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Glossary Terms

Mortgage Buzz Words

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 at maturity.

Combined loan to value ratio (CLTV)
Percentage of the principal balance of all loans secured by the property divided by the value of the property.

Conventional Loan
A loan with a fixed rate, fixed term.

Debt Ratio
The relationship between income and debt.

The cash value of a property after repaying loans.

The deposit of funds with a third party to carry out specific transactions.

Federal Deposit Insurance Corporation (FDIC)
Insures up to $250,000 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.

A legal proceeding to take possession of collateral securing a defaulted loan.

Jumbo Loan (Jumbo)
Loans of over $417,000 or more in most states.

Junior Mortgage
A mortgage whose lien, or junior, to a prior mortgage such as a First Mortgage.

A charge against property making it security for the payment of a debt, mortgage or taxes.

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.

Mechanics Lien
A lien placed on property by contractors that provide home improvement work or construction.

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.

Multi-family 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 specifications set by FNMA and FHLMC.

Notice Of Default (NOD)
A 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 in case of a default.

Fees paid to induce lenders to make a mortgage loan. Each point equals 1% of the loan principal.

Preliminary Title Report (Prelim)
A report showing the status of title to a property. 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
A 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 obtaining a new loan which pays off an earlier loan.

Seasoned Loan
A loan in existence long enough to show a pattern of payments. i.e. 12 months.

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.

The person who approves or denies a loan based on the credit worthiness of the applicant.

A mutual effort by a property owner and lender to avoid foreclosure/bankruptcy following a default.

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