Common Mortgage Terms
Glossary Index | A B C | D E F | G H I J K L M N | O P Q R S T U V Z
G
Good-Faith Estimate
Required by federal law, a Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with a mortgage transaction, including the lender's charges along with the local closing agent's charges and fees. It also includes estimated amounts for real estate property tax and homeowner's insurance.
Gross Monthly Rental Income
The amount of money received each month for rent on property that is owned and used for investment purposes. This income will need to be verified through a lease or through tax returns.
HELOC
A secure line of credit using the available equity in the applicant's residence as collateral. HELOC stands for Home Equity line of credit.
Homeowner's Insurance or Hazard Insurance
Insurance protecting against loss to real estate caused by fire, other natural causes, vandalism, etc., depending upon the terms of the policy. You must have this type of insurance to close on a loan. This may not cover flood or wind damage.
Housing ratio
A borrower's total monthly housing payment (PITI - Principal, Interest, Taxes, and Insurance) divided by gross monthly income and shown as a percentage. For example, if PITI = $1,500 and gross monthly income = $6,000, then the Housing ratio would equal $1,500 divided by $6,000 or 25%. Sometimes referred to as the front ratio.
HUD
Stands for the U.S. Department of Housing and Urban Development. This government agency is responsible for implementing and overseeing federal housing and community development programs. It also oversees the Federal Housing Administration.
HUD-1 Uniform Settlement Statement
See Closing Statement.
Income
Sources of revenue including your salary, bonuses, interest and investment income. Income is one area of financial information that lenders review during the mortgage lending process.
Index
A published rate used by lenders that serves as the basis for determining interest rate changes on ARM loans. Some commonly used indices include the 1-Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
Interest Rate
The fee paid to a lender to borrow money expressed as a percentage.
Investment Related Savings
The estimated total savings of buying invested at a rate of 8% for the number of years that a borrower would plan to own a home.
Jumbo Loan
A mortgage loan that exceeds the conforming loan amount. Jumbo loans usually command higher interest rates.
LIBOR (London Interbacnk Offered Rate)
The rate at which banks in the foreign market lend money to one another. One of the more dependable barometers for the international cost of money, the LIBOR is one of many indices used for setting interest rates for ARM loans.
Lien
A legal claim against a property.
Lifetime Cap
A provision of an ARM that limits the highest interest rate that can occur over the life of the loan. These caps vary with each ARM and can be used as a point of comparison when shopping for a loan.
Loan Amount
The amount a consumer borrows from a lender to purchase a home.
Loan Programs
The type of loan as defined by term and repayment features. Examples include 30-year fixed-rate mortgage, 10/1 ARM mortgage.
Loan-to-Value Ratio(LTV)
The loan amount expressed as a percentage of the lower of the appraised value or purchase price of the property. For example, a 90% LTV loan means a 10% downpayment or financing 90% of the sales price or appraised value of the property. There are often different maximum LTV limitations for different loan programs.
Lock Rate
See Rate Lock.
Manufactured Housing
Factory-built or prefabricated housing, including mobile homes.
Mortgage
A legal document that pledges a property as security for repayment of a loan.
Mortgage Insurance (MI)
Insurance paid by the borrower that protects the lender in case the borrower defaults on a loan. With conventional loans, mortgage insurance is not required if your downpayment is at least 20%. Also known as private mortgage insurance.
Mortgage Insurance Premium (MIP)
The up-front insurance premium you must pay if you get an FHA loan. The insurance helps cover the cost of reselling your home if you default on the loan.
Mortgagee
The company or person in a mortgage loan transaction that holds the mortgage note as a pledge for repayment of the loan
Mortgage Note
A written, legal document that binds the borrower to repay a loan at a stated interest rate, during a specified period of time.
Mortgagor
The borrower in a mortgage loan transaction.
Multi-family
A building with more than four residential units.
Negative Amortization
When monthly mortgage payments do not cover the principal or interest due, rather than declining, the balance on the loan will actual increase.
Nonconforming Mortgage Loan
See Jumbo Loan.
