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Glossary of Terms

A

Acceleration Clause

A common provision of a mortgage or note providing the holder with the right to demand that the entire outstanding balance is immediately due and usually payable in the event of default.

Accrued Interest

Interest earned but not yet paid.

Adjustable Rate Mortgage Loans (ARM)

Loans with interest rates that are adjusted periodically based on changes in a pre-selected index. As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. These mortgage loans must specify how their interest rate changes, usually in terms of a relation to a national index such as (but not always) Treasury bill rates. If interest rates rise, your monthly payments will rise. An interest rate cap limits the amount by which the interest rate can change; look for this feature when you consider an ARM loan.

Adjustment Interval

The length of time between changes in the interest rate or monthly payment on an ARM loan.

Agreement of Sale

Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Alternative Documentation

A method of documenting a loan file that relies on information that the borrower is likely to be able to provide instead of waiting on verification sent to third parties for confirmation of statements made in the application.

Amortization

Repayment of a loan with periodic payments of both principal and interest calculated to payoff the loan at the end of a fixed period of time.

Amortization schedule

A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.

Amount Financed

This figure is used to calculate your APR. It represents your loan amount minus any prepaid finance charges and assumes you will keep the loan to maturity and make only the required monthly payments.

Annual Percentage Rate (APR)

There are two interest rates applied to your loan: the Actual Interest Rate and the Annual Percentage Rate. The Actual Rate is the annual interest rate you pay on your loan (sometimes referred to as the “note rate”), and is the rate used to calculate your monthly payments. The amount of interest you pay, as determined by your Actual Rate, is only one of the costs associated with your loan; there may be others. The Annual Percentage Rate (APR) includes both your interest and any additional costs or prepaid finance charges you might pay such as prepaid interest, private mortgage insurance, closing fees, points, etc. Your APR represents the total cost of credit on a yearly basis after all charges are taken into consideration. It will usually be slightly higher than your Actual Rate because it includes these additional items and assumes you will keep the loan to maturity.

Application

An initial statement of personal and financial information required to apply for a loan.

Application Fee

Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.

Appraisal

An appraisal is a written analysis of the estimated value of your property. A qualified appraiser who has knowledge, experience and insight into the marketplace prepares the document. It demonstrates approximate fair market value based on recent sales in your neighborhood and is required to purchase or refinance your new home or property.

Appraisal Fee

A fee charged by a licensed, certified appraiser to render an opinion of market value as of a specific date. This fee is paid to the outside appraisal company we engage to objectively determine the fair market value of your property. This fee varies based on the location and type of your property.

APR

See Annual Percentage Rate.

ARM

See Adjustable Rate Mortgage Loans.

Assessed Value

The valuation placed upon a property by a public tax assessor for the purposes of taxation.

Assignment

The transfer of ownership, rights, or interests in property by one person, the assignor, to another, the assignee.

Assignment Recording Fee

In many instances, after closing the lender transfers your loan to a specialized loan “servicer” who handles the collection of your monthly payments. The Assignment Fee covers the cost of recording this transfer at the local recording office.

Assumption

A method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property.


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B

Balloon Mortgage

Balloon mortgage loans are short-term fixed-rate loans with fixed monthly payments for a set number of years followed by one large final balloon payment for all of the remainder of the principal. Typically, the balloon payment may be due at the end of five, seven, or ten years. Borrowers with balloon loans may have the right to refinance the loan when the balloon payment is due, but the right to refinance is not guaranteed.

Bankruptcy

A proceeding in a federal court to relieve certain debts of a person or a business unable to pay its debts.

Beneficiary

A person named to receive a benefit from a trust. A contingent beneficiary has conditions attached to his rights, usually someone else must die first.

Bequest

A gift of personal property by will.

Blanket Mortgage

A mortgage that covers more than one parcel of real estate.

Bona Fide

In good faith.

Borrower (Mortgagor)

An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.

Broker

An individual who brings buyers and sellers together and assists in negotiating contracts for a client.

Broker Processing Fee

The fee charged to you to have your file packaged and handed over to a selected lender. There is no broker involved in your Quicken Loans transaction; you deal with Quicken Loans from start to finish.

Buy-Down

When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. Brokers us ally charge a fee or receive a commission for their services.

Buyer's Market

Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.


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C

Call Option

A provision of a note that allows the lender to require repayment of the loan in full before the end of the loan term. The option may be exercised due to breach of the terms of the loan or at the discretion of the lender.

Caps (interest)

Consumer safeguards that limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.

Caps (payment)

Consumer safeguards that limit the amount monthly payments on an adjustable rate mortgage may change. Since they do not limit the amount of interest the lender is earning, these consumer safeguards may cause negative amortization.

Cash Out

Any cash received when you get a new loan that is larger than the remaining balance of your current mortgage, based upon the equity you have already built up in the house. The cash out amount is calculated by subtracting the sum of the old loan and fees from the new mortgage loan. For example, if your existing loan is $100,000, you might refinance it with a loan of $120,000. After you pay off your current loan ($100,000) and any loan-origination costs for the new loan (for example $2,000 in points), you would be left with $18,000 cash out. Cash-out loans may not be available for all types of property.

Cash reserve

A requirement of many lenders that buyer have sufficient cash remaining after closing to make the first two mortgage payments.

Cashier's Check (or Bank Check)

A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.

Ceiling

The maximum allowable interest rate of an adjustable rate mortgage.

Certificate of Eligibility

Document issued by the Veterans Administration to qualified veterans and that verifies a veteran's eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).

Certificate of Reasonable Value (CRV)

An appraisal issued by the Veterans Administration showing the property's current market value

Certificate of Title

Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.

Certificate of Veteran Status

FHA form filled out by the VA to establish a borrower's eligibility for an FHA Vet loan. Obtainable through local VA office by submitting form DD 214 (Separation Paper) with form26-8261a (request for certificate of veteran status).

Chain of Title

The chronological order of conveyance of a property from the original owner to the present owner.

Clear title

A title that is free of liens and legal questions as to ownership of the property.

Closing (or Settlement)

The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Closing Costs

Also known as settlement costs, these costs are for services that must be performed to process and close your loan application. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.

COFI

See Cost of Funds Index.

Collateral

Assets (such as your home) pledged as security for a debt.

Commission

Money paid to a real estate agent or broker for negotiating a real estate or loan transaction.

Commitment

A promise to lend and a statement by the lender of the terms and conditions under which a loan is made.

Comparables

An abbreviation for “comparable properties”; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Compound Interest

Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.

Comparative Market Analysis

An informal estimate of market value that a real estate agent or broker calculates based on sales of comparable properties. An appraisal or a comparative market analysis are the most accurate ways to determine what your home is worth.

Condominium

A real estate project in which each unit owner holds title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. The condominium may be attached or detached. The homeowners association dues are included in the total monthly mortgage payment for qualifying purposes.

Conforming Loan

A mortgage loan that meets all requirements to be eligible for purchase by federal agencies such as Fannie Mae and Freddie Mac. The maximum conforming loan amount is $300,700 for a one-unit property ($451,050 in Alaska, Hawaii and the Virgin Islands).

Consumer Reporting Agency

A company that regularly gathers, files and sells information to creditors to facilitate their decisions to extend credit.

Construction Loan

A short term interim loan for financing the cost of construction. The lender advance funds to the builder at periodic intervals as the work progresses.

Contingency

A condition that must be satisfied before a contract is legally binding.

Contract of Sale

The agreement between the buyer and seller on the purchase price, terms and conditions of a sale.

Conventional Loan

Loans that are not made under any government housing program; they are not subject to the restrictions of government housing programs, such as loan size limits.

Conversion Clause

A provision in some ARMs that allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.

Convertible ARMs

A type of ARM loan with the option to convert to a fixed-rate loan during a given time period.

Conveyance

The document used to affect a transfer, such as a deed, or mortgage.

Cost of Funds Index (COFI)

An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

Covenant

A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's association

Credit Bureau

A credit bureau is a clearinghouse for credit history information. Credit grantors provide the bureau with factual information on how their credit customers pay their bills. The bureau regularly assembles this information, along with public record information obtained from courthouses around the country, into a “file” on each consumer.

Credit Report

A report detailing the credit history of a prospective borrower that's used to help determine borrower creditworthiness.

Credit Score

A statistical method of assessing your creditworthiness. Your credit card history; amount of outstanding debt; the type of credit you use; negative information such as bankruptcies or late payments; collection accounts and judgments; too little credit history and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine your credit score.


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D

Debt-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans).

Deed

Legal document with which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.

Deed of Trust

A legal document that conveys title to real property to a third party. The third party holds title until the owner of the property has repaid the debt in full.

Default

Failure to meet legal obligations in a contract, including failure to make payments on a loan.

Delinquency

Failure to make payments as agreed in the loan agreement.

Discount Points (or Points)

Points are an up-front fee paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount. Points and interest rates are inherently connected: in general, the more points you pay, the lower your interest rate. However, the more points you pay, the more cash you need up front since points are paid in cash at closing.

Document Preparation Fee

Occasionally we use outside companies to prepare the loan closing documents. This fee covers the cost of this service.

Down Payment

The amount of your home's purchase price you need to supply up front in cash to get your loan. For conventional loans, you should strive for a down payment that's at least 20% of your home's value, since lenders generally do not require private mortgage insurance with a down payment of at least 20% of your home's purchase price. (Note, however, that FHA and VA loans have different policies regarding insurance.)

Due-on-Sale Clause

Provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.

Duplex

Owner occupied property for more than one family


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E

Earnest Money

Deposit made by a buyer towards the down payment in evidence of good faith when the purchase agreement is signed.

ECOA

See Equal Credit Opportunity Act.

Encryption

This is a procedure used in order to prevent anyone but the intended recipient from reading the data. There are many types of data encryption, and they are basis of network security. Common types include (Data Encryption Standard) and public-key encryption.

Equifax

One of the three largest credit bureaus in the United States.

Equal Credit Opportunity Act (ECOA)

Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

The difference between the current market value of a property and the total debt obligations against the property. On a new mortgage loan, the down payment represents the equity in the property.

Escrow

A transaction in which a third party acts as the agent for seller and buyer, or for borrower and lender, in handling legal documents and disbursement of funds.

Escrow Account

An account held by the lender to which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses escrow account funds on behalf of the borrower when they become due. Also known as Impound Account.

Escrow Agent

A person with fiduciary responsibility to the buyer and seller, or the borrower and lender, to ensure that the terms of the purchase/sale or loan are carried out.

Estimated Closing Fees

An estimate of the fees that must be paid on or before the closing date by the buyer and/or seller for services, taxes and items necessary to obtain mortgage. These fees will average between 2% and 5% of the loan amount and vary by lender, property location, and type of mortgage.

Experian

One of the three largest credit bureaus in the United States.

Express/Courier Fee

On refinance transactions, we typically use an overnight courier to expedite the payoff of your existing loan. This fee covers the cost of the courier.


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F

Fair, Isaac and Co.

The company that invented credit-scoring software.

Fannie Mae

This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.

FDIC

See Federal Deposit Insurance Corporation.

Federal Deposit Insurance Corporation (FDIC)

Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation's banking system.

Federal Housing Administration (FHA)

A federal agency within the Department of Housing and Urban Development (HUD), which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Fee Simple

Absolute ownership of real property.

Federal Reserve Board

The 7-member Board of Governors that oversees Federal Reserve Banks, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms. also called the Fed.

FHA

See Federal Housing Administration.

FHA Loans

Fixed- or adjustable-rate loans insured by the U.S. Department of Housing and Urban Development. FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans. With FHA insurance, eligible buyers can purchase a home with a down payment of as little as 3% of the appraised value or the purchase price-whichever is lower. FHA borrowers typically are required to participate in a face-to-face meeting with their lender or a government approved mortgage counselor prior to closing on a new mortgage loan. The current FHA loan limits vary depending on home type and home location. To find the most recent limits for your home, consult the FHA Maximum Mortgage Limits web page.

FICO

The most common credit-scoring model used by lenders, it is also known as a Fair, Isaac score. Your FICO can range from 200 to 900. According to this model, the higher your score, the less likely you are to default on your loan.

Filing Fees

The amount charged by public officials in your area for recording your mortgage and other documents.

Finance Charge

Your finance charge is the total of all the interest you would pay over the entire life of the loan, assuming you kept the loan to maturity, as well as all prepaid finance charges. If you pre-pay any principal during your loan, your monthly payments remain the same, but your total finance charge will be reduced.

First Mortgage

A mortgage that is in first lien position, taking priority over all other liens. In the case of a foreclosure, the first mortgage will be repaid before any other mortgages.

Fixed Rate

An interest rate that is fixed for the term of the loan.

Fixed-Rate Loans

Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.

Float

Until you request to secure a lender's quoted interest rate, the interest rate will continue to change, or float, due to market fluctuations. Locking or securing a rate protects you from these potential fluctuations from the time your lock is confirmed to the day your lock period expires. You may choose to float your rate up until the time your lender contacts you to schedule your closing. At this time, an interest rate must be secured in order to prepare your closing documents.

Flood Certification Fee

Federal law requires that you obtain flood hazard insurance if your property lies in a flood zone. As part of our evaluation of your property, we engage a flood determination company to tell us whether or not your house is located in a flood zone. The flood certification fee covers the cost. If your house is located in a flood zone, you will be required to purchase Flood Insurance.

Flood Insurance

Insurance that compensates for physical damage to a property by flood. Typically not covered under standard hazard insurance.

Flood Life of Loan Coverage

Flood zone determinations may change from time to time. The “Life of Loan Coverage” fee allows us to track any changes in your property's flood zone status over the life of your loan.

Forbearance

The act by the lender of refraining from taking legal action on a mortgage loan that is delinquent.

Foreclosure (or Repossession)

Legal process by which a mortgaged property may be sold to pay off a mortgage loan that is in default.

Freddie Mac

This agency buys loans that are underwritten to its specific guidelines. These guidelines are an industry standard for residential conventional lending.


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G

Good Faith Estimate

Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), The lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Government Recording Fee

We pay this fee to your local county recording office for recording our mortgage lien, and in the event of a purchase transaction, the deed that transfers title. Fees for recording vary by county and are set by state and local governments.

Grace Period

Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.

Gross Income

Total income before taxes or expenses are deducted.

Guideline Ratios

There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. Typically, this ratio should not exceed 28%. The second is called the back-end, or bottom ratio, and is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross monthly income. Typically, this ratio should not exceed 36%.

H

Hazard Insurance

Protects the insured against loss due to fire or other natural disaster in exchange for a premium paid to the insurer.

Home Equity Line of Credit

A home equity line of credit is a credit line that is kept open and restored as you pay off what is owed. An equity line of credit also has a high credit limit similar to a credit card that you are allowed to draw upon as needed.

Homeowners Insurance

Just as you insure your automobile to protect against theft and damage, you insure your home. Homeowners insurance is required by all lenders to protect their investment, and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home.

Housing and Urban Development

See HUD.

HUD

Housing and Urban Development, the U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

HUD-1 Uniform Settlement Statement

A standard form that itemizes the closing costs associated with purchasing a home or refinancing a loan.


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I

Impound Account

Also known as an Escrow Account it is an account held by the lender to which the borrower pays monthly installments, collected as part of the monthly mortgage payment, for annual expenses such as taxes and insurance. The lender disburses impound account funds on behalf of the borrower when they become due.

Index

Most lenders generally tie adjustable rate mortgage loan (ARM) interest rate changes to an “index.” An index is a widely published rate such as LIBOR, T-Bill, or 11th District Cost of Funds (COFI). Lenders use these indices to establish the interest rates charged on mortgage loans. For ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.

Initial Cap

Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage can change during the first adjustment period. See Caps.

Initial Rate

The rate charged during the first interval of an ARM loan.

Insurance

The type of insurance(s) required for your loan. Private mortgage insurance may also be required in addition to what is indicated.

Interest

Charge paid for borrowing money.

Interest Rate

The annual rate of interest on the loan, expressed as a percentage of 100.

Interest Rate Cap

Consumer safeguards that limit the amount the interest rate on an ARM loan can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.

Interest Rate Disclosure

A description of the conditions applicable to the processing of your loan as well as the terms of your interest rate agreement with Quicken Loans.


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J

Joint Liability

Liability shared among two or more people, each of whom is liable for the full debt.

Joint Tenancy

A form of ownership of property giving each person equal interest in the property, including rights of survivorship.

Jumbo Loan

A mortgage larger than the limits set by Fannie Mae and Freddie Mac as shown below: Lower 48 States 1 unit $322,700 2 unit $413,100 3 unit $499,300 4 unit $620,500 Alaska and Hawaii 1 unit $484,050 2 unit $619,650 3 unit $748,950 4 unit $930,750

Junior Mortgage

A mortgage subordinate to the claim of a prior lien or mortgage. In the case of a foreclosure, a senior mortgage or lien will be paid first.

L

Late Charge

Penalty paid by a borrower when a payment is made after the due date. Lender The bank, mortgage company, or mortgage broker offering the loan.

Lender Fees

Lender Fees are fees paid to the lender.

Lender Processing Fee

The lender processing fee covers the cost of analyzing your loan application and compiling and packaging the necessary supporting documentation to close your loan.

LIBOR (London Interbank Offered Rate)

The interest rate charged among banks in the foreign market for short-term loans to one another-a common index for ARM loans.

Lien

A legal claim by one person on the property of another for security for payment of a debt.

Lifetime (or Overall) Cap

Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage loan (ARM) can change over the life of the loan. See Caps.

Loan Application

An initial statement of personal and financial information required to apply for a loan.

Loan Application Fee

Fee charged by a lender to cover the initial costs of processing a loan application. The fee may include the cost of obtaining a property appraisal, a credit report, and a lock-in fee or other closing costs incurred during the process or the fee may be in addition to these charges.

Loan Origination Fee

Fee charged by a lender to cover administrative costs of processing a loan.

Loan Term

The period of time between the closing date and the date of your last payment is paid.

Loan-to-Value Ratio (LTV)

The percentage of the loan amount to the appraised value (or the sales price, whichever is less) of the property.

Lock or Lock-In

A lender's guarantee of an interest rate for a set period of time-usually between loan application approval and loan closing. The lock-in protects you against rate increases during that time.


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M

Manufactured Home

A factory assembled residence built in units or sections that are transported to a permanent site and erected on a foundation.

Margin

The percentage difference between the index for a particular loan and the interest rate charged. This is a number predetermined by the lender.

Maximum Cash Out

The maximum amount of money you are allowed to get back from your mortgage transaction based on the loan information provided and the amount of equity you have in your home.

Maximum Monthly Payment

As part of your Mortgage approval, you are given a maximum monthly payment for which you qualify based on the information you provided. This maximum payment is inclusive of the four major components of a typical mortgage payment: taxes, insurance, loan principal and interest.

Monthly Mortgage Payment

A monthly mortgage payment typically contains four parts called the PITI (principal, interest, taxes, and insurance). If you pay your taxes and insurance on your own, you pay only principal and interest to your lender.

Monthly Principal and Interest (P&I) Payment

Principal and interest is the dollar portion to repay the loan. All interest that occurs is calculated on the current balance owing. The principal reduces the remaining balance of a mortgage.

Mortgage

A legal document by which real property is pledged as security for the repayment of a loan.

Mortgage Banker

An individual or company that originates and/or services mortgage loans.

Mortgage Broker

An individual or company that arranges financing for borrowers.

Mortgage Insurance

Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's appraised value. (Note, however, that FHA and VA loans have different insurance guidelines.)

Mortgage Loan

A loan for which real estate serves as collateral to provide for repayment in case of default.

Mortgage Note

Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

Mortgage Term

The length of time given to repay the loan.

Mortgagee

The lender in a mortgage loan transaction.

Mortgagor

The borrower in a mortgage loan transaction.


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N

Negative Amortization

A loan payment schedule in which the outstanding principal balance of a loan goes up rather than down because the payments do not cover the full amount of interest due. The monthly shortfall in payment is added to the unpaid principal balance of the loan.

Non-Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage by another borrower without the prior approval of the lender.

Note

Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

Notice of Default

Written notice to a borrower that a default has occurred and that legal action may be taken.

O

Origination Fee

Fee charged by a lender to cover administrative costs of processing a loan.


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P

Password

A password is a special code made up of letters and numbers that will allow you, and only you, to gain access to your personal account information. The best passwords combine letters (both upper and lower case) and numbers. It is best not to use your address, names of friends or family members, or other easily accessed or guessed words.

Payment Cap

Consumer safeguards that limit the amount monthly payments on an adjustable-rate mortgage may change. Since they do not limit the amount of interest the lender is earning, they may cause negative amortization.

Payment Schedule

The method for disclosing your payment schedule varies by loan type. For fixed-rate loans, the payment schedule indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for VA, FHA, one-time MIP and uninsured conventional loans should also indicate a fixed monthly payment. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates.

Per Diem Interest

Interest calculated per day. (Depending on the day of the month on which closing takes place, you will have to pay interest from the date of closing to the end of the month. Your first mortgage payment will probably be due the first day of the following month.)

Periodic Cap

Consumer safeguard that limits the amount the interest rate on an adjustable rate mortgage (ARM) can change in an adjustment interval. Caps.

PITI

Abbreviation for Principal, Interest, Taxes and Insurance, the components of a monthly mortgage payment.

Planned Unit Development (PUD)

A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an owner's association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners' association must require automatic, non-severable membership for each individual unit owner, and provide for mandatory assessments.

Points (or Discount Points)

Points are an up-front fee paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount. Points and interest rates are inherently connected: in general, the more points you pay, the lower the interest rate you get. However, the more points you pay, the more cash you need up front since points are paid in cash at closing.

Power of Attorney

Legal document that authorizes one person to act on behalf of another.

Pre-approval

The process of determining how much money a prospective homebuyer or refinancer will be eligible to borrow prior to application for a loan. A pre-approval includes a preliminary screening of a borrower's credit history. Information submitted during pre-approval is subject to verification at application.

Prepaid Expenses

Taxes, insurance and assessments paid in advance of their due dates. These expenses are included at closing.

Prepaid Interest

Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.

Prepayment

Full or partial repayment of the principal before the contractual due date.

Prepayment Penalty

A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information.

Pre-qualification

The process of determining how much money a prospective homebuyer will be eligible to borrow prior to application for a loan. Information submitted during pre-qualification is subject to verification at application.

Principal

The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)

Insurance to protect the lender in case you default on your loan. With conventional loans, mortgage insurance is generally not required if you make a down payment of at least 20% of the home's purchase price. (Note, however, that FHA and VA loans have different insurance guidelines.)

Property Taxes

The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal.

Purchase Agreement

Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.


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R

Real Financing Cost

The real financing cost is a consumer-oriented rate that takes into account specific costs, fees, potential rate changes and the projected amount of time you will have the loan. The fees and costs are distributed over the time you plan to be in the house, allowing you to do an apples-to-apples comparison of a variety of loan types. The real financing cost is not the APR. The APR assumes that you keep your loan for the entire term (e.g. 30 years for a 30-year fixed loan) and includes only some of your loan fees. The total financing cost takes into account all of your closing costs associated with your loan and also how long you plan to be in your house.

Real Property

Land and any improvements permanently affixed to it, such as buildings.

Recording

The act of entering documents concerning title to a property into the public records.

Recording Fee

Money paid to a government agent for entering the sale of a property into the public records.

Refinancing

The process of paying off one loan with the proceeds from a new loan secured by the same property.

Rent Free

If you are living with a relative or friend without paying rent, this is considered “rent free.”

Requested Cash Out

The amount of money you requested to get back from your mortgage transaction. Remember, your closing costs and escrows will be subtracted from this amount.

Reverse Mortgage

A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. You may visit http://reversemortgage.org/ for more information pertaining to reverse mortgages.

RESPA

The Real Estate Settlement Procedures Act (RESPA) is a federal law that gives consumers the right to review information about loan settlement costs after you apply for a loan and again at loan settlement. The law obliges lenders to provide these settlement costs only after application.

Right to Rescission

Under the provisions of the Truth-in-Lending Act, the borrower's right, on certain kinds of loans, to cancel the loan within three days of signing a mortgage.


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Sales Agreement

Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Second Mortgage

An additional mortgage placed on a property that has rights that are subordinate to the first mortgage. A second mortgage is a lien in which you are given a lump sum amount that you pay off in installments over a specified period of time. Home improvement and debt consolidation loans are considered second mortgages.

Security

This refers to the address of the property being pledged as security for your loan.

Settlement (or Closing)

The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Settlement Costs

Also known as closing costs, these costs are for services that must be performed to process and close your loan application. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.

Settlement Cost (HUD guide)

HUD - published booklet that provides an overview of the lending process, and that is given to consumers after completing a loan application.

Simple Interest

The interest calculated on a principal sum, not compounded on earned interest.

Single Family

It is a residence that houses one family.

Site Condominium

A detached single-family dwelling characterized as a site condominium by the way it is platted by the builder, however it is still considered a condominium.

Streamline Refinance

FHA has permitted streamline refinance loans on insured mortgages since the 1980's. The streamline refinance refers to the amount of documentation and underwriting that needs to be performed by the lender.

Structural Improvements

A “Structural Improvement” is any permanent improvement made to your property that is not strictly for decorating purposes. Examples include: additions, new flooring, kitchen or bathroom upgrades, new windows and central air. Swimming pools are considered structural improvements only if they are in ground and your property is in a year round warm weather climate.

Subject Property

The home that you intend to obtain the mortgage on is called the subject property.

Survey

A mortgage survey is a bird's eye sketch of your property that shows the boundary lines of your lot, and details any encroachments between you and your neighbors.

Survey Fee

The survey fee covers the cost of the survey.

Sweat Equity

Value added to a property in the form of labor or services by the owner rather than by cash.


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Tax Impound

Money paid to and held by a lender for annual tax payments.

Tax Lien

Claim against a property for unpaid taxes.

Tax Sale

Public sale of property by a government authority as a result of non-payment of taxes.

Tax Service Fee

In some cases, we engage a third party to monitor and/or handle the payment of your property tax bills. The Tax Service Fee covers the cost of this service.

Term

The period of time which covers the life of the loan. For example, a 30 year fixed loan has a term of 30 years.

Third Party Fees

Fees paid to a third party for services requested by the lender on your behalf.

Title

Document that gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property. Individuals who will have legal ownership in the property are considered “on title” and will sign the mortgage and other documentation.

Title Company

A company that insures title to property.

Title Company Closing Fee

This fee is paid to the title insurance company that conducts your closing and handles the transfer of funds among the parties.

Title Insurance

Title insurance protects a lender against any title dispute that may arise over a particular property. It is required to close on your home. You may also purchase owner's title insurance which protects you as the homeowners.

Title Insurance Premium

In order to determine that the property is properly owned and not subject to any unacceptable liens, we require a search of the local real estate records, and a title insurance policy insuring the lender that there are no defects in title. The Title Insurance Premium covers the cost of the search and the insurance. The cost of title insurance varies both by state and by county.

Title Search

Examination of local real estate records to ensure that the seller is the legal owner of a property and that there are no liens or other claims against the property.

Total Payments

This is the total amount you will have paid over the life of the loan for principal, interest and prepaid finance charges, assuming you keep the loan to maturity and made only the required monthly payments.

Trade Lines

Trade lines are your different credit accounts listed on your credit report.

Trans Union

One of the three largest credit bureaus in the United States.

Transfer Tax

Tax paid when title passes from one owner to another.

Truth-in-Lending Act

Federal law requiring written disclosure of the terms of a mortgage (including the APR and other charges) by a lender to a borrower after application. Also requires the right of rescission period.


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Underwriting

In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.

Underwriting Fee

The underwriting fee covers the cost of evaluating your entire loan package, including your credit report and appraisal, to determine whether we can approve your loan request.

Username

A unique sequence of characters including letters and numbers which is generated by Quicken Loans and used as identification when logging on to My Quicken Loans. It is required to give you exclusive access to the status of your loan and your loan documents online.

Usury

Interest charged in excess of the legal rate established by law.

V

VA Loans

Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. They are designed to make housing affordable for eligible U.S. veterans. VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans with 100% entitlement. Eligible veterans may be able to purchase a home with no down payment, no cash reserve, no application fee, and lower closing costs than other financing options. The maximum VA loan amount is currently $203,000.

Variable Rate Mortgage

See Adjustable Rate Mortgage.

Variable Rate

Interest rate that changes periodically in relation to an index.

Verification of Deposit (VOD)

Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.

Verification of Employment (VOE)

Document signed by the borrower's employer verifying the borrower's position and salary.


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Waiver

Voluntary relinquishment or surrender of some right or privilege.

Walk-through

A final inspection of a home to check for problems that may need to be corrected before closing.

Wire Transfer Fee

On occasion, we will transmit funds via the inter-bank wire transfer system to you, your prior lender, and/or the title insurance company conducting your closing. This fee covers the cost of such transfer.

Z

Zoning Ordinances (or Zoning Regulations)

Local law establishing building codes and usage regulations for properties in a specified area.


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