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Glossary
TERM (BUZZ WORD)
DEFINITION
- Adjustable Rate Mortgage (ARM)
A loan that has periodic rate adjustments at specific intervals. (ie. 3mo. 6mo. 12mo. 3yrs)
- Balloon Payment
A final lump sum installment due on a note or mortgage that pays the loan off in full.
- Combined loan to value ratio (CLTV)
Percentage of all recorded liens on the value of the property.
- Conventional Loan
A loan with a fixed rate, fixed term.
- Debt Ratio
The relationship between income and debt.
- Equity
The cash value of a property after repaying loans.
- Escrow
The deposit of funds with a third party to carry out specific transactions.
- Federal Deposit Insurance Corporation (FDIC)
Insures up to $100K for each depositor in most commercial banks.
- Fair Issacs Company (FICO Score)
A credit risk score that measures from 300 to 800.
- First Mortgage (First)
A mortgage with priority over all other mortgages.
- Fixed Rate Loan
A loan with a fixed rate over the term of the loan.
- Foreclosure
A legal proceeding to take possession of collateral securing a defaulted loan.
- Jumbo Loan (Jumbo)
Loans of $350K or more in most states.
- Junior Mortgage
A mortgage whose claim against the property will be settled after prior mortgages have been paid.
- Lien
A charge against property making it security for the payment of a debt, mortgage or taxes.
- Liquidity
Ease of converting assets to cash.
- Loan Application (App)
Form used to qualify a borrower for a loan.
- Loan To Value Ratio (LTV)
The loan amount compared to the property value.
- Mechanic Lien
A lien placed on property by contractors that provide home improvement work.
- Mortgage Lien
An encumbrance on property used to secure a loan. The holder of the lien has a claim to the property in case of loan default.
- Multifamily Housing
A residential structure with more than one dwelling in the same building, such as a condo or duplex.
- Non-conforming Loan
A residential mortgage loan exceeding the loan specification set by FNMA and FHLMC.
- Notice Of Default (NOD)
A recorded document that is delivered to a borrower when a default on a deed of trust occurs.
- Origination Fees
Charges to cover the costs of issuing a loan, such as credit checks, appraisal, and title expenses.
- Private Mortgage Insurance (PMI)
Insurance to cover mortgages incase of a default.
- Points
Fees paid to induce lenders to make a mortgage loan. Each point equals 1% of the loan principal.
- Preliminary Title Report (Prelim)
Contains legal, vested owner, liens, and derogatory public record information.
- Prepayment Penalty (Prepay)
A penalty for prepayment of a mortgage before it actually becomes due.
- Prime Rate
The lowest commercial interest rate charged by banks on short term loans to their most credit worthy customers.
- Principal and Interest (P&I)
A periodic payment including the interest charges plus an amount applied to the principal balance.
- Principal, Interest, Taxes and Insurance Payment (PITI)
A periodic payment including principal, interest insurance premiums and property taxes.
- Refinance (REFI)
The process of restructuring or rewriting an original loan term or conditions.
- Seasoned Loan
A loan in existence long enough to show a pattern of payments. ie 12 months.
- Security
Property that serves as collateral for debt.
- Sub-Prime (B&C)
Applicants with minor or major derogatory credit.
- Title Search
An examination to determine the ownership and encumbrances affecting real property.
- Underwriter
The person who approves or denies a loan based on the property and the applicant.
- Workout
A mutual effort by a property owner and lender to avoid foreclosure/bankruptcy following a default.
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