Glossary of Terms - www.GoSkylineDirect.com

Glossary of Terms



The mortgage glossary:

Buying a home involves a whole new vocabulary. Let us help you understand some of these new terms with our glossary of terms.

When you purchase a home and apply for a mortgage, a residential loan application, also known as a form (1003) will need to be filled out. This four-page form will ask you questions about your employment history, your current income, your residence history, your savings and asset information and will ask questions about the home that you are purchasing.
A mortgage or deed of trust with a variable interest rate (an interest rate that changes periodically). This mortgage tends to attract more people into the mortgage market.
The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
Cost for professional evaluation of the property’s market value based on comparable sales, improvements on the property and location.
A request analysis of the estimated value of a property prepared by a qualified appraiser.
Estimated worth of a property determined by someone qualified in valuation.
The valuation placed on property by a public tax assessor for purposes of taxation.
A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must “qualify” in order to assume the loan.
This fee is paid to the attorney who prepares and reviews all of the closing documents on your behalf.
When the final payment on a note is greater than the preceding normal installments, the final installment is termed a balloon payment. An installment promissory note providing for the last payment to be much larger than any previous payment.
A signed document from the borrower that allows releasing personal information.
A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.
The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector.
The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
For loans that require a Loan Estimate (LE) and that proceed to closing, creditors must provide a new final disclosure reflecting the actual terms of the transaction called the Closing Disclosure. The form integrates and replaces the existing HUD-1 and the final TIL (Truth in Lending) disclosure for these transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation (closing) of the loan.
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”
A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
Refers to home loans other than government loans (VA and FHA).
This covers the cost of transporting documents to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan.
Credit history of a person or business issued by a company in the credit reporting business, used to help determine creditworthiness.
Any missing information on your credit report supplied by the credit bureau.
Borrowers monthly payment obligations as a percentage of their income.
The legal document conveying title to a property.
In the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any “points” paid in addition to the one percent loan origination fee. A “point” is one percent of the loan amount.
A deposit made to a seller showing the buyer’s good faith in a transaction. Often used in real estate transactions, earnest money allows the buyer additional time when seeking financing. Earnest money is typically held jointly by the seller and buyer in a trust or escrow account.
A right of way giving persons other than the owner access to or over a property.
For most mortgage loans additional title endorsements are necessary to provide additional title protection for the lender. These additional endorsements will vary.
Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.
Title company’s service fee for acting as an escrow agent, carrying out contract instructions, obtaining execution, and recording of necessary documents; disbursing sale proceeds; usually split between buyer and seller.
Ownership in property, determined by calculating the fair market value less the amount of liens and encumbrances.
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
Fees for recording documents in the appropriate county; fee is determined by the number of pages per document.
A mortgage with an interest rate that does not change over the life of the loan.
The release of loan funds from a lending institution to the escrow company, generally on the closing day of escrow or recordation.
Total income before expenses is deducted.
Fire and extended coverage casualty insurance protects property and contents in case of loss; required by lender for at least the loan amount.
An examination of the property for various reasons such as termite inspections, mechanical inspections, roof inspections; parties may also require follow-up inspections after required repairs are completed.
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
A type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.
A trust account established by the lender to pay property taxes and hazard insurance.
The monthly payment on a loan (including principal, interest, taxes and hazard insurance) divided by the borrower’s monthly gross income.
A number used by a lender to measure interest rate changes over time; used as a guide for resetting rates of adjustable rate loans.
An examination of the property for various reasons such as termite inspections, mechanical inspections, roof inspections; parties may also require follow-up inspections after required repairs are completed.
A free float down policy allows you the peace of mind to know that even after you lock in your rate, if the market rates go down and your loan is not closed yet, the lender will float the interest rate down to the current market rate. A free float down policy allows you the advantage to take advantage of a unstable market and insure you get the best rate possible.
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
A money judgment that, because it has been recorded, has become a lien against the judgment debtor’s real property.
Policy insuring lender of validity and priority of its lien.
Debts or claims that creditors have against assets.
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
Upon completing your application for a mortgage, the lender is required to provide the consumer with good-faith estimates of credit costs and transaction terms on a new form called the Loan Estimate. This form integrates and replaces the existing RESPA GFE (Good Faith Estimate) and the initial TIL (Truth In Lending) for these transactions. The creditor is generally required to provide the Loan Estimate within three-business days of the receipt of the consumer’s loan application
(An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
The processing fee pays for the person who does all the paperwork involved in getting a loan into underwriting, taking care of any conditions, and making sure the loan closes. The processor orders the appraisal, the insurance certificate, the flood certificate, any verifications that are needed, etc.
The underwriting fee goes to the lender and pays for the person who determines whether the borrower and the property fall within the loan program guidelines (credit, income, assets, etc.). The underwriter verifies everything that the processor has sent to the lender.
The amount of unused equity left after borrowing against the property.
May include fees for underwriting, processing, tax service fee, warehousing, etc.; varies with each lender. Check your lender’s LE (Loan Estimate / sometimes referred to as a Good Faith Estimate) for disclosure and explanation.
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use first trust deeds.
Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers.
Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves “No MI” are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves.
Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
Interest due on seller’s existing mortgage through date of pay-off received. Interest is usually paid in arrears. Interest also includes prepaid interest on the buyer’s loan for the remainder of the month in which closing occurs.
The fee a notary public charges to verify all parties are who they say they are while signing loan documents and deeds of trust.
On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called “discount points.” One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
Policy that indemnifies the buyer against losses for covered defect in title. (Premium is set by the State Board of Insurance.)
The “par rate” is the wholesale rate before a lender, banker, or loan officer marks it up to increase their profits and/or commissions.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
A point is 1 percent of the amount of the mortgage.
A report showing the current status of a property and the condition under which a title company is willing to insure title as of a specific date.
An additional fee a lender may charge if a borrower pays off all or part of the loan balance before a period chosen by the lender or before the loan is due.
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Taxes are prorated with the seller paying taxes from January 1st through the closing date, and buyer paying the remainder. Figures are usually based on actual taxes charged the previous year. Any shortages or overage due at the end of the existing year are between buyer and seller.
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” or “front” ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing costs as will as all other monthly debt.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
With regard to mortgage loans, an accumulation of funds, collected from the borrower by the lender as part of each monthly mortgage payment, an amount allocated to pay property taxes and insurance when they are due.
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. The purposes of RESPA are:
  • To help consumers become better shoppers for settlement services
  • To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.RESPA covers loans secured with a mortgage placed on a one-to-four family residential property. These include most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit. HUD's Office of RESPA and Interstate Land Sales is responsible for enforcing RESPA.
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
A statement (drawing) showing the corners, distances, and directions of the boundaries of a tract of land along with easements, encroachments, etc. as may be required in the contract.
Certificate obtained to determine any unpaid property taxes or assessments that may constitute liens against the property.
As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
Evidence of the owner’s right or interest in property. (1) The right of ownership. (2) The evidence of a person’s ownership or interest in property.
A company that specializes in examining and insuring titles to real estate.
Insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
A report which discloses condition of title, made by a title company preliminary to issuance of title insurance policy. A duplicate (usually microfilmed) of a county’s public record, maintained by a title company at its offices for use in title searches.
TRID Is The New TILA RESPA Integrated Disclosures. • The Loan Estimate replaces the initial Truth-in-Lending disclosure & Good Faith Estimate for most. closed-end mortgage loans.
(PMI-private mortgage insurance conventional loans, MIP-mortgage insurance protection –FHA loans) insures lender against loss in the event of default by the borrower.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
The manner in which title is held.
Verification of deposit form sent to borrower’s financial institutions to verify funds for the down payment and closing costs.
Verification of employment form sent to prospective borrower’s employer to verify employment.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!

Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.