Amortize Payoff off a debt in installments which includes both principal and interest.
Application Fee A fee charged by the lender or broker for the loan application.
Appraisal A report that estimates the value of real estate.
Annual percentage rate (APR) The calculated cost of credit as a yearly rate and shown as a percentage. It is often higher than the interest rate because it incorporates prepaid finance charges that are not interest.
Balloon payment A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments. It is designed to occur when the regular payments do not pay off all interest and principal owing (not fully amortizing) on the loan over the term of the loan.
Broker Agreement (Mortgage Broker Agreement) A contract between a borrower and a mortgage broker. It describes what the broker will do for the borrower, and the terms of the agreement, including compensation.
Broker Compensation or Fee The amount of money the broker will receive for finding a loan for a borrower. This may be an amount paid by the borrower, an amount paid by the lender or a combination of the two.
Cash-out Refinancing Loan A loan that refinances a prior mortgage and that provides additional cash to the borrower.
Closing The time when loan and mortgage documents are formally signed and the loan transaction is completed. Sometimes called "Settlement."
Closing Costs A general term to describe the fees that a borrower will pay at closing. Sometimes called "settlement fees."
Credit Report This is a report which is generated by a credit reporting agency. It is supposed to show accurately the history of your on-time and late payments on mortgages, credit cards, rent, utilities, and other debts.
Deed of Trust In some states loans are secured by means of a document called a deed of trust, instead of a mortgage document.
Document Preparation Fee An amount of money that you may be charged for the preparation of mortgage loan documents.
Equity This is the dollar amount of your home that you really own. You can calculate your equity by taking the market value of your home and subtracting out the debt that is secured by your home.
Fees This is money you pay or is charged to you up front to get a mortgage loan. You may pay fees in cash or finance them (or a portion of them) as part of the loan. If you finance fees, your loan balance will be higher and your equity will be lower.
Finance Charge The finance charge is a disclosure that appears on the Truth in Lending Act Disclosure Statement. It is intended to show the cost of your loan as a dollar amount. It includes (1) interest that will be charged over the life of the loan and (2) some up front fees (prepaid finance charges). Prepaid finance charges include such items as mortgage broker fees; lender fees; points; and some closing agent fees.
Fixed Rate Loan A loan where the interest rate does not change during the term of the loan.
Flood Certification Fee A fee charged to determine if the property lies in a flood zone and whether flood insurance is required.
Good Faith Estimate This document lists the estimated fees you will have to pay to get the loan. It also identifies who is expected to provide services and receive fees in connection with your loan, such as credit bureaus, appraisers, and closing agents.
Government Recording Fees and Taxes Fees and taxes required to be paid to the local government where your mortgage documents are filed.
Home Equity Loan A loan made to a current homeowner that is secured by the equity in the home.
Homeowner's/Hazard Insurance Homeowner's or Hazard Insurance is insurance required to protect the mortgage lender against possible damage to your home. A borrower must obtain this insurance and bring proof of its existence to the loan closing.
Interest Rate Cost of borrowing money expressed as a percentage of the amount borrowed.
Introductory Rate Some loans have a lower introductory interest rate, which is in effect for a limited time. At the end of the introductory period, the interest rate will increase.
Jumbo Loans Loans which exceed the Fannie Mae guidelines for loan size and amount. Jumbo loans may have different guidelines from a "conforming" loan.
Lien A legal claim against a home. Common types of liens include a mortgage, tax lien or judgment lien.
Loan Approval/Commitment A lender's agreement to make a loan on particular terms, including interest rate, fees and charges.
Loan Term Length of time until your loan is due and payable.
Mortgage A mortgage is a pledge in which you agree to put up your home as security for a loan. The mortgage secures the Promissory Note, in which you promise to repay the loan at a certain date.
Mortgage Broker A person or company that obtains a mortgage loan for the borrower from another lender. A mortgage broker will not always be representing the borrower and will not necessarily be looking after the borrower's best interests.
Mortgage Insurance Insurance that may be required when a loan is greater than 80% of the value of the home. This insurance protects the lender in the event a borrower fails to make his or her loan payments. The borrower ordinarily pays the cost of MI or PMI, in the form of monthly premiums added to the mortgage payments.
Points A fee charged by the lender as additional compensation for making the loan. One "point" is equal to 1% of the principal amount of the loan.
Promissory Note A legal contract in which the borrower promises to pay back the loan. The "promissory note" sets forth the terms and conditions that apply to the loan repayment, such as interest rate, when payments are due, where payments are made, what happens if payments are not made, etc.
Rate Lock Refers to the agreement between the borrower and the lender or broker that as long as the loan is closed within a certain period of time (for example, 30 or 60 days), the interest rate on the loan will be set (locked) at an agreed-upon rate. A "rate lock" agreement must be in writing or it will be unenforceable.
Recording Fees Fees charged by the local government to record loan documents (for example, the mortgage). These fees will be charged to the borrower and shown on the Settlement Statement.
Refinance To repay one or more existing mortgage loans by getting a new mortgage loan.
Secondary Mortgage Loan A mortgage loan that is in addition to a mortgage that already exists on the home.
Settlement The time when loan and mortgage documents are formally signed and the loan transaction is completed. Sometimes called "Closing."
Survey A drawing or map showing the precise legal boundaries of a property and other physical features, prepared by a registered land surveyor
Term The period of time during which loan payments are made. At the end of the loan term, the loan must be paid in full.
Underwriting Fee The fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan. An underwriting fee may be charged to the borrower and shown on the Settlement Statement.