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A |
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Annual Percentage Rate |
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A measure of interest rate
that expresses the cost of a mortgage as a early rate on a
loan balance. |
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B |
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C |
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Closing Cost |
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These
include fees outlined in the Good Faith Estimate such
as; loan origination fee, points, appraisal, title search
and insurance, survey, taxes, deed recording, credit report,
and other cost incurred at settlement. |
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Closing Statement |
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Document provided by escrow
to all parties listing the financial details of the
transaction. . |
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COFI (Cost of Funds Index) |
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An index used to determine
interest rate changes for certain adjustable rate (ARM)
mortgage loans. COFI index bases the index percentage
based on the savings and borrowings of funds utilized by the
institution(s) sourcing the index. |
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Credit Ratio |
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A percentage calculation
determined by the borrowers monthly debt calculation divided
by their gross monthly income. (Government funding's
determine this percentage using the net monthly income) |
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Credit Scoring |
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A method of rating the
borrowers credit worthiness by using characteristic details
of the individuals credit profile. |
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D |
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E |
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Escrow |
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The operation of a neutral
third party in acting as trustee in the frame of a real
estate transaction. Escrow handles documents and funds
in the transaction ensuring all parties are in agreement.
Escrow accounts are bonded under federal law and bound by
the U.S. Department of Housing and Urban Development
requirements. |
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F |
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FICO |
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A formula developed by the
Fair, Isaac Corporation for credit rating. The formula
is used by lending institutions to determine credit
worthiness of the borrower. The formula is provided
directly to credit reporting agencies only. FICO
scores range from 200 to 900; higher credit scores displays
the worthiness of the borrower. |
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G |
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H |
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Home equity line of credit |
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An equity loan allowing the
homeowner to borrow funds under an open-end line of credit. |
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HUD-1 |
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See Closing Statement |
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I |
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Impound Account |
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Additional money collected
with each mortgage payment for property taxes, insurance and
sometimes private mortgage insurance. Funds collected
by the lender are disbursed to the separate agencies based
on the payment due date. |
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Index |
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A percentage used to
calculate the upward/downward adjustments of an adjustable
rate mortgage loan. The index is an interest rate
determined by one, three and five year U.S. Security yields,
the monthly average interest rate on closed by savings and
loan institutions and the monthly average cost of funds
incurred by savings and loans. |
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Interest Rate |
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A fee percentage charged for
the use of funds in a loan. |
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J |
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K |
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L |
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Loan Costs |
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Fees associated with the real
estate transaction. Escrow reflects all cost/fees on
the closing statement for all parties to view and approve. |
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Loan-to-value |
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A percentage calculation
based on the value of the real property and the total loan
amount encumbered against the real property. (total loan
amount divided by value) |
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M |
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Margin |
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The numeric value added to
the index in determining the new interest rate on a
adjustable rate mortgage loan. |
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Mortgage Insurance (Private
Mortgage Insurance) |
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Money paid by the borrower
for the insurance of the mortgage loan. Generally
applies to loan when down payment is less than 20 percent or
refinance exceeds 80 percent of the appraised value. |
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N |
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Negative Amortization |
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Monthly interest is less than
the amount needed to cover principal and interest payment
portion. Important note: the shortage of interest paid
is added to the principal balance of the loan.
Homeowner may owe more than the initial loan amount borrowed
due to the shortage in payment. |
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Non-recurring closing cost |
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One time fees paid through
escrow. |
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O |
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Origination Fee |
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Fee charged by bank or broker
to facilitate the loan transaction. |
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P |
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Per diem interest |
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Interest charged or accrued
daily. |
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PITI |
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Principal, interest, taxes
and insurance |
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Points |
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Fees charged by bank or
broker to facilitate the loan transaction. |
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Prepayment penalty |
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Penalty fee determined for
the early payoff of the loan. Fee varies by lending
institutions. |
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Q |
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R |
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Rescission (3-day Right of
Recession) |
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A document offering a
borrower the right to cancel within three days of signing
loan documents. (Generally applies to all owner
occupied property transactions) |
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Reconveyance |
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Deed used to record the
payment in full of the previous mortgage debt. |
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Recording fees |
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Fees charged by county and
city officials for recording of deeds/documents. |
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Regulation Z (RegZ) |
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Written advisement to a
borrower of all fees/cost associated with the mortgage
transaction. Also known as the Truth in Lending Statement. |
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RESPA (Real Estate Settlement
Protection Act) |
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A disclosure document
provided for details concerning loan servicing rights and
government monitoring regulations. |
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S |
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Servicing agreement |
| |
A document outlining the
details of a lenders intentions of transferring servicing
rights to another lender. |
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Subordinate loan |
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A lien in 2nd or 3rd
position. |
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T |
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Teaser rate |
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A low rate of interest
offered for a designated period. |
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Title |
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Documents provided outlining
details concerning the ownership of real property. |
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Title Company |
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A neutral third party of the
real estate transaction offering information involving the
real property and its owners. |
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U |
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Up-front Cost (Out of pocket
expense) |
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Any fees paid by borrower
outside of escrow or closing. (eg. Appraisal fee, Loan
application fee) |
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V W X Y Z |
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