A mortgage where the rate is variable. This type of mortgage “adjusts” and is different from a fixed mortgage.
You pay both principal and interest when a loan is amortized, and your debt is gradually paid down. At the end of the term, your loan will be paid in full.
A schedule that shows each payment amount and how much is applied to interest and principal. The schedule shows your remaining unpaid principal balance after your payments are applied.
Annual Percentage Rate (APR)
The APR is the cost of your mortgage represented by an annual rate. The APR includes interest, loan origination fee, points, and any mortgage insurance. When shopping for a loan, the best way to compare is by comparing the APR.
All borrowers applying for the mortgage.
Sometimes called a 1003 by loan advisors, it’s the 5-page document you fill out at the beginning of the process to give information about your address, finances, employment, assets, and background.
Real estate appraisal, property valuation, or land valuation is the process of developing an estimation of a property’s current market value.
Automated Underwriting System (AUS)
The AUS is an automated process of evaluating mortgage risk. Once you complete your application, your loan advisor will put your application through the AUS for a loan recommendation.
Sometimes called a discount point. Generally, a basis point is 1% of the total loan. Discount points are prepaid interest that a borrower can pay to lower their interest rate.
Describes the state of the market when the housing supply exceeds the buyers’ demand. The buyer has the upper hand in this market and can negotiate when buying a home.
With a cash-out refi, you refinance your current mortgage and get money back. The transaction pays off your existing loan and gives you a new larger loan. Most borrowers roll in any costs into their loan, so they don’t have to come up with money out of their pocket.
Certificate of Eligibility
Known as a COE, the VA issues this document and certifies a veteran’s eligibility for a VA mortgage. You’ll need to have your DD 214 to get your COE. If you’re applying for a VA loan, we can help you obtain your COE.
You go to closing once your loan is approved and all the documents are ready to sign. You’ll sign the paperwork, and if it’s a purchase, you’ll get your keys.
These are costs outside of the property price associated with buying a home. These include things like underwriting fees, appraisal fees, credit report fees, and title charges. These are paid to the lender at closing, usually 3%-6% of the loan amount.
Closing Disclosure (CD)
A CD is a document that gives you the final details of your mortgage. You’ll find the loan term and projected monthly payment. It also lists all closing costs and fees. Homestead will give you your Closing Disclosure at least three business days before the closing on your loan.
The second or third persons etc. on loan along with the borrower who signs the promissory note.
A person who is jointly liable with the borrower and signs the mortgage note. For example, a parent may co-sign on the mortgage of their adult child.
The property that is pledged as security for the mortgage.
Combined Loan-to-Value Ratio (CLTV)
This is the ratio used for a mortgage loan that includes the balance of the first mortgage and any second or third mortgages compared to the value. For example, if your home is worth $500,000 and you have a $200,000 first mortgage and a $50,000-second mortgage, your CLTV would be 50%.
Sometimes a loan will be approved with conditions. These are tasks and items that must be completed before funding. Examples are home repairs, employment verification, or an updated credit report.
A unit in a condominium complex where each unit owner has title to their unit. They also have an individual interest in the common areas of the complex. Interest rates for condos are higher than for single-family homes because there is more risk for the lender. For government loans, the condo has to be on the approved list of condominiums.
A mortgage within the guidelines and loan amounts established by Fannie Mae and Freddie Mac.
A non-government mortgage. Conventional loans are both conforming and non-conforming.
The three main credit bureaus are Experian, Equifax, and Transunion. They gather, record, update and store public records and financial information about the payment history of borrowers applying for credit.
Debt to Income Ratio (DTI)
The ratio of your debt compared to your income. Here’s an example: $2,500 month debt includes house, car, and credit card debt. Income is $6,000. Your DTI would be 41.6%. Every loan has a DTI requirement that ranges between 36% to 50%.
A legal document that transfers property ownership from one person to another.
The paperwork and documents you need to supply to prove your income, assets, identity, etc.
The difference in the sales price of the home and your mortgage amount. It’s how much money you put down on the house.
Earnest Money Deposit (EMD)
This is the amount of money you put down when you place an offer on a home. It shows the sellers you’re serious about buying their property.
Is the difference between the value of your home vs. what you owe. For example, if your home is worth $400,000 and you have a $200,000 mortgage, your equity is $200,000.
This is a special account set up by your lender. Your taxes, homeowners’ insurance, and any assessments go into this account and are paid when due.
Federal Housing Administration (FHA)
It’s an agency within HUD that insures residential mortgages that private lenders make.
The credit score developed by Fair Isaac represents a borrower’s creditworthiness via their payment history, credit utilization, and more.
It is a mortgage where the rate stays the same throughout the term of the loan.
Government-Sponsored Enterprise (GSE)
A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy, to make those segments of the capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital.
What you pay the lender for borrowing the money for your mortgage. Interest is usually written as an annual percentage rate.
A home loan that exceeds the conforming loan limits.
A person’s obligations such as vehicle loans, mortgage, and credit card debt.
It’s a loan or claim against the property that has to be paid off when the property sold. Examples are first mortgages, HELOCs, and tax liens.
Loan Estimate (LE)
A document you receive from your lender that spells out your estimated loan fees and closing costs. You will receive an LE within three business days of completing your mortgage application.
The ratio of the home loan amount to the appraised value of the property.
A legal document that pledges the property to the mortgage lender. This secures the debt to the home.
Mortgage-Baked Security (MBS)
A mortgage-backed security (MBS) is a type of asset-backed security which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals that securitizes, or packages, the loans together into a security that investors can buy.
The fee the lender charges you to process your mortgage loan.
Your monthly mortgage payment that includes the principal, interest, taxes, and insurance (PITI).
Upfront costs and payments a buyer must make before a home purchase closes. These commonly include things like homeowners insurance and property taxes.
Private Mortgage Insurance (PMI)
Mortgage insurance is required for a conventional loan when you put down less than 20%.
A mortgage recast is when you make a lump-sum payment toward the principal balance of your loan. Your lender will then reamortize your mortgage with the new (lower) balance. Your interest rate and term remain the same, but you can lower your monthly payments because your principal went down.
Money in your bank account (or liquid assets) that you have left after the down payment and any closing costs.
Secondary Mortgage Market
The secondary mortgage market is a market where existing mortgage loans and servicing rights are bought and sold by various entities.
Costs that are associated with buying a home that the seller agrees to pay. This can be some or all of a buyer’s closing costs and prepaids, or it can go toward home improvement or repair costs. Seller concessions are a way to lighten the buyer’s costs and make a property more enticing.
Describes the state of the market when the demand for housing exceeds the supply of houses. The seller has the upper hand in this market and can maximize the sale price of their home.
Legal documentation showing that a person has the right to property ownership.
Insurance that covers any defects in the title or prior undiscovered claims.
The title company searches to ensure there are no liens or outstanding claims to the property, and the seller is the legal owner.
The person who decides to approve your loan or not. They calculate the risk of lending you the money and follow loan guidelines regarding income, debts, credit score, etc.
A USDA Home Loan from the United States Department of Agriculture provides financing for rural properties. These loans offer zero down, good rates, and lenient credit guidelines.
The Department of Veterans Affairs guarantees VA loans for those eligible veterans and service members. VA loans offer zero down and have great rates.