Annual Percentage
Rate/APR: APR includes the origination fee and other finance charges in addition to the interest on the mortgage for the annual interest rate. The APR will be higher than the "Locked-In" Interest Rate due to the additional fees included in this calculation. The APR is a good "apples-to-apples" comparison tool for evaluating the annual cost per loan with the different mortgage program types.
Appraisal: An appraisal is used to determine the value of a home. The appraiser utilizes comparable homes sold in a particular area to help determine the value. Types of appraisals include: Full Appraisal, Tax Record Appraisal, Drive-by Appraisal.
Brain-damage: What prospective borrowers will avoid if they get all of the documentation requested by their mortgage professional organized and delivered in a timely manner.
Closing: The meeting between Buyer, Seller, Title Company's Escrow Agent, Real Estate Agents and Mortgage Lender Professional to finalize sale of real estate between Buyer and Seller.
Closing Costs: Costs for transferring the title and deed of a real estate from the Seller to the Buyer for proper recording of real estate ownership.
Credit Report: Reflects the payment history of a person, referenced/filed by their full name, address and Social Security Number. This will also reflect Public Records for any bankruptcy, liens or judgments. It's not unusual for credit reports to contain outdated or incorrect information, and it's important that prospective mortgage borrowers scrutinize all three of their own reports at least 90 days prior to beginning the actual application process. See Equifax, Experian and TransUnion for more information.
DTI or
Debt to Income Ratio: Projected house payment (principle, interest, taxes & insurance) plus all installment and revolving debts, divided into the borrower's gross income.
Escrow: An account set up during the mortgage lending process (to hold for future distribution) the Buyer's monies for payment of future property taxes and one year's worth of (projected) homeowner's insurance premiums.
Equifax: One of the world's largest credit reporting agencies, headquartered in Atlanta, GA. Consumers/prospective home buyers need to review their personal credit reports on file with the company at least 60-90 days prior to starting the home buying/financing process to allow ample time to correct incorrect or outdated information. Equifax provides two types of credit reports, their
basic
report and an
enhanced
version that contains the consumers actual credit score, also known as a
FICO score.
The basic report costs $8-$9 on average; the enhanced version in the $13 range. Consumers would be wise to spend the extra money and buy the credit score enhanced version. Go to their
website
and order on-line directly: or call: (800) 685-1111.
Also worth noting...you might get a freebie! If you've been declined credit, insurance, housing or employment based on information contained in your credit report, you're eligible under federal law to obtain a free copy of your credit report. The "turn down" letter must state which credit reporting agency provided them with the information on which they based their decision, as well as a phone number or website to contact to get your free report.
Equity: The value of the net worth in a particular property. For example...a house is appraised for $100,000 and the total loans/liens against the property total $60,000, the remaining $40,000 difference is the amount of equity on that property.
Experian: One of the world's largest credit reporting agencies, headquartered in Orange, CA with a major consumer data outpost in the Dallas, TX suburb of Allen. Consumers/prospective home buyers need to review their personal credit reports on file with the company at least 60-90 days prior to starting the home buying/financing process to allow ample time to correct incorrect or outdated information. Experian provides two types of credit reports, their "basic" report and an
enhanced
version that contains the consumers actual credit score, also known as their "Scorecard" score. The basic report costs $8-$9 on average; the enhanced version in the $13 range. Consumers would be wise to spend the extra money and buy the credit score enhanced version. Go to their
website
and order on-line directly: or call: (800) 787-6864
Also worth noting? You might get a freebie! If you've been declined credit, insurance, housing or employment based on information contained in your credit report, you're eligible under federal law to obtain a free copy of your credit report. The "turn down" letter must state which credit reporting agency provided them with the information on which they based their decision, as well as a phone number or website to contact to get your free report.
Interest: The cost paid to the Lender for the financing of the purchase of the real estate.
Loan Origination: The fees for mortgage financing services.
LTV or Loan To Value Ratio: The amount of the Loan in relation to the appraised value of the property. Example: Loan Amount of $80,000 vs. Appraised Value of the home $100,000 = LTV of 80%
Points (Discount): Prepaid interest on the mortgage loan charged by the Lender. The points charged are usually in the 1% (of the total loan amount) range, but can be higher for specialty loans, such as Reverse Mortgages. Brokers or lenders may charge excessive points on deals if you have a checkered credit past; be wary of dealing with companies that attempt to penalize you by loading up in this area.
Prepaids: These are the property taxes, homeowner's insurance and interest paid outside of the closing or included in the fees of the mortgage loan.
Principal: The actual balance (amount) of the mortgage owed, not including the interest.Private Mortgage Insurance (PMI): Insurance provided (benefiting the Lender) protecting them from potential non-payment of the mortgage loan. PMI is utilized when the mortgage loan exceeds 80% [or the buyer has less than 20% cash or equity in the deal].
Survey: This is a measurement of the real estate reflecting the point, dimensions, easements, gas lines and standing structure(s) on the land or lot.
Title Commitment: Analysis from the Title Company showing the following:
- Amount of Proposed Loan
- Legal Description of Property
- Schedule A - Vesting - Name listed on Title, Prospective Lender
- Schedule B - Survey Exceptions, etc.
- Schedule C - Existing Liens of Record, Easements, etc.
Title Insurance: Insurance policy issued to protect both the Buyer and the Lender against errors in legal ownership of the real estate.
TransUnion: World's third-largest credit reporting agency, the privately-owned company is headquartered in Chicago, IL, with a major consumer report processing outpost located in Wichita, KS. Consumers/prospective home buyers need to review their personal credit reports on file with the company at least 60-90 days prior to starting the home buying/financing process to allow ample time to correct incorrect or outdated information. TransUnion provides two types of credit reports, their "basic" report and an "enhanced" version that contains the consumers actual credit score, also known as their
Credit Score Plus FICO Score
version. The basic report costs $8-$9 on average; the enhanced version in the $13 range. Consumers would be wise to spend the extra money and buy the credit score enhanced version. Go to their
website
and order on-line directly: or call: (800) 888-4213
Also worth noting? You might get a freebie! If you've been declined credit, insurance, housing or employment based on information contained in your credit report, you're eligible under federal law to obtain a free copy of your credit report. The "turn down" letter must state which credit reporting agency provided them with the information on which they based their decision, as well as a phone number or website to contact to get your free report.
Underwriting: The review process of a prospective mortgage borrower's financial situation and credit history; also analyzes the underlying value of the actual property being purchased/financed.