Mortgage Terms

Lien- A claim led by one person or company on the property of another as security for money owed

Good Faith Estimate- An estimate of closing costs and prepaid finance charges to be paid at closing

Pre-Qualified v.s. Pre-Approved- Pre-Qualified means you have talked with a lender and he/she has told you what amount you can be approved to borrow, simply by asking you a few questions. Pre-Approved is more formal and the lender has pulled your credit and guarantees you can be approved for a certain loan program and amount.

Amortization Schedule- Shows the paying off of debt over a set period of time

Interest Only ( IO )- The borrow only pays off interest of the loan amount, over set period of time and no payment towards principle of the loan

ARM- Adjustable Rate Mortgage. A mortgage whose interest rate changes periodically based on the changes in a specified index.

Principle- Amount of debt, not including interest. The face value of a note or mortgage.

Front Ratio or Top Ratio- Mortgage payment to income ratio

Back Ratio or Bottom Ratio- Total debt to income ratio

 LTV - Loan to value ratio. This determines the value of the home and the amount borrowed. Most lenders require no more than 80% LTV to be a conforming loan

HUD- The U.S. Department of Housing and Urban Development.

Conforming- A lender usually requires a 20% down payment. The current conforming loan limit is $322,700 and below. The loan is subsidized by the government.

Conventional- Conventional mortgages are not insured or subsidized by the government. Most lenders require a down payment of at least 20% on a conventional loan, but offer them with lower down payments if the buyer purchases Private Mortgage Insurance (PMI).

FHA- A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

Escrow- An escrow account holds funds for property taxes, title insurance, and home owner's insurance

PMI-  Private Mortgage Insurance

Fixed- A fixed rate mortgage is usually for 15 or 30 year mortgages. The interest rate on the loan never fluctuates.

MIP- Mortgage insurance for FHA loan