisal. |
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| Borrower |
| The person, sometimes referred to as the mortgagor,
who obtains a mortgage loan. |
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| Closing |
| The time and date set for the transfer of the
property from seller to buyer and/or for the signing
of the loan documents. |
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| Closing
Costs (settlement costs) |
| Fees, in addition to the purchase price of the
property, charged at closing which include but are
not limited to lawyer's fees, title search and insurance,
survey charges and fees to record the deed, mortgage
and other documents. |
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| Commitment
Letter |
| A lender's written offer to grant a mortgage loan
outlining the terms, the amount of the loan, the
interest rate, and any other conditions. It can
also serve as a communication of the lender's decision
on the borrower's application. |
| |
| Counter
Offer |
| An offer made by the lender to grant credit other
than in the amount or terms requested by the application. |
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| Equal
Credit Opportunity Act |
| Federal and state laws that prohibit discrimination
in the granting of credit based on race, color,
religion, national origin, sex, marital status,
age, or whether a person is receiving public assistance
or alimony. |
| |
| Escrow
Account |
| money collected in advance by the lender, usually
on a monthly basis, for the payment of real estate
taxes, betterment's and/or insurance. |
| |
| Fixed
Rate Mortgage |
| A conventional mortgage loan with a set interest
rate and equal monthly payments for the entire term
of the loan. |
| |
| Good Faith Estimate |
Referred to as a GFE must be provided by a mortgage lender or broker in the United States to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan.
These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges.
A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers.
The good faith estimate is only an estimate. The final closing costs may be different – sometimes very different. |
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| Lender |
| The entity or person, sometimes referred to as
the mortgagee, who offers the mortgage loan. |
| |
| Lien |
| A legal claim, granted by contract or by a court,
against a property. A mortgage is one link of lien.
|
| |
| Loan
to Value Ratio |
| The percentage comparison between the unpaid principal
balance of the mortgage and the sales price or the
appraised value of the property, whichever is lower. |
| |
| Mortgage |
| A lien placed by the lender on the borrower's
property and removed when the note has been paid
in full. If the borrower defaults on the note, the
lender can sell the property to satisfy the debt. |
| |
| Mortgage
Review Board |
| A voluntary board consisting of an equal number
of lenders and community representatives who will
review the residential mortgage loans denied by
participating lenders where the applicants believe
the denial was based on the location of the property. |
| |
| Note |
| The borrower's legally binding written promise
to repay a debt to a lender on a specific date. |
| |
| Point |
| A sum of money, equal to one percent of the principal
amount of the mortgage, charged by the lender to
cover certain costs of making a loan or to "buy
down" your interest rate. |
| |
| Private
Mortgage Insurance |
| Protection for lenders against borrower default.
Paid for by the borrower and usually required when
the down payment is less than 20% of the purchase
price. |
| |
| Rate
Lock Agreement/Interest Rate Commitment |
| A written agreement by which a lender will hold
an interest rate on a mortgage for a specified period
of time. The terms and conditions of a rate lock
agreement vary from lender to lender. |
| |
| Real
Estate Settlement Procedures Act (RESPA) |
| A federal law that requires a good faith estimate
of closing costs required to be given on certain
first mortgage. |
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| Right
of Rescission |
| State and federal laws that allow consumers who
refinance first mortgage and certain second mortgages
to cancel their contract and receive a refund of
all the mortgage fees. This must take place within
three business days following the closing, or following
the delivery of the required information and rescission
forms and disclosures, whichever occurs last. |
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| Secondary
Mortgage Market |
| Investors who purchase residential mortgages originated
by lenders. |
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| Short Sale |
| A sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. |
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| Title
Insurance |
| Protection against loss due to defects in the
title that were not uncovered in the title search
and not listed in the title report. Both the lender
and the borrower may purchase title insurance to
protect their own interest. |
| |
| Title
Search |
| An examination of legal records to check the validity
and completeness of the title to the property. The
title search should uncover any liens, overdue assessments
or other claims against the property. |
| |
| Truth
in Lending |
| Federal and state laws that require lenders to
provide borrowers with full disclosure of the true
cost of a loan and easy to understand information
about the annual percentage rate and terms of the
loan. |
| |
| Urea
Formaldehyde Insulation Notice (UFFI) |
| A state law requiring a borrower or seller to
disclose to a lender the absence or presence of
UFFI and formaldehyde lever in a dwelling. |
