Use the glossary below to find information On Mortgage Loans
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Acceleration Clause: This is written into mortgage loan contracts in the case that you miss a mortgage payment and go into default with your loan then your lender can demand full payment of the balance due on your mortgage.
Acceptance: After you make an offer on a home and the seller accepts, you sign a purchase agreement that states the purchase price and other terms of the sale is drawn up and earnest money is put on the home.
ACE-Automated Certificate of Eligibility: This system is used by VA approved lenders in order to help veterans get the Certificate of Eligibility they need to take part in the VA Home Loan Guarantee Program.
Acreage: The amount of land that is being purchased as an empty lot or with a home pre-existing on the property. One acre is equal to $43,560 square feet.
According to Value: Also called 'Ad Valorem' which refers to the value of your home and property that your property taxes are based on.
ARM-Adjustable Rate Mortgage: A mortgage in which you have a specified amount of time at the beginning of the loan where the rate of interest is fixed, usually 2 or 3 years, and after that time period is over the interest rate fluctuates with the current. This type of mortgage is usually only a good idea if you plan to only live in the home during the fixed interest rate period of time.
Adjustment Date: The dates at which your adjustable rate mortgage interest rate can change. After the initial fixed rate period is over the interest rate can usually be adjusted every 6 months.
Amortization: The process of paying off your mortgage with payments due every month for a certain amount of years.
Amortization Schedule: The statement from your mortgage lender that shows you exactly what your monthly mortgage payment is, how much is going towards your principal loan amount, how much is going towards interest, how much is going into your escrow account and your escrow account balance if applicable, and the remaining balance of your loan.
APR-Annual Percentage Rate: The percent you are paying for a full year that includes interest on your loan, mortgage insurance costs, and other fees that may be applied depending on your mortgage loan agreement.
Appraisal: The fair market value of a property based on a professional evaluation of real estate trends in the area and amenities of the home.
Appreciation: The amount of increase in value that takes place on a property due to real estate trends in the area, home improvements, and other influences that cause the market value of a home to increase.
Assessed Value or Assessment: The value a property is given by a tax assessor in order to determine the cost of property taxes for that parcel.
Assets: Anything you own that has value.
Asset-to-Debt Ratio: The value of the assets you own minus the amount of debt you have.
Assumable Mortgage: A mortgage loan that can be taken over by the buyer rather than a new mortgage contract being written to purchase the home. In most cases the seller of the home would still be liable to the mortgage company in the case that the buyer missed a payment. In some cases the seller can allow the buyer to assume the mortgage without continuing to be liable.
Assumption: When the seller officially transfers their mortgage to the buyer of their property.
Balloon Mortgage: When a buyer acquires this type of mortgage they are required to make payments for a certain amount of time and then after this specified period of time they have to pay the mortgage loan in full. The time period is usually for 5 to 10 years and this type of mortgage is good for buyers who do not plan to live in the home for the full term of the loan or plan to refinance the loan before the balloon payment is due.
Balloon Payment: At the end of a balloon mortgage this is the balance of the entire loan amount that is due in one final large payment.
Bankruptcy: The act of claiming you do not have the means or any way to acquire the means to pay off your current debt. This is a legal court proceeding in which you turn in all of your asset and debt information to the court and they rule to the effect of if they think you are capable of paying your creditors or not. In the case that you have no or very few assets Chapter 7 is bankruptcy is usually filed. In the case you have assets you want to keep, like a home, Chapter 13 bankruptcy is usually filed. In this case you are required to make payments to the court, which the court determines how much you can afford, and the court will then distribute the money to your creditors. These payments last over the span of a few years, and you usually end up repaying close to half of your debt before you are relieved from further payments.
Binder: Once earnest money is put down toward the purchase of a home this agreement holds the home while the proper inspections and appraisals are conducted.
Bridge Loan: In the case that you find the home you want to purchase before you have sold your current home you can take this type of loan where the equity in your current property is used as the downpayment on the new property you are purchasing. Once your current home is sold the lender on your bridge loan will take the downpayment money from the sale of your home along with any fees they charge for their service.
Broker: A person who is in the business of shopping for mortgage loans. A broker is the middle-man who takes the information from people looking to borrow money and shops around to different lenders in order to find a loan for their clients. Brokers get a paid a percentage of the loan as a commission for their services.
Bundle Of Rights: Your rights as a property owner.
Buy Down: When someone makes a payment to a lender in order to obtain a lower interest rate.
Cap: With an adjustable rate mortgage this is the limit for how much the interest rate can rise.
Cash Reserve: In order to get a mortgage loan some lenders require that the borrower have money in savings or in easily liquefiable assets.
Certificate of Eligibility: You need this in order to prove your entitlement to participate in the VA Home Loan Guarantee Program. In order to get a Certificate of Eligibility you should contact a VA approved lender who in most cases can use the ACE system on the internet to prove eligibility in minutes.
Certificate of Reasonable Value: Once the home is appraised this certifies the fair market value of the property.
Clear Title: The title or deed to a particular property that is completely free of all debts, liens, and encumbrances. The owner holds the title free and clear.
Closing: When the buyer officially signs all the mortgage paperwork and pays for the property they are purchasing. At this time the property is transferred to the buyer and the sale is final.
Closing Costs: Also called settlement costs, these are all of the costs associated with the buying and selling of property.
Commitment Letter: The letter given from a lender to a potential borrower that specifies the terms being offered for a mortgage loan.
Condominium: A type of home where you own the specific unit you buy that may be attached to other units owned by many different people. There may be specific associations involved that include monthly or annual fees, owner rules, and common areas in the community.
Consumer Credit Counseling: Where a consumer can get help in the case that they have over-extended or developed derogatory credit.
Contingency Clause: When associated with a mortgage this is when the seller can back out of the purchase contract in the case that the buyer can not obtain financing within a specified amount of time.
Convertible Adjustable Rate Mortgage: An ARM that can be converted into a fixed-rate mortgage under the terms of the loan agreement.
Co-operative: A type of housing arrangement where all of the owners in a housing complex own part of the unit and agree to occupancy arrangements, necessary improvements, maintenance, and more.
Counter Offer: When a potential buyer makes an offer for the purchase price and terms to the seller of a property the seller then may make a counter offer of a different price and new terms.
Covenant: Restrictions that are placed on the borrower about what can be done with the property they purchase. Mortgage lenders may do this in order to sustain the value of the home.
Credit Bureau: An agency that keeps track of individual's credit history and updates their payment history when borrowing money. The three largest bureaus are Equifax, TransUnion, and Experian.
Credit Report: A person's personal payment history of how they repaid borrowed money in the past.
Credit Score: The number that can fluctuate depending on your payment history. If you pay your creditors on time your score will rise, and if you pay late or are delinquent your score may fall.
Debt to Income Ratio: The monthly or annual amount of income compared to your monthly or annual debt owed.
Deed: Also called a Title, this document shows legal proof of ownership for a property.
Deed of Trust: This is when the deed is overseen by a trustee who works as a liason between the borrower and lender in some states.
Default: When you do not make a mortgage payment on time you are in default of your loan terms and agreement. At this time the lender can choose to make a payment plan available to you for repayment of the amount owed from your missed payment or they can request all of the balance due on the loan which you must pay or foreclosure may occur.
Delinquency: The period of time between when your mortgage payment is due and when you pay it, up to thirty days. If you are late with a mortgage payment you are considered delinquent until the payment is officially thirty days late at which time the loan goes into default.
HUD-Department of Housing and Urban Development: A Department within the federal government which aids people with the purchase of property through guaranteed loans, energy efficient home improvement loans, general home improvement loans, refinancing options, loans for the disabled and elderly to renovate their housing, and much more. HUD also has a program where they sell homes for under market value to people who are looking to become home owners. Visit www.hud.gov for more information on the many services offered by the Department of Housing and Urban Development.
Depreciation: When the value of a property gets lower due to the real estate market in the area or the property owner not keeping up with home repairs and allowing the property to fall into disrepair.
Discount Points: When you get a mortgage loan you may pay these discount points in order to get better terms on your long-term mortgage loan. A point is usually equal to 1% of the loan value, so if you were taking a loan for $200,000 one point would be $2,000. Points are paid out-of-pocket by the borrower in order for the lender to have an incentive to offer a lower overall interest rate.
Down Payment: The amount of money you put down on the purchase of a home. The amount of a down payment is usually a certain percentage of the price of a home which varies from lender to lender, but generally anywhere from 3-10% is required. Some lenders accept gift funds for down payment assistance from organizations such as Ameridream. For VA Home Loan Guaranteed mortgages no down payment is required because of the guarantee to the lender from the VA.
Due on Sale: When you sell a property which has a mortgage lien the remaining balance of the loan is paid to the lender at the time of the sale.
Earnest Money: The money that is placed on a purchase agreement that shows a buyer wants to purchase a home. This money is given to the real estate or title agent so that the seller holds the home until necessary appraisals and inspections can be completed and the closing of the loan takes place.
Easement: Part of the property that is not the sole property of the owner but also must be made available to the local town, city, township, or community. Usually this is for the local government to have access to portions of the property they need for utility lines, road extensions, sewer and water pipeline installations, hazardous tree removals, and more.
Employment Verification: A lender requires employment verification of potential borrowers to verify their income and job security.
Entitlement: The amount in which you are allowed to use in a program depending on your status. In the case of the VA Home Loan Guarantee Program once you receive a Certificate of Eligibility you are entitled to a flat guarantee amount of $36,000 for homes under $144,000 and for homes over this amount you can get up to 25% of the loan guaranteed on the purchase of a home with a maximum loan amount of $417,000. The VA does raise and change these limits and terms over time, so go to www.va.gov for the most current information.
Escrow: A middleman account, usually with a title agency, that holds money and distributes the funds in a manner that both parties agree upon. Earnest money is often held in an escrow account and some mortgage companies require borrowers to pay their property taxes and homeowners insurance as part of their mortgage payment which is also put into an escrow account for distribution when due.
Escrow Company: Also called a Title Company or Title Agency. They hold the money in an escrow account until funds need to be distributed correctly. They also help with the closing of a home purchase, the mortgage paperwork, the transfer of money from the lender to the seller, and the title changes.
ECOA-Equal Credit Opportunity Act: An act created by the federal government to forbid lenders to discriminate on any basis.
Fair Housing Act: An act created by the federal government that makes it illegal for lenders, sellers, agents, brokers, and anyone involved in the sale or purchase of a home to discriminate against a buyer for any reason.
FHA-Federal Housing Authority: In connection with the Department of Housing and Urban Development, the FHA is a department of the federal government that encourages homeownership by offering loan guarantees, home improvement loans, consumer counseling, information for purchasing and selling homes, and much more. Go to www.fha.gov for more information about the Federal Housing Authority and their programs.
Fees: The costs that are associated with getting a mortgage loan that include servicing fees, loan origination fees, title fees, appraisal fees, home inspection fees, and more. The VA also charges a fee for using their Home Loan Guarantee Program.
Foreclosure: When a borrower fails to meet the obligations agreed upon in the mortgage loan agreement and the lender repossesses the property in order to get the money back they loaned to the borrower.
Funding Fee: The name of the fee that the VA charges when a veteran uses their Home Loan Guarantee Program. This fee is generally around 2% to 3% depending on if it is your first VA loan or not. Disabled veterans may be exempt from this fee.
Gift Funds: Free down payment assistance that is given to a buyer in order to help them purchase a home. VA loans allow the use of gift funds to make the down payment on a home, and there are organizations like Ameridream that offer this service. Through the Ameridream program they pay anywhere from 3% to 10% of the cost of the home as a free down payment for the buyer, and once the sale is completed the seller pays the gift money back to the Ameridream program. So the seller is basically giving the buyer down payment assistance in return for buyer their home at asking price.
Gift Letter: In the case you are given money for a down payment from a friend, relative, or employer you must have a letter stating that the person giving you the money does not expect to be paid back. This is because if you borrow money that is expected to be repaid then the mortgage lender will need to calculate this into your income to debt ratio.
GPM-Graduated Payment Mortgage: A type of mortgage loan where payments start out low and increase with time. This type of loan is good for people who expect their income to increase over time.
Grantee: The legal term for a buyer in mortgage loan paperwork.
GEM-Growing Equity Mortgage: A type of mortgage where the payments increase overtime, but the extra money is applied to the principle of the loan in order to pay off the loan faster.
Hazard Insurance: Insurance that pays to repair a property in the case of damage from fire, ice, floods, storms, acts of vandalism, and more. This type of insurance is usually required by your mortgage lender and can be included in your homeowners insurance policy.
Home Loan Guarantee Program: A program within the Department of Veterans Affairs that guarantees a loan for veterans to purchase homes. Because the loans are partially guaranteed by the VA veterans are able to get home loans easier and under better terms. This is one of many benefit programs offered to veterans.
Home Warranty: A warranty that covers and problems that occur with your home within a specific amount of time. Some real estate companies offer a one year home warranty when you purchase your home that covers main systems like the heating, ventilation, air conditioning, appliances, and more. If you build a new home the builder offers a limited warranty on the home.
Homeowners Insurance: Insurance that covers damage to your property or home. This type of insurance also covers your personal belongings and contents of your home. Homeowners Insurance is required by your mortgage lender.
HUD- The Department of Housing and Urban Development: A government agency that aids people with purchasing homes, getting financing for a home mortgage, counseling and education for the home buying process, and much more.
HUD-1 Form: A list of the purchases and transactions involved when you buy a home through The Department of Housing and Urban Development and The Federal Housing Authority.
Hybrid Mortgage Loan: A loan to purchase a home that combines an adjustable rate mortgage with a fixed rate mortgage. Most hybrid mortgages have a fixed interest rate for the first ten years and then the interest rate becomes adjustable. This type of mortgage is good for people who are not planning to live in the home during the adjustable interest rate period or who plan to refinance the mortgage before the interest rate begins to rise.
Income: Any money that you receive in a given period of time. For the purposes of obtaining a mortgage you should consider your steady monthly income when determining your affordable mortgage payment amounts. You may not want to include income such as child support, interest on investments, or other variable amount types of income.
Interest: The money that is paid to a lender for the use of their money. In the case of a mortgage the interest is a percentage rate over a certain period of time paid to the mortgage company.
Interest Only Loan: A mortgage loan that allows the borrower to pay only the interest on the mortgage for a set amount of time before they start paying towards the principal. People use this type of mortgage when they expect an increase in income in the future, do not plan to live in the home for a long period of time, or plan to refinance the mortgage on the home once their current mortgage begins requiring them to make larger payments. Often times once the interest only period is over the mortgage converts to an adjustable interest rate which is also undesirable if you plan to stay in the home for a long period of time.
Interest Rate Cap or Interest Rate Ceiling: The highest amount of interest that can be charged according to a legal agreement. With adjustable rate mortgages there is an interest rate cap that allows the mortgage lender to raise the interest rate to a certain point, and then they are not allowed to raise the rate any further.
IRRRL- Interest Rate Reduction Refinancing Loan: This is a VA mortgage loan that takes mortgages in the VA Home Loan Guarantee Program and allows the owner to refinance the loan for a lower interest rate. The loan can be an adjustable rate mortgage refinanced to a fixed rate mortgage or a fixed rate mortgage refinanced to a fixed rate mortgage as long as the interest rate is lower and your monthly mortgage payment decreases. The VA does not allow you to take cash out of an IRRRL, but you may finance to pay for energy efficient home improvements or to take advantage of lower interest rate trends in the market.
Joint Tenancy: When more than one person lives in a home and they both have equal rights to ownership of the property. Usually this is in the case of marriage or co-ownership and each of the entitled property owners has the right of survivorship.
Late Charge or Late Fee: An extra amount of money you have to pay when you are late making your mortgage payment. This also may be called a penalty fee or penalty payment.
Lease-Purchase Agreement: A way to purchase a home by first renting the home for a set amount of time and then purchasing the home. This is also called rent-to-own and is extremely useful to people who need time to repair their credit or want to wait for lower interest rates before obtaining a mortgage loan.
Lease-Purchase Mortgage Loan: A way that is available to purchase homes by first leasing the home and then purchasing the home for low income families. This option is offered by Fannie Mae and the families lease the property from the not for profit organization with the opportunity to purchase the home later. Part of the monthly rental payments are saved in order for the renters to have down payment money at the end of their lease in the case they want to purchase the home.
Lender: The company that loans you the money to purchase a home.
Lender Appraisal Processing Program: A program through which the Department of Veterans Affairs allows VA approved lenders to conduct their own appraisals of value on a property. The VA may also require one of their own appraisers to also appraise the property in order to determine value for the VA Home Loan Guarantee Program.
Lien: The legal right to ownership of a property or part ownership of a property. In the case of a mortgage loan on your home the lender has the legal right to the amount of money your home is worth up to what you still owe as your principal balance. Any lien on a home is paid when the home is sold.
Lifetime Cap: With an adjustable rate mortgage this is the highest interest rate than can be charged over the life of the loan.
Loan: When money is given to a second party with the legal stipulation that the second party pay back that money in accordance with the terms of the agreement.
Loan Approval: When the lender agrees to loan money to a borrower based on information like income, debt, assets, employment, credit worthiness, and more.
Loan Servicing: The maintenance required for any given loan. In the case of a mortgage loan with an escrow account the servicing is needed to take the monthly mortgage payment and split the money between the principal, interest, and the escrow account. Then when the time comes for the homeowners insurance and property taxes to be paid the loan servicer is responsible for making those payments on time. This fee is usually added to your monthly mortgage payment.
Loan Guarantee Entitlement: The amount of money that you can get from the VA for guaranteeing your home mortgage loan.
LTV- Loan to Value Percentage: The amount of a home you own as compared to the amount of a home you still owe to a mortgage lender expressed as a percentage. For instance, if you put 25% down on a home then your Loan to Value Percentage is 75% because that is what you still owe to the mortgage lender.
Lock-In: An agreement with a mortgage lender that a specific interest rate will be guaranteed or locked in as long as the borrower closes within a certain period of time.
Market Value: The value you home will sell for depending on the current real estate market trends in your area.
Mortgage: A loan that allows you to purchase a home in return for monthly payments over a set period of time that pays back the loan with interest.
Mortgage Banker: A company that makes mortgage loans to people in order to sell the mortgages for a profit. Once the mortgage is closed then they will sell it on the secondary loan market to another company who wants to invest in the mortgage in order to get the interest money.
Mortgage Broker: A person who takes the financial and credit information of people who are looking for a mortgage lender and facilitates the process by shopping for a mortgage loan for the borrower. You will usually pay a commission fee for the services of a mortgage broker, who in essence is the 'middle man' of a mortgage loan transaction.
Mortgagee: A term used in mortgage loan paperwork that refers to the lender.
Mortgage Insurance Premium: The amount of money you pay either monthly included as part of your mortgage payment, or annually out of an escrow account that insures your mortgage from default. The FHA requires mortgage insurance for any borrower that is financing a loan through them and puts down less than 20% of a down payment of the home.
Mortgage Interest Rate: The percentage of interest you agreed to pay in your mortgage loan terms.
Mortgage Margin: For adjustable rate mortgages this is the set amount of how much your interest rate can increase at each adjustable period of time. For instance, if your loan agreement states that your interest rate can not increase more than 1/2% in any 6 month period of time then that is your mortgage margin.
Mortgage Note: The legal paperwork of a mortgage loan that specifies the terms of the loan which include the monthly mortgage payment amount, the interest rate, the amount of the loan, and the length of time the term of the loan is for.
Mortgagor: In the legal paperwork of the mortgage loan this refers to the borrower.
Negative Amortization: In the case that the monthly mortgage payment is not enough to cove r the interest and principal amount due on the loan then whatever the negative difference is will be added to the loan. This means that the amount you owe will increase instead of decrease. A good example is a graduated Payment Mortgage in which the monthly payments start out low and grow overtime, so in the beginning the payments may not be high enough to cover the principal and mortgage payments, but the difference is added to the total principal of the loan which you will pay off in time as the monthly mortgage payments gradually increase.
Notice of Default: In the case a borrower goes into default the mortgage lender will send them this notice to inform them that they have broken the mortgage contract agreement. At this time the borrower should contact the mortgage lender to work out a forbearance or terms of repayment for the missed mortgage amount.
Origination Fee: The fee that the lender charges the borrower for the services that are required in order to create a mortgage loan agreement. This usually includes underwriter costs, legal fees, and other fees associated with originating the mortgage loan.
Owner Financing: In cases where the buyer can not get a mortgage loan due to lack of down payment or derogatory credit the seller may make arrangements to finance the loan for the buyer in which case the buyer would sign an agreement with the seller as to the loan terms.
Payment Cap: In some adjustable rate mortgages there is a limit as to how high a monthly mortgage payment can increase even when the interest rate is increased. For instance, there may be a payment cap that does not allow the monthly payment to go over $800, but the mortgage company has increased the interest rate to where the payments should be $855 per month. In cases such as these the additional money owed would be added to the principal of the loan which creates negative amortization.
PITI- Principal, Interest, Taxes, and Insurance: These are the four monthly costs that are combined into a mortgage payment. Some mortgage loan agreements do not include these additional housing costs, so make sure you know what your monthly mortgage payments include before you choose a loan.
PUD- Planned Unit Development: An association in a neighborhood of homes that shares some common property in exchange for monthly or annual fees for the association to maintain the common property. An example of a PUD is a condominium development where each homeowner pays a monthly maintenance fee that is used for the upkeep of the property like grass mowing and snow removal, and the upkeep of any shared facilities like playgrounds, tennis courts, or pools.
Points: Usually a point is 1% of the mortgage loan amount that is paid as an upfront finance charge. Points are paid in order to negotiate lower interest rates on a loan. Sometimes if you pay more points at the beginning of your mortgage when you originate the agreement you can save a lot of money overtime in unpaid interest.
Power of Attorney: A legal document that gives one person the full legal right and authority to act for another person.
Prepayment Penalty: The fee that is paid to a lender in the case you pay off your mortgage loan before a certain amount of time has gone by. This penalty may or may not be written into a mortgage loan agreement. It is designed to deter the borrower from refinancing the loan so that the lender is guaranteed a certain return on their investment. If you are financing through the VA Home Loan Guarantee Program you can not have a prepayment penalty written into your mortgage contract.
Pre-purchase counseling: First time buyers should obtain counseling on the process of purchasing a home and obtaining a mortgage prior to beginning the process. This is done in an attempt to allow the borrower the knowledge to make informed decisions through the purchasing process. In the case of FHA loans you are required to obtain pre-purchasing counseling before you can get a loan.
Prequalification: A borrower can give all of their financial and credit information to a lender who will use this information to inform the borrower what type of loans they qualify for and how much of a monthly payment they can afford based on their personal situation. This way the borrower knows exactly what price range they can shop for a home in and is assured they can get a mortgage loan.
Principal: The amount of money that is loaned to a borrower. The principal loan amount decreases every time a mortgage payment is made for most types of mortgages.
PMI- Private Mortgage Insurance: In the case the borrower puts less than 20% of a down payment when purchasing a home the lender usually requires mortgage insurance until the amount of equity is built up to or surpasses 20%.
Promissory Note: The legal document that a borrower and his or her spouse must sign that agrees to pay the mortgage loan back to the lender.
Property Taxes: The amount of money you pay to the local government depending on the assed value of your home and the local cost of levies and tax rates. This payment may be part of your mortgage payments.
Purchase and Sale Agreement: An agreement between the seller and buyer of a property that states the terms of the sale of the home.
Purchase Contract: The contract that is signed once the buyer and seller finish negotiating the terms of the sale of the home.
Qualifying Ratios: Lenders look at asset-to-debt and other ratios in order to determine exactly how much the borrower can financially afford as a maximum mortgage amount. The more you owe in debt the less you will be able to borrow because the lender considers your total monthly expenses when determining how high of a mortgage payment you can afford. This is why it is important to rid yourself of as much unnecessary debt, like unsecured credit card debt, as possible before you apply for a mortgage loan to purchase a home.
Rate Lock: A specific fixed interest rate for a specified amount of time that is guaranteed by the mortgage lender.
Real Estate Agent: A licensed professional who can help with the procedures involved with the purchase or sale of real property. Real estate agents accept a percentage of the sale price of a home as their commission payment for their services.
RESPA- Real Estate Settlement Procedures Act: This states that borrowers must be informed in advance of all of the charges for closing costs of the loan. There is usually a meeting where the borrower sits down with the lending agent while the agent reviews all of the associated costs and fees of the mortgage loan.
Real Property: Any land, improvements to land or structures, and physical structures or buildings that is entitled to by ownership of a title or deed.
Refinancing: Getting a new mortgage loan that replaces and pays your existing mortgage loan in full. This is like getting an entirely new mortgage loan which is usually done in order to lower interest rates on a current mortgage loan or take cash out of the equity in a home. If you have a VA home loan you can refinance with the VA through their Cash-Out Refinance option or their Interest Rate Reduction Refinancing Loans, IRRRLs, which allow veterans to refinance their current VA mortgage to a lower interest rate in order to save them money and lower their monthly payments.
Rent and Mortgage Payment History: A lender will look into the history of other dwellings you have inhabited in order to see if you make your payments on time and are credible in the area of housing payments. They will contact past landlords or look at your credit history from any previous mortgages to make sure you were never delinquent.
Rescission Agreement: The legal document that both parties sign in order to cancel a previously signed legal contract. In the case of real estate transactions there may have been a purchase agreement signed and then the buyer or seller changed their minds about the home then a rescission agreement would have to be signed.
Residual Income: What is left of your earnings after you have paid you fixed expenses, variable expenses, and a future mortgage payment. Lenders look at this in order to determine how much of a monthly mortgage payment you can afford.
Second Mortgage: Another loan on the equity of a home. The second mortgage takes secondary authority to the first mortgage on the lien to the home. When the home is sold or in the case of a default or foreclosure the first mortgage lien holder is paid first and the second mortgage lien holder is paid later. Second mortgages usually have higher interest rates because they are higher risks because in the case of a foreclosure the lender may not fully be able to redeem their investment.
Secondary Mortgage Market: Where mortgages are purchased and sold by companies.
Seller Concessions: The seller may put a valuable asset into the purchase agreement for the buyer. An example of a seller concession is leaving all of the appliances in the home as an additional benefit to the buyer.
Seller Take Back: When the seller agrees to finance the property for the buyer which could also include assuming a mortgage contract.
Settlement: Also known as the closing of the loan, where the title of the home is transferred to the new owner and the sale of the property is finalized.
Settlement Sheet: A document that lists all of the details of the sale of the home. A real estate agent will normally go over this document with the buyer ans seller and explain the fees or costs including previous years property taxes, points, insurance, title insurance, commission fees, loan and financing fees, and more.
Survey: The land layout of a property that shows the exact legal boundaries of the property. This is done in order for the buyer to know their legal property boundaries and to make sure there are no legal property boundary disputes with adjacent property owners.
Statement of Service: This document shows your service record including when you entered the service, how long you served, and with what branch you served, and is usually provided by the military unit you served with.
Tenancy by Entirety: This is a legal entitlement to a property to a spouse in the case the other spouse dies.
Tenancy in Common: This is a legal entitlement to only your portion of a property in the case the other property owner dies.
Title: Also called a deed. This is the legal document that specifies who owns a particular property.
Title Company: A company that researches titles, the history of titles, liens, and encumbrances in order to make sure all entitlement to a property are fulfilled before the tile can be transferred to a new owner.
Title Insurance: A protection that you pay for when you purchase a home in the case there is a disputes over the ownership rights to a property so that the buyer and the lender are protected.
Title Search: A title company will perform this service to make sure there are no legal rights to a property that have not been settled before a title can be transferred to a new owner.
Transfer Tax: When a title is transferred to a new owner there are state and local taxes that need to be paid.
Truth in Lending Act: A government act that insures all lenders fully disclose the costs associated with the money being borrowed.
Underwriter: A person employed by a lending company who evaluates a borrower's loan application and all of the paperwork involved to determine if the borrower can receive the loan or not.
Variable Rate: Also called an adjustable rate, it is an interest rate that changes. The changes in interest rates usually occur with fluctuation in the current market.
VA Eligibility Center: Where veterans submit their requests for a Certificate of Eligibility. Once a VA form 26-1880 and a form DD 214 have been completed a veteran can either contact a VA approved lender and submit this information electronically through the ACE system or send the completed forms to the VA Eligibility Center at:
VA Loan Eligibility Center
PO Box 20729
Winston-Salem, NC 27120M
VA Form 26-1880: The request for Certificate of Eligibility form. Veterans must complete this form in order to be eligible for many VA benefits including the VA Home Loan Guarantee Program. You can find a copy of the VA Form 26-1880 by going to http://www.vba.va.gov/pubs/forms/vba-26-1880.pdf
Variable Rate: Also known as an adjustable rate, it is an interest rate that can change over time. Usually variable or adjustable interest rates can only change a specified amount within a certain amount of time. Variable rates also usually have a cap to prevent the interest rate from going to high and a floor to prevent the interest rate from going to low. The terms of a variable or adjustable interest rate are found in the mortgage loan contract.
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