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HOME LOAN/MORTGAGE TERM GLOSSARY
Check out our Homes for Sale page to see what's available in our markets! Adjustable Rate Mortage (ARM)
A mortgage having an interest rate that can change at designated intervals, based on a financial index; UnitedOne offers this type of home loan.
Amortization
The gradual reduction of the principal of a mortgage by scheduled installment payments
Annual percentage rate (APR)
A rate that reflects the actual annual cost of a loan, incorporating the loan interest rate, private mortgage insurance, points and fees
Application fee
The amount a lender charges for processing a loan application; usually nonrefundable. UnitedOne does not charge an application fee.
Appreciation
Increase in value of a property
ARM
See adjustable-rate mortgage
Assessed value
The value placed on a property by local officials for taxation purposes (may or may not equal appraised value)
Appraised value
The value placed on a property by a professional appraiser for determining the market value of a house (may or may not equal assessed value)
Balloon Loan
A mortgage having a fixed interest rate for a designated amount of time. After that time the remaining loan balance must be paid in full or refinanced by the borrower.
Biweekly mortgage
A mortgage in which payments are made every two weeks instead of monthly, thus making the equivalent of 13 monthly payments a year (there are 26 two week periods) instead of 12. Allows more rapid payment of mortgage and thus less interest paid over life of the loan.
Cash reserve
A requirement of some lenders that the buyer have enough cash left after closing to make the first two mortgage payments
Clear title
A title to property that is free of liens and legal questions as to ownership
Closing
The legal procedure in which the transfer of property becomes final. Also called settlement
Closing costs
Costs incurred by the buyer and seller in transferring ownership of a property
Commitment letter
A lender’s formal notice to a borrower that a loan has been approved; states the terms and conditions of the loan
Condominium
A form of property ownership in which the owner holds the title to an individual dwelling, plus interest in common areas of a multi-unit project
Condo fee (or homeowners association dues)
The monthly maintenance fee condominium unit (or planned unit development) owners must pay to cover common-area expenses
Contingency
A condition that must be met before a contract is legally binding
Conventional mortgage
Any mortgage that is not insured or guaranteed by the federal government
Convertible ARM
An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions
Co-signer
A person who signs and assumes joint liability with another person for repayment of a debt
Covenant
A clause in a mortgage that obligates or restricts the borrower and which, if violated, can result in foreclosure
Credit report
A report of an individual’s credit history prepared by a credit bureau and used by a lender to determine a loan applicant’s creditworthiness
Deed
The legal document conveying title to a property
Default
To fail to make mortgage payments on a timely basis or to comply with other mortgage conditions
Delinquency
Failure to make a loan payment on time; the loan is not yet in default
Depreciation
A decline in property value; opposite of appreciation
Downpayment
The part of the purchase price of a home which the buyer pays in cash up front, not included in the loan
Earnest money
A deposit given to the seller by the buyer when submitting an offer to show serious intent about buying property
Equity
The difference between the market value of a property and the owner’s outstanding mortgage balance; measures the degree of ownership. For example, if your home’s market or appraised value is at $125,000 and you owe $100,000 on your mortgage, you then have $25,000 in equity.
Escrow
The holding of documents and money (such as a deposit) by a neutral third party prior to closing. Also an account held by the lender into which a homeowner pays money for taxes and insurance
FHA loan
A mortgage insured by the Federal Housing Administration. Down payment may be as little as 3 percent, but purchase price is limited
Fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire life of the loan
Flood insurance
Insurance that will be required if a property is in a federally designated flood hazard area
Foreclosure
The legal process by which a mortgaged property may be sold when a mortgage is in default
Good faith estimate
A written estimate of closing costs provided by a lender within three days after someone applies for a loan
Hazard Insurance
Insurance to protect the homeowner and lender against physical damage to property from fire, wind, vandalism and other hazards
Home equity loan
A loan based on the borrower’s equity in his or her home; also called second mortgage
Homeowner’s insurance
An insurance policy that combines hazard insurance and liability coverage
Interest
The cost for borrowing money
Lien
A legal claim against a property that must be paid when a property is sold
Loan-to-value ratio (LTV)
The ratio between the amount of the mortgage and the total value of the property. For example, if your home is valued at $100,000 and your current mortgage balance is $80,000 your loan to value ratio would be 80% (80,000/100,000=.80 which is 80%).
< /FONT> Lock-in-rate
An interest rate the lender guarantees to the borrower provided the mortgage is closed within a certain time period. The borrower pays a fee for the guarantee.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt
Mortgage note
A legal document obligating a borrower to repay a loan at a stated interest rate during specified time period; this is secured by a mortgage
Mortgagee
The lender in a mortgage agreement
Mortgagor
The borrower in a mortgage agreement
Offer to purchase
A formal document in which a buyer proposes to buy a property for a specified amount and under certain conditions. Acceptance by the seller creates a contract binding on both parties, subject to any contingencies
Origination fee
A fee paid to a lender for processing a loan application, stated as a percentage of the mortgage amount, or points. Due at closing
Perc test
A test to determine if a property is suitable for a septic tank
PITI
Stands for principal, interest, taxes and insurance—the components of a monthly mortgage payment
Points
A one-time charge by the lender to increase the yield of a loan. Paying points can sometimes lower the loan rate for the borrower. Equal to one percent of the loan amount and paid at closing
Prepayment penalty
A fee some lenders charge to a borrower who pays off a loan before its due date. UnitedOne Credit Union does not charge prepayment penalties for loans.
Prequalification
The process of determining how large a loan a prospective homebuyer can qualify for; this procedure is done before actually applying for the loan. There is no charge to do this at UnitedOne.
Principal
The amount originally borrowed. Also that amount of the monthly mortgage payment that reduces the outstanding balance of a mortgage
Private mortgage insurance (PMI)
Insurance provided by a non-government insurer to protect a lender against loss if a borrower defaults. Usually required if down payment is less than 20 percent
Real estate agent
A person licensed to negotiate and transact the sale of real estate; works on behalf of the seller, unless designated as a buyer’s broker
Real Estate Settlement Procedures Act (RESPA)
A federal consumer protection law that requires lenders to give borrowers advance notice of closing costs
Refinancing
The process of obtaining a new mortgage, usually at a lower rate, to repay and replace an existing mortgage
Right of first refusal
An owner’s promise to let someone make the first offer on a property, or to match the amount offered by another party
Second mortgage
An additional mortgage behind the first mortgage on a property. The rights of the second mortgage holder are subordinate to the rights of the first mortgage holder. A second mortgage loan is also called a home equity loan
Survey
A drawing showing the legal boundaries of a property and the location of structures on it
Term of a mortgage
The length of time you are given to repay a loan
Title
A legal document establishing the right of ownership
Title insurance
Insurance to protect the lender (lender’s policy) or the buyer (buyer’s policy) against loss arising from disputes over property ownership
Title search
A detailed examination of the title records to ensure that the seller of a property is the legal owner and that there are no liens or other claims outstanding
Transfer tax
State or local tax payable when title passes from one owner to another
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other chargers
Underwriting
The process of evaluating a loan application to determine the lender’s risks
VA loan
A loan guaranteed by the Veterans Administration, requiring a small downpayment or no downpayment. In Wisconsin, there are Federal and State VA loan options. UnitedOne Credit Union offers both types.
Please feel free to ask a UnitedOne Credit Union Mortgage Specialist for clarification on any mortgage term you do not understand.
For a complete listing of mortgage loan programs available at UnitedOne Credit Union, click here. |
